It is an industry truth: on average, 20 percent of the hours incurred on any project are ultimately not billable to the client—meaning you may be losing between $100,000 and $200,000 from your bottom line.
Wow! That is a lot of money.
Slippage occurs even in well-managed agencies. Because time is all most agencies have to sell today, it's critical to recapture some of those lost dollars.
Following are some ideas that may help:
Make sure each job you open has good solid input from the account executive to the creative team. Insist upon written input, and insist on a face-to-face meeting between account executives, creatives and production staff before kicking off any decent-sized project.
Trust your production manager’s estimates. If you allow account executives to modify estimates without prayerful consideration, you will discover what many of us have known for years—production managers generally give accurate estimates. Don't allow clients (or even principals) to reject estimates, and then scream when it turns out the estimates were right on.
Break estimated hours into clearly designated categories, enabling those working on the project to see the time allocated category by category. Also, make sure a copy of the estimate worksheet is accessible to all workers via your workflow system. The production job folder can be digital and/or or a “hard copy” with a schedule on the production folder’s face.
Keep track of “author’s alterations” (yours and the client’s), and send revised estimates to clients when a change is clearly their responsibility.Use email—just request an "approval of estimate" via return email. In the old days we tried to build some allowance into the initial estimate for changes, but today's budgets are so tight you can rarely do that. Read more about managing scope of work.
Keep your system current so you can pull accurate reports on charges spent to date. Have your staff input their time records every day. In our dealings with agencies, we see more abuse of the time recording situation on both sides of the equation than any other agency task. Employees tend to submit their time when they feel like it, if at all; and administrators do not follow up until someone shouts, “Where’s my report?”
Keep track of your write-offs. Develop a system for tracking and recording hours that cannot be billed, and maintain this record concurrently with active client jobs (use a spreadsheet). Make sure account executives and production managers refer to those pre-recorded hours each time they bill other jobs for that client… or, more important, as they estimate new jobs. Managing this issue will help you to recapture a fair amount of hours lost to earlier inefficiencies.
Put these six tactics into practice in your agency, and you may recoup thousands of dollars in billings that otherwise may “vanish into the ozone.”
It sure can’t hurt to try them!