Working for free on a Friday?
As a former agency CFO, I know that the DBA Annual Survey Report will be opened with some trepidation when it lands on your desk next month.
Will it show that you’ve been smarter or less smart than your peer group? If your agency isn’t performing as well, will you console yourself with excuses about the clients you have, compared to those of other agencies?
The playing field is never level, but the fact is that the most successful agencies are more profitable no matter who their clients are, because they manage their businesses effectively and professionally.
Your business is made up of projects large and small. Some are very profitable and others you may wish you hadn’t started. At the outset, each project is estimated with an appropriate profit margin and it is up to you to make sure you make that margin.
The way your profitability performance can be better than your competitors is by improving your:
- Recovery rate, the % of billable time charged to your clients
- Utilisation rate, the % of time spent on billable work
This year’s DBA Annual Survey Report tells us that the average recovery rate is 78% – so, in essence, most of you are still working for free on a Friday!
But you shouldn’t have to: you can improve your recovery rate if you have the right systems and processes in place, providing you with reliable, real-time information on which to act.
As the project progresses at each stage there can be time or cost over-runs. You need systems that provide an alert before the cost over-run occurs at a predetermined % of the total – say 80%. Projects that are flagged need to be analysed to understand why, and then, if possible, the reasons should be shared with the client – often these are changes in the brief, additional tasks added or many rounds of revisions. If these issues are raised with the client as they occur it may be possible to convince the client to pay for them. All too often, these issues are left until it is too late.
Sometimes projects are made unprofitable by over-servicing and this too should be flagged and prevented.
This can also be described as Capacity Planning. To improve utilisation you have to know the projects in the pipeline, their deadlines and the resource each project requires vs the resource available. With thorough forward planning, projects can be juggled to better match resource and reduce the need for freelancers.
There must be a single source of truth within your business: running an agency requires real-time data to make informed real-time decisions and knowledge is power.
The most successful agencies will use this knowledge and will focus on the now and the future, not the past.
Partners for the DBA Annual Member Survey Report 2017
Pegasus provides a specialised marketing services software solution focused on exceeding our clients’ expectations, developing the system with our user base and building long term relationships through innovation and exceptional client support. Our clients include all major international groups, plus a growing number in the UK with notable agencies such as JKR and Droga5 amongst them. Supporting over 130 clients with 6,000+ staff globally in London, New York, Australia, New Zealand, Singapore, Malaysia, Hong Kong, Philippines, Japan, we are a private staff-owned company with over 30 years experience focused solely on the advertising and communications industry. All directors are previously agency FDs, all client service and product delivery staff have worked in agencies in senior financial roles. Our in-depth understanding of agencies’ processes is our strength!