The Profitable Agency: How Tracking Time Can Impact Agency Profits

By | January 5, 2015
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Chirag Ahuja

This is a guest post from Chirag Ahuja (@ChiragAhujanz), head of marketing at WorkflowMax, a cloud-based agency management software.

A profitable agency is an efficient agency. As a service-based business, the speed at which high-quality work gets done and approved by the client has a significant impact on your overall profitably.

Regardless if your agency’s pricing model is billable hours or value-based, time tracking should be an essential element to your project management process.

Armed with timesheet reports, you’ll have access to the data required to effectively evaluate your agency’s profitability across the following three key pillars.

Top 3 Ways To Evaluate Profitability with Time Tracking

1. Evaluate Client Profitability

All clients are different. Some are very hands-off and give you the freedom to do what you do best. Others are hands-on, more reactionary than visionary, and want to approve and discuss every aspect of a project or campaign. In detail. Repeatedly. Then, change their minds and start the discussion over again.

A client’s clarity of vision, goals, feedback, timeliness and frequency of meeting requests all impact your agency’s efficiency. By tracking your time against the client and all associated projects, you can quickly create reports that show the total time invested in one client versus the rest of your client base.

Compare this time to revenue generated in order to uncover the real profitability of a client. If their indecision or need for constant communication is eating into your profits—or even worse: costing you money—have a conversation with them. If the problem persists, contemplate ending the relationship altogether. 

2. Evaluate Employee Profitability

The key to an agency’s profitability lies in how quickly and efficiently your employees can get work completed. Not every employee is created equal, and despite training and coaching, some will excel where others do not.

Use time tracking reports to determine which of your employees can complete specific types of project or campaign work most efficiently. For those employees that aren’t as fast, work with them to improve. Develop a personalized training program, pair them with a mentor, or find different service areas where their skill sets are better suited.

With time tracking reports, these sensitive conversations about an employee’s weaknesses and his or her need to improve can be based on actual data, instead of opinion and conjecture.

3. Evaluate Pricing Profitability

By tracking employee time against individual projects, you can start to build a baseline for how long different types of projects take to complete. Compare this time to what you’re charging clients.

For example, say on average, a two-page brochure takes you 10 hours to produce and get approved by the client. If you’re only charging $800 for this type of job, contemplate whether $80/hour is considered profitable.

If it’s not, adjust your pricing based on time tracking reports. Use the data to define what a competitive, yet profitable, price is for a specific service. If you can’t find a good balance of profitable and competitive pricing, how can you rewrite the service description to ensure you’re not delivering too much for the price?

Learn about more opportunities to grow a profitable agency by registering for our upcoming webinar. Paul Roetzer and Chirag Ahuja will walk you through the impact of talent, tech and strategy on the long-term success and profitability of your agency.

Does your agency use time tracking insights to assess profitability? Share lessons learned in the comment section below.

Editor's Note: WorkflowMax is a PR 20/20 client.