I spent the first six years of my marketing agency career chasing hourly quotas instead of results. Our goal was to bill a minimum of five hours per day.
Yes, we cared if the client was happy and successful, but the fundamental economic driving force behind the firm's existence, and my career potential, was the billable hour.
I discovered early on that the billable-hour model was a flawed, archaic, agency-centric system that wrongly tied agency performance to outputs, not outcomes.
In 2004, four years into my career, I became highly motivated to build a more efficient and profitable solution that shifted the focus to client needs and goals.
The idea was centered on making services tangible with clearly defined costs, features and benefits, almost like buying a product off a retail shelf or signing up for a software service.
My theory was that if clients understood exactly what they were getting, and agreed ahead of time what it was worth, then we could remove the mystery from the equation and focus on delivering value and results.
The problem was that the billable-hour model was the only one I had ever known. How would I build an entirely new financial model and productize a service business?Read More
This is a guest post from Joe Olsen. Joe is the CEO of Rova, an agency growth tool, built by agency veterans for agencies. With Rova, dubbed The Client Services Engine, empower your agency team to manage, measure and grow strategic client relationships. You can get in touch with Joe on Twitter and LinkedIn.
Let’s start with a fact. Successful agencies create revenue through the ability to generate profitable business with new clients but also within current relationships. Show me your New Business and Client Services team, their processes and tools, and I can tell you how far you’ll go, your capacity for growth and your ability to thrive in this cutthroat industry.Read More
This is a guest post from Drew McLellan. Drew leads the Agency Management Institute, which advises advertising agencies on how to grow and build profitability. He can also be reached via LinkedIn and Google+.
Did you complete your time sheet today? Did your employees?
If your answer is “no,” your agency is missing out on a crucial opportunity to increase profits and productivity. There are consultants out there who think agency folks shouldn’t have to do time sheets, but they’re wrong.
People are your biggest asset and your biggest resource, but they’re also your biggest expense. Consistent use of time sheets is the only way to know how your employees are spending their time and whether that time is well spent. Without the use of time sheets, you cannot evaluate the performance of your business — both how your assets and resources are being applied and how profitable your clients are with respect to your time investment.Read More
This is a guest post from Jason Brewer (@jaybrew). Jason is founder and CEO of Brolik, a digital agency in Philadelphia. As an entrepreneur, Jason is passionate about helping other business owners navigate the complicated journey of owning a business and developing strategies to grow their brand.
Ask agency owners about their pricing strategies and they might look at you with a blank stare. That’s because agency fees are commonly based on inputs, and are lacking any form of strategy for maximizing the skill and performance of their team to increase profit.
Agencies need to be open to new compensation models that align their goals with those of their clients. Pricing based on an input like a billable hour puts a ceiling on potential profit and creates a perception that the agency’s service is a commodity.
When it comes to pricing strategy, the hourly rate says commodity.Read More
“The future belongs to dynamic agencies with more efficient management systems, integrated services, versatile talent, value-based pricing models, a love for data, and a commitment to producing measurable results.” — The Marketing Performance Blueprint
Pricing can have a positive impact on productivity, accountability, client performance, agency growth and profits. Yet, many agencies still rely on billable hours as the key component to their pricing strategies. This wrongly ties agency performance to outputs, instead of outcomes, and lacks the transparency clients demand.
There is an opportunity for agencies to shift to value-based pricing models that focus on client needs and goals—rather than how long it takes to complete an activity. Without hourly quotas looming over their heads, employees are empowered to focus on results and value creation. And clients aren’t left asking how their money was spent.Read More
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.Read More
Growth is the easy part. Retaining it, and making it profitable, is the real challenge for agencies. As the demand for digital services increases, many agencies are offering new services and/or are unsure how to attract and retain a profitable client base. This is where these 15 tips come in handy; use them to maximize your agency’s profits.Read More
This is a guest post from Michael Cahill, editor of the Vista Health Solutions Blog. He writes about the healthcare system, health insurance industry and the Affordable Care Act. Follow him on Twitter at @VistaHealthMike.
Freelance marketers trade away the tidy perks of the corporate world, like health insurance, for greater lifestyle freedom. That said, with the Affordable Care Act (ACA) now in full swing, self-employed professionals need to have a firm grasp of the legislation. Why? Because the law is making big changes to the American health insurance system at large, many of which directly impact freelance marketers.Read More
In this guest post, Mary-Lynn Bellamy-Willms, CEO of FunctionFox, provides five administrative tips to help ensure financial success for your small marketing company.Read More
As detailed in The Marketing Agency Blueprint, billable hours are contingent on the producer’s efficiency, creating what we believe to be a flawed pricing model.
A project that may take one person three hours to complete could take another at the same level five hours. The underlying cause will vary—distractions, lack of training, misunderstanding of the project, etc.—but the end result is the same. In the latter scenario, the client pays more, but receives no additional value.
But it doesn’t stop there. Agency professionals are typically evaluated based on the number of billable hours they track. There are no incentives to be efficient, but rather motivators to be inefficient.Read More