Smooth Sailing Operations

You can be bringing in sales like there's no tomorrow and coming up with the best ideas for your clients, but if your operations and delivery are poor it will lead to the ultimate demise of your agency. Work has to be delivered efficiently to be profitable, and just as important as that is the journey and experience that your clients have.

At My Accountancy Place we talk a lot about understanding your capacity. With the team that you have right now, what is the potential revenue and profit that your agency can generate? To get to this figure, take your target utilisation, multiply it by working days and by your day rate. Repeat for each chargeable employee and you have the answer. If your current revenue is lower than this figure, you have some work to do on the fundamentals of the business before you considering bringing in more people.

Assuming that the issue is not an initial lack of sales, there are four remaining key issues that could be leading to a revenue shortfall. They are under-pricing, under-scoping, over-servicing and finally it could be under-utilised staff. Let’s take a look at each of those individually.

Under-pricing - through looking at the cost of each member of staff, the overheads of the business and your target profit margins, you should already be very clear on what the day rate for each member of the team needs to be in order to hit your desired revenue. In my experience most agencies don’t have an issue with the their day rate not being high enough. What you will often find is that there are a number of clients, potentially older ones, paying a lower rate. It may be that you felt the need to discount in order to get them on board, but whatever the reason your first port of call for improving revenue should be to review all clients rates and put a plan in place to increase them to the latest rate.

Under-scoping - You know the scenario. You budget ￡10k for a project, you've got your times down to a tee and you know which team members are doing what and when. Then as the project progresses you hit hurdles and it throws things off track. Development projects especially can often encounter unforeseen challenges. With all projects communication at the start is key. The client should be really clear on what exactly you're delivering and what input is required from them along the way in order to avoid any bottlenecks. Implementing a change order process can be especially effective. If a formalised process is required for the client to make any changes rather than just a quick phone call to your PM, they understand from the offset that this change could alter the fees and it avoids any awkward conversations. 

Over-servicing - naturally, all agencies want to deliver exceptional outcomes and really wow their clients, but the key point here is that there are ways to deliver exceptional service without throwing more time (and therefore money) at it. Over communicate at every stage, phone calls rather than emails, make them feel loved. Think about what those ways are in your agency. Make sure you're tracking time against clients and projects so you understand where you're putting too much in and you can map out a plan to bring it back in line.

Under-utilisation - it could be that your billable staff are being inefficient with their time. Opening up the finances and allowing the team to see the impact on the performance of the business that their utilisation has can really help. You could even back that up by implementing a profit related employee bonus scheme. Most studios across Manchester are open plan which is great for building an enjoyable atmosphere but can bring a lot of distractions with it. Staff shouldn't be afraid of putting their headphones on and getting into the zone. Finally, consider if they're spending a lot of time on admin based tasks that would be better handled by someone dedicated to that role.

So there we have it. If you can get those things right with your current team you'll close the gap on that revenue shortfall, and be well positioned to grow knowing that you'll be bringing in the deserved amount of profit with it.

At My Accountancy Place we only work with Digital Creative agencies that are looking to improve their business. For more insights and proven strategies please feel free to download our ebook here.