Finances/Profitability

No wonder you can’t make any money

We're working with two agencies with identical issues: They were struggling with timelines, profitability, and process and system bloat. Interestingly, they both recently changed to a new project management software and hired a consultant to help them map their processes. When we got in there, we discovered that the processes were bloated. People who weren't doing the work every day were the ones who had their hands in building out the process. They hadn't included the team as well; they should have to figure out how long things took and what the handoffs were. Instead, we found that with the consultant's help, the project management team had created a complicated, bloated, over-layered system and process that frankly meant that from the get-go, every project they bid on came in way over budget compared to everybody else. Number two, there were many steps in there they didn't need. Number three, they could not get profitable to save their life to get the work done. So, we had to deconstruct and reconstruct their processes to figure out precisely what it took to complete the work. Want to know the fix? Keep listening. Watch »

An Expensive Delta

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. Watch »

Making More Without Selling More

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. Watch »

Timesheet specifics

Let's talk to you about timesheet codes, the function codes you use to track and define how time is being spent when you do your timesheets. Many agencies have these big black holes, particularly around your non-billable time. It's uper important that you track both billable time and non-billable time. Why? Timesheets aren’t really about billing. They're about understanding what your team is doing. How long it takes. It's about looking for efficiencies and effectiveness. Who needs more training?Are our estimates accurate? It answers a ton of questions that actually have nothing to do with billing. But it starts with A) doing your timesheets every day and B) having the right function codes so you know how people spend their time. Watch »

What does an hour cost?

We don't talk as much as we should about what an hour costs our agency. Maybe that will help inspire you to look at raising your rates. So the poor man's way of figuring that out is you need four numbers. Number of hours, number of employees, total salary cost, and your overhead cost. Watch »

How are agencies making money doing video?

I recently got asked this question: Is there a way to properly manage a client's organic social media and still make a profit? So much goes into creating video content. Are most agencies getting away from truly beneficial organic reels? It's so high touch. So yes, there's a way, but it's usually a collaboration with the client and agencies who are making money doing organic social videos or doing a couple of things. Let's look at what they're doing. Watch »

Is your boat at risk of sinking?

When our agencies are going through rough waters, agency owners have difficult decisions to make. Without a doubt, the most difficult is letting go of team members because your boat cannot carry everyone's weight any longer. But we have to remember our most important role as the captain of the boat....getting the boat to calm waters. Watch »

Billability vs. Utilization

When I speak with agency owners there is always a lot of confusion around the related topics of billability versus utilization. I take a couple minutes in this video to help you understand both concepts. Watch »

Your top line is not the only way to grow your bottom line

Many agency owners believe that to grow your bottom line, you have to grow your top line, your # of FTEs and your client volume. That's just not the case. Watch »