When agency owners think about gross billings or adjusted gross income, we immediately think we must sell more to make more money.
And the reality is it is equally important that you do a couple of things. Number one, increase your hourly rate so you’re not selling more stuff; you’re just getting paid more for it. For most of you, you can’t afford to charge less than $175 an hour here in the States. For other countries, it will be different based on your currency, but $175 an hour.
Why? We used to say $150 an hour. But the truth is employment costs, benefit costs, all of that’s gone up. We haven’t raised our rates in forever. And so, if you are one of the laggards, we’ve been pushing on this $175 for about 18 months now. If you still haven’t done it, now is the time. Maybe you can’t do it for existing contracts and clients, but you should do it for new clients or new projects.
The second thing is being thoughtful about reducing waste. How do your people spend their time? How much of the billable time actually gets billed to a client? Reduce the amount of write-offs and over-servicing. If you can fix those two problems, you can add more money to the bottom line without selling another thing to another client or prospect.
The other huge influencer of how you drop money to the bottom line is managing your cost of goods and ensuring that you’re getting proper margin and markup on those costs if you’re acting as the bank for a client. So if you are incurring those expenses, whether it’s media, photography, or anything else, you are entitled to charge a margin or a markup on that to ensure you are being compensated for being their bank.
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Hey, everybody. Drew McLellan here from Agency Management Institute. And as you can see over my shoulder, still in Chicago near the iconic Wrigley Field.
One of the things that I want you to be thinking about are how you are accomplishing your KPIs. And one of the ways that I think everybody thinks about their gross billings or their adjusted gross income, and we immediately think we have to sell more to make more money. And the reality is, for most of you, it is as equally important that you do a couple things. Number one, that you increase your hourly rate so you're not selling more stuff, you're just getting paid more for it. For most of you, you can't afford to be charging less than $175 an hour here in the states. For other countries, it's going to be different based on your currency, but $175 an hour. Why? We used to say $150 an hour. But the truth is employment cost, benefit costs, all of that's gone up. We haven't raised our rates in forever. And so if you are one of the laggards, we've been pushing on this $175 for about 18 months now. If you still haven't done it, now is the time. Maybe you can’t do it for existing contracts and existing clients, but you absolutely should be doing it for new clients or new projects.
Second thing is, being thoughtful about reduction of waste. How your people spend their time. How much of the billable time actually gets billed to a client? And reducing the amount of write offs, reducing the amount of over servicing. If you can fix those two problems, you can drop more money to the bottom line without selling another thing to another client or prospect. The other huge influencer of how you drop money to the bottom line is managing your cost of goods and making sure that you're getting proper margin and markup on those cost of goods if you're acting as the bank for a client. So if you are incurring those expenses, whether it's media, photography, or anything else, you absolutely are entitled to charge a margin or a markup on that to make sure that you are being compensated for being their bank.
Those three things. Should you sell more? Absolutely. We'll talk about that next week. But one of the ways that you can increase the bottom line without actually increasing the top line with new revenue, is to simply charge what you're worth, cover your expenses, and be mindful of how you take care of clients. We want you take care of them well, but we don't want you to over service them. So again, $175 an hour. Be really mindful of how you're over servicing clients and writing time off. And the third one is make sure if you're acting as the bank for someone and you're buying products or services, subcontractors on behalf of your client, that you're marking that up. Okay?
Hopefully that'll put a little more money in your pocket. I'll see you next week.
