At AMI, we see the finances—P&L, balance sheet, and all the details—from hundreds of agencies a year. Once a year, we crawl through those finances and pull data points. We pull trends and things that we’re seeing.
And one of the most startling numbers that we calculated this year was the – the idea – we looked at the idea of, all right, if an employee spends X number of hours a year doing billable tasks, and a subset of those hours actually gets billed to a client, what’s the delta?
We write off time because we’re overserving the client. Maybe our estimates are wrong. Maybe we’ve made mistakes. There are a variety of reasons why all of our billable time doesn’t get translated into an invoice. But for whatever that reason is, the delta between the billable time and what we call utilize time, meaning it got used on an invoice, was, on average, across the board, about $40,000 per employee.
View Video Transcript
Hey, everybody. Drew McLellan here from Agency Management Institute this week coming to you from London, England. You know, we see the finances – P&L, balance sheet, all the details from hundreds of agencies a year. And once a year we kind of crawl through those finances and we pull data points out. We pull trends and things that we're seeing. And one of the most startling numbers that we calculated this year was the idea of, all right, if an employee spends X number of hours a year doing billable tasks, and a subset of those hours actually gets billed to a client, what's the delta? Like, if I had an employee who I could bill every one of their billable hours, so they spent X number of hours doing billable work throughout the year. And if I could bill every one of those hours, how much more money would I make per employee versus what happens now, which is my employees spend time on billable tasks and I bill some of those to clients. But a lot of them we eat, we write off because we're over servicing the client. Maybe our estimates are wrong. Maybe we've made mistakes. There's a variety of reasons of why all of our billable time doesn't get translated to an invoice. But for whatever that reason is, the delta between the billable time and what we call utilize time, meaning it got used on an invoice, was on average, across the board about $40,000 per employee. In other words, you would have another $40,000 down to the bottom line, pure profit, if you could have billed those to clients rather than writing them off.
So one thing I want you to pay attention to, and I want you to focus on as you round the corner towards 2025, is I want you do some analysis of how much of my team's time do we write off every year and why. Why are we writing the time off? Are our estimates too low? Are we not watching and we're allowing our teams to over service? Do our employees even know how many hours they have for any given task so that they can manage themselves to those number of hours? Because I'm telling you, you multiply the number of employees you have times $40,000, and that's what you left on the table in 2023 and probably in 2024. So this is, this is a number. And these are statistics and data points that are worth you digging into and solving for your individual agency. The reason why is going to be a little different for every shop. But the fact is that we're finding that across the board it is about that delta for the average agency at $40,000 per employee that you're writing off. And by the way, that's per employee, whether they're billable or not. We are looking at the aggregate of hours and the aggregate of employees. So if you have ten employees and two of them are non billable, you still multiply that $40,000 times ten to see what you're leaving on the table. So dig in. Figure out why you are leaving so much billable time on the table and not billing it to clients. And make that a priority to solve in 2025. All right? Okay, I'll see you next week.
