This is agency life: creativity and pressure. How you handle pressure paves the way for profitability.
Fear not, we’ve got some answers:
- Hidden costs eat into your margins. Find them in timesheets.
- Unintentional client churn. Control and reduce it here.
- Up your fees to up your profit. This is how.
- Measure profitability often. You already have the data.
- Be time-efficient. The rest follows.
We’ve also talked to four agency growth experts about their tips on profitability. Curious?
It’s all in this ebook. Get it and start running the agency you want. Here’s the summary.
Reduce hidden costs with timesheet data
Hidden or ignored, costs rise when you’re inefficiently delivering client work. For example:
When you’re consistently overservicing
Small tasks that overrun and those poorly defined add up to 20-80% overtime.
Identify them in your timesheet data. First, analyze time spend by tag and activity, for an entire project to gauge the baseline of your current time utilization. Then, set time-bound assignments to help employees reduce overtime. Lastly, reanalyze team efficiency against ideal benchmarks.
Any time improvement is a cost reduction.
“Whilst stopping charging client work by the hour is wise, not measuring the time spent on client work is foolhardy. Time is money, goes the old saying. But time is also data. It's essential for managing your agency and optimizing its profitability.” - Gareth Healey, CEO of Beyond Noise and award-winning author of “Standout or die”.
When you’re not measuring sunk costs
When you don’t measure time spent on projects, you run on guesstimates, not facts. These guesstimates inaccurately represent your fees and costs.
For example, agencies that cover the cost of pitching, don’t know to what extent and will set lower fees as a result. SaaS companies also absorb operational costs – like time spent on sales, marketing, and professional services.
Timely customers who track time on sunk costs control them better. Walpole Partnership saved 50 hours of unproductive time by analyzing timesheets and the ROI of captured work.
Reduce agency client churn
46% of agencies have four months of cash in the bank, according to Mailchimp. And, if you’re working on a project-by-project basis, your client churn rate could be as high as 50%.
If you’re working with retainers, losing one big client uncovers you for more than four months.
So, control your churn in two ways.
Preempt it by predicting churn risks, using Lift
Dan Haestbaek built a churn-reduction machine for agencies that factors in client interactions and feedback to point out accounts at risk of churn. Use it to engage them and fix the issue.
“Through data, we know that by following the LIFT methodology, an agency will reduce their revenue churn at least 30% YoY. This means that an agency with 20% revenue churn before using LIFT will minimum reduce this to 14% the year after.” Dan Hestbaek, Founder of Lift Relations.
Build client trust with live project updates and timesheets
You’d think timesheets are internal, but no. They’re the reason why you could be having better conversations with clients.
Timesheet reports show how you manage agreed budgets, why fees need to change, and how your client is getting value from your services. Even better, in Timely, they’re live and branded.
Up your fees to up your profit
It may seem hard to have a clear pricing strategy for agency work when you’re using a blended model: retainers, hourly rates, and flat-fee projects. And, when other agencies price aggressively to lure away your prospects.
First, solve your inefficiencies to stay competitive and deliver faster, then package services as outcomes. The rest is a positioning play. Why? Because clients want outcomes, not an itemized list of competitively-priced labor.
“Upgrading your offer and positioning yourself better. You may have the best ideas or services or have years of experience, but you need to make it clear to prospects how you impact their top line. Your value is determined by your market, not vice versa.” - Romans Ivanovs, Head Coach and Founder of CEO Operating Systems.
Measure profitability often. You already have the data.
79% of agencies that measure and update revenue projections frequently are more likely to grow than those that don’t.
What exactly needs to be measured? The answer is:
“Simple things. Like:
- Estimating accurately
- Regular price increases
- Ensuring gross margins are AT LEAST 50% (i.e. 2X what it costs you to deliver)
- Timesheet accuracy
- Reviewing the finances regularly (monthly)
- Making decisions quickly
- Managing costs
That is, being more like a business (with rigor and predictable practice) and less like a plate-spinning, fire-dousing agency of individuals. It's not exciting, but profit, growth, and true scale start with being brilliant at the basics.” - Janusz Stabik, Managing Partner at GYDA
Be time-efficient. The rest follows.
If you spend two hours on timesheets per week, how about we make that 10 minutes for you? Train Timely AI to draft your timesheets for repetitive tasks, and just approve them at the end of the day.
Efficiency is about tools and processes, not people. That’s why we built Timely to automatically track your work, draft timesheets for you, and sync projects and tasks, wherever they may sit. And ultimately, help you understand where your time goes so you can be more efficient with it.
Run an agency the way you’ve always wanted and let timesheet data back up your decisions. When you do, opportunities for profitability get surfaced in real-time, so you don’t have to wait until the end of the year to change your fees, reposition your packages, or control your costs.
More practical tips in our ebook about using timesheet data to become more profitable. Get it here.