How an agency spends time on projects can determine whether it's profitable. Here's how time data can affect crucial aspects of your agency.
A creative agency that we worked with years ago struggled to make payroll as it couldn't get out of the red. It didn't have the appropriate processes in place and was spending too much time on projects, which turned out to be the primary reason for the issues.
When the agency started working with us at Creative Agency Success, the owner said that the agency could never manage existing work levels with less staff. In fact, they were hardly keeping up with the work as it was.
However, profitability is seldom a question of the number of employees. When an agency isn't profitable, it's because something's wrong with the model and service delivery.
In this particular case, we focused on time tracking. After a study of how each team member was spending their time, it turned out that there were plenty of inefficiencies, performance gaps, and task duplication.
The data from this study allowed for adjustments in the agency's process.
Once all of the redundancies have been removed, the agency immediately went from having its worst year to making $10 million per year. Simultaneously, they were able to reduce team staff levels by 30%.
This example shows the value of time tracking. Even though agency owners rarely enjoy this process, it's an essential tool for boosting profitability.
And in this article, we'll explain the four ways in which time tracking helps agencies become more efficient and achieve a cost-effective process.
How Does Time Tracking Help Your Agency?
Understanding how an agency uses labor time is crucial when it comes to improving various aspects of the business. Time tracking makes it possible to manage this most important asset.
There are four key benefits to time tracking.
Benefit #1.
Empowers You to Manage Scope Creep
Many agency owners feel that time tracking is unnecessary since they know that their team works hard on every project. What they don’t realize is that measuring time usage isn't just about monitoring the team or not having trust in their performance. Tracking time produces other pieces of data that can prove quite far-reaching.
One of the useful aspects that time tracking reveals is that you can go through a project and see where it started to deviate from the initial plan. This information can prevent scope creep because it shows the points at which the project could go off the rails in terms of time and budget.
Each project has a particular amount of time allocated to it in total, time that can be broken down by month. Time tracking can show whether your agency is using more time on a project within a given month. If that's the case, the likely cause is that your agency's doing tasks that weren't included in the original scope.
Reviewing the time tracking data shows scope creep, allowing you to reset client expectations and even upsell the client on additional services if they're needed for the project.
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Benefit #2.
It Lets You Create a More Accurate Reporting
With the information you gain from time tracking, you can produce detailed reporting that allows you to fine-tune how your agency works.
Ideally, your model will be based on a fixed fee, not on billing by the hour. If your projects are fixed retainer or project billing, every hour your agency goes over budget means less revenue. With time tracking, you can understand what causes unnecessary time spending and make adjustments accordingly.
The reporting can show how profitable each project is and you can break down this data by revenue, service, and individual clients. The more accurate this reporting is, the faster you can make crucial changes, which can make all the difference in the agency.
Benefit #3.
You Can Make Pricing Improvements
Time tracking gives you an overview of what happened at different stages of a project. This data can help you understand what goes on during different projects and create better proposals.
In many cases, agencies don't accurately determine how many hours a project will take. This makes their pricing process less efficient because they aren't using empirical or historical data. In other words, they don't have a clear understanding of how much time it'll take them to complete the project.
With time tracking, you'll have precise information on what your agency did or didn't do on a project. You can also compare the time you expected to spend with what you ended up spending. Finally, you can determine the reason why the project took longer than it should have.
This analysis will show what aspect of your process you can improve and how you should price your services to make sure that your agency's always profitable.
TipBenefit #4.
It Allows You to See Which Areas Need Process Improvements
A time study often reveals specific issues that agencies might not be aware of, leading to significant improvements.
As an example, one of our clients used time tracking to determine which projects were the most profitable and ended up with a very interesting conclusion.
Whenever this agency had projects that didn't need to go through different departments, they were highly profitable. But as soon as the project had to involve another team, it would become unprofitable. This indicated that data transference was the issue.
The agency's creative briefs turned out to be the cause of the issue. And as soon as they made adjustments in that aspect, the situation improved.
Examples such as these show the real value of time tracking, as it can reveal parts of your process that you can tweak and make more efficient. And with accurate time data, you can create impactful changes and improve the overall performance.
Tracking Time Leads to Superior Results
Time tracking provides detailed insight into multiple aspects of processes and operations. This information is precious because it allows for faster reaction, better adjustments, and a clear understanding of what goes on during projects.
As the most valuable resource your agency has, time should be managed and spent in the best way possible, and time tracking can show you how to do just that.
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