The importance of information
Notwithstanding creative recognition, the success of a design business and its profitability is down to how efficiently the agency uses its resources – it’s all about the people!
I have heard many times from successful agencies ‘we don’t do timesheets, we make good margins and business is going well’ and I despair.
To a point, one could agree that if things are going well, who cares if you’re completing timesheets or not? But if the tide should turn and you find things are suddenly on the slide, you’ll want to know why. That’s when you’ll find yourself with no information to fall back on.
Information is important, regardless of how an agency is performing. In fact the best time to gather data is when things are going well, so you stay on track or can spot the problems before they have an impact on the business. What’s more, information needs to be gathered and reported in real time, not just at the end of a month or end of a project.
Data gathering and reporting should be easy
Because of the effort sometimes involved in gathering and reporting information, many agencies review their business in detail just once or twice a year. But the ability to gather relevant information and to use it effectively is critical to any business. Important measures such as client contributions, efficiency of the studio, average bill rate per head and performance of Business Directors should be prepared and reported monthly so you are able to react before problems set in, not when it is too late.
The process to compare your agency’s performance to the benchmarks in the DBA survey should then be seamless and not require someone spending hours extracting data from a system and crunching it in Excel. Whilst comparing your results to the DBA survey is highly valuable, also using the data to regularly understand which clients are “earners” and which are “burners” can also make a critical difference to the performance of your business throughout the year.
The value of information
Negotiations with clients can be tough, particularly if the procurement department see you as just another supplier with creativity out of the equation – they want more for less, often comparing the cost of the ‘service’ rather than the quality of the work.
Whether you operate with retainer fees or project fees, the client is likely to start with a relatively imprecise scope of work which becomes more detailed and more onerous as the project progresses.
Having the information to challenge your clients’ perceptions and demonstrate you run an efficient business can instil confidence in you as a partner. The ability to report the use of resources in detail on projects will demonstrate the actual time you are spending compared to an estimate. This could illustrate over servicing by role and provide vital information for re-negotiations of the contract.
Using this information to demonstrate in detail time spent on briefs that got cancelled, or numerous changes to a job that swallowed up designers’ time are invaluable when sitting down with a client.
Clients will often use their agency as their internal finance team, asking how much they spent with you across all the brands you work on, broken down by each campaign so they can prepare their budget for the following year. Having this information can take many hours to prepare, is often expected as part of the service and therefore the time taken to do this is not recovered.
Having a robust system to deliver this information quickly and customised for each client not only saves you time, but creates confidence in your team and makes for a very happy client!
Making it work
The key to achieving all of these objectives is having a system that captures data easily and produces timely and accurate reporting.
The first magic ingredient to a successful system is understanding what you want out, before you start deciding how to get information in. When working with clients I usually start with the final desired result, not the data they are trying to report. The end result shapes how the information is gathered.
The second ingredient is that things have to be easy. Preparing estimates, entering timesheets, scheduling resources, identifying exceptions, preparing detailed client contribution reports and staff/departmental recovery rate reporting should be seamless. In many instances agencies spend hours using different tools – usually not integrated – which ultimately causes huge inefficiencies. Job information should be in one place and one place only – your core system. Using Excel and other tools to prepare estimates, create revenue forecasts, allocate resources etc. means you are losing control of the data. If it is not in the same place as you record time, billing and expenses, you can’t use the information efficiently without yet another tool. Inefficiencies are inevitable and once a switched on Finance Manager who created a great Excel model leaves, so does the understanding of how it works and a new Finance Manager will find themself having to reinvent the wheel.
Many design businesses are similar but none are exactly the same. Your structure and creative process is your edge in the market, and therefore the design and structure of any system that supports your business should be particular to your needs.
Integrated systems are the way to go, but it’s finding one that is flexible in design and allows finance users and (more importantly) non-finance users to engage with it that is key.
Partners for the DBA Annual Member Survey Report 2016
Pegasus provide 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 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 an agencies processes is our strength!
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