Agency life is a lifestyle. If you don’t like it you can’t be part of an agency. That is love, emotions and… that things you probably have seen on social media behind #agencylife. 🙂 But at the end of the month you should pay your employees, bills and have profit if you want to grow your company.
As co-founder of Kontra and IT product company (project stopped in 2015.), in this article I will talk about my experiences during the last 6 years. On a daily basis, I’m surrounded with people from creative, IT – tech, PR, performance and other types of agency’s. My conclusion is that all of us have same problems. We sell hours and we should invoice most of them (depends on lot of variables and company goals, founders etc).
First you should measure hours within your company.
Is it necessary for agencies to measure their performances?
When we talk about web development, IT agencies such as our development department have a little bit simpler situation because you can “easily” measure client’s requests (features, extra design hours, maintenance etc…). Situation with digital marketing agencies or departments that provide services such as digital marketing project management (account managers), social media marketing, Facebook ads, Google ads, SEO, Google analytics and consulting is a little bit complicated.
What gets measured gets managed. ~ Peter Drucker
Firstly, you should measure your employees (resources) if you want to see where “your time” goes. We are selling our time and this is our value. If you don’t know where your time goes, this isn’t good for business and company. When I’m talking about employees’ measurement, I’m not talking about freak controlling. It is about agreement between you, your employees and finally it depends on company culture. Employees in your company will understand why they should measure the time spent on billable and non-billable projects. At Kontra we talk about that almost every day.
Furthermore, when measurement is part of your company’s DNA, you should measure your client’s requests.
Digital marketing example
I have been working with one client on two sides of digital marketing: Social Media Marketing and Content Marketing (creating blog posts). As a digital marketer, you probably know that you need other elements of digital marketing as well if you want to be successful. We have had a situation when client had a problem with bounce rate (90%+) because they have an old website without Call to Actions, bad design – user flow etc. During the period of 10 months we advised them on following non-billable parts of digital marketing (remember, we have been paid only for social media marketing and creating blog posts): UX/UI consulting, how to create an e-book consulting, CTA deployment on existing website, creating digital marketing strategy for the following year, constantly educating their employees because they aren’t digital marketers (without basic knowledge).
Do you know what is the result of my measurement:?
- In average, for this client, I’ve spent 15 extra hours/per month during the period of 10 months = 150 non-paid hours
- Non-paid digital marketing strategy, I spent 150 hours on this project with my team.
Sometimes it seems to be a “little help” but when you summarize your hours on monthly/yearly basis, it is so much more than you can imagine!
You should also measure non-billable projects in your company because all your employees have their time-cost. For example, when your employees write content for your corporate blog, it is great to know how much time you’ve spent. Let’s see the example of the calculation:
- They spent 10 hours per month for content marketing
- This is 120 hours per year
- The cost of this is 4800$ (40$ per hour)
- The revenue from your content marketing strategy is 10000$ (you collect 300 leads and 1 convert to a customer).
Great, for the following year you know what type of marketing works for your agency, so you will invest more time (money) in this segment.
Web App development example
We decided to start an IT project (web application) with specifications we haven’t even see. This is always risky (deadlines, budget, time etc..) but only way if you want to learn something new and upgrade your team!
It was full-custom project from scratch. I would like to focus on the main aspects of this project.
- Developing functionalities we never did before. We learned that we needed extra 120hrs for this and that we could automatize some processes and cut our time for at leas 60hrs!
- During project client decided to import “just one thing” that we didn’t agreed in project specification – scope. We allowed this request without extra hours and timeline corrections. What happened? We lost about 40hrs (non-billable) and our deadline was under risk. What we learned after that? If a client wants new feature/functionality/design improvement or something else during project, he must approve change requests (extra billable hours and deadlines correction). Don’t forget, this is the only way to protect your business and your employees from unwanted stress.
What is the result of my measurement?
- I’ve spent 40 extra hours.
- We couldn’t charge extra hours because it was our failure not client’s.
- We “jumped” into other project timeline.
- We lost 5 man/days this year irretrievably.
- My team was stressed.
Is it hard to “force” employees to measure their time?
I believe that force can’t impact positive changes. These are few steps you should do within your digital agency if you want that numbers. I will start with those HR porn – words, but in our case this worked.
- You should incorporate this in your company DNA and culture. It is important explain to everyone why is it important for company and which impact has on profitability.
- How? We incorporated this in our company – policy rules.
- Authorities (CEO, managers etc…) should follow these rules. There shouldn’t be exceptions for anyone. They are example which people should follow.
- You should not expect that people will do that activity by themselves.
- How? Just create recurring task in your PM tool.
- One person should be responsible for this activity as some kind of a stakeholder. He should remind team members if they forget, analyze data and create reports.
- How? Define who is in charge.
- Be transparent and communicate numbers/reports towards your team.
- How? Prepare reports from your PM tool on a monthly basis. This part depends on your company culture and procedures.
How to measure?
I don’t have a magic recipe, but I will talk from my experience and things that work for my company. For project management, we use ActiveCollab which has great functionalities such as time measurement and time/expenses reports. This tool allows us to measure each task or we can add extra activity and its time. Maybe you are using other tool, you can even do it with Excel spreadsheet. It doesn’t matter which one you use, but it is important that you have this data.
In the following picture, you can see how it looks like in ActiveCollab!
What do we measure? We try to measure everything we can:
- Sales activity
- Client Consulting
- Content writing
- Meetings with clients and internal meetings
- Preparation time for a meeting
- Facebook Ads campaign creating
- Newsletter creating
- Digital Marketing strategy creating
- Social application creation
For this blog post, I will measure the time I need to write, proofread and insert multimedia materials. Measurement isn’t about the tool you use; it is about decisions and willingness to integrate these into your company’s DNA.
“The price of light is less than the cost of darkness.” -Arthur C. Nielsen
You can’t measure everything, but those things you can, will help you in decision-making and finally, it is about your agency profitability. Sometimes you will realize that some of your projects aren’t profitable, or you should increase your prices or decrease activities on some projects.
It is not easy to always remember to measure your tasks and you can’t do it “from now”! It takes time and this is a process, but you can do it with your employees from month to month. Analyse, check your reports and draw the conclusions based on data.
What about your digital agency, how do you measure your activity? If not, are you planning to introduce this? Tell us about your progress in comments.
Editor’s Note: This post was originally published on February 6th, 2017. and has been completely revamped and updated for accuracy and comprehensiveness.