The simple solution to start making your agency more profitable today
If your agency isn’t as profitable as it should be it usually comes down to one of 5 really common money leaks.
Unfortunately, it’s not always easy to spot them.
As a business owner who’s also an accountant, I’m constantly on the lookout for money leaks and they aren’t always easy to spot. But this surprisingly simple solution helps you see clearly where you’re wasting money, and has totally transformed our own profitability – and that of our clients.
How to get more control over your profits
Making a profit on a project is a constant balancing act. If you don’t get certain things right, there’s a huge potential to lose money.
Some of the things you need to consider are that:
- You have the right mix of people
- Your team doesn’t over (or under) deliver
- You’ve priced the job well
That means your people costs play a huge part in how profitable your agency is.
So what do you really do all day?
When I asked my team to start tracking their time (and started to track my own time too), what we discovered gave us so much more control over our profitability. Time tracking isn’t about spying or trying to catch people out; it’s not about charging by the hour, either. The simple fact is, if you don’t know exactly how your team is spending their time, you’ll always be stuck on the treadmill of busy work.
Tech to help you track…
You can get your team to track their time really easily using a simple app like Harvest. Once this is in place you have all the insights you need to spot your money leaks.
Here are 5 of the most common and costly leaks that time tracking has uncovered for us and our clients:
1. Scope creep
If a client is regularly adding in extra services and you’re not renegotiating the project fees to accommodate this work, you’ve got scope creep, and it’s costing you money. Simply identifying where it’s happening, however, and putting a system in place to manage it, will not only improve your bottom line but ensure that fewer projects go over budget.
2. Under-estimating how much a project will cost to deliver
It’s easy to underestimate the true cost of running a project, particularly if you don’t have any data to base it on. When you underprice yourself regularly, your profit margins will be lower than you expect, and you’re going to start running out of cash. Once again, timesheets are your saviour here, because when you understand what a job involves and who is doing the work, you’ll finally know the true cost of a project and charge for it.
3. Inefficient processes
When you start to track your team’s time you start to see which parts of a project or process are most time-consuming. Then you can then work out how to make the process more efficient. Often it can be as simple as moving from manual systems to automated ones and with the wealth of tech available it can be very simple to implement.
4. Too much non-billable time
There are only so many hours in the day, and no matter how efficient your agency is you’ll want to make sure that you’re using those hours wisely. This means working on those activities which are the most profitable for your business. Setting a realistic target of how many billable hours your team is expected to be doing helps them to manage their workload in a more time-efficient and profitable way.
5. One team is less efficient than another
If one of your teams is running projects more profitably than the other, digging deeper to understand why can help you improve efficiencies in the other team. Time tracking is a great way to work out a best practice that can raise the bar across your whole agency. It will also highlight which teams have spare capacity or not enough, so you can plan ahead and redistribute your people accordingly.
Plugging the leaks in your business is just one of the many tools we use to help our clients grow more successful agencies.
If you’d like to find out more about the systems, processes and structures we use to help our clients thrive, I wrote a whole book about it.
You can get your copy of The Prosperous Agency: How to scale your agency business profitably and sustainably here.