Below is a guest post from Mary-Lynn Bellamy-Willms, CEO of FunctionFox and a visionary who has built several successful companies. She has an uncanny ability to synthesize information, identify new opportunities, and bring ideas to life in fresh and innovative ways. A serial entrepreneur, she’s not afraid to make a big idea happen.
In her free time, Mary-Lynn is engaged on several boards, speaks at industry events, travels and enjoys time with her family. This post was originally published on the FunctionFox website; it has been reprinted with permission.
Building a successful small marketing company means you’ve got to be good at a lot of things—strategic planning, market and trend analysis, creative problem-solving, client relations and team motivation.
Being good at the marketing side of your business provides no assurance your company will be profitable, though.To boost your profits, you’re going to have to pay some attention to the administrative side. You don’t have to know it all, nor have a background in business, but spending your time wisely on tracking a few things will help ensure your financial success:
1. Hire a Great Bookkeeper
Be sure it’s one who does bookkeeping for a living, not as a favor or sideline — a real one! This is extremely important. You probably don’t need a full-time bookkeeper, though. Find someone who can come in one day a week, and make that your ‘financial check-up’ day.
2. Learn How to Read Financial Statements
You need to be able to look at your income statement and balance sheet each month to understand what’s going on in your business. It may be smart to develop a habit of looking each week, when your bookkeeper is in
This isn’t rocket science, and you don’t need to understand the principles of accounting, but your income statement gives you a quick look at the state of things at that moment—cash, receivables (who owes you), payables (who you owe), net income and the like. Your balance sheet indicates the health of your business over the long term.
Once you learn to read these two documents, and keep up with them monthly or weekly, you’ll always know where you stand.
3. Invoice Everything at the End of Each Month
Billing is everyone’s least favorite task, but it’s important because it will help you predict the ebb and flow of your business more accurately. (You’ll also love what it does to your bank balance.)
Progress billing isn’t always what a client wants. They prefer to be billed at the end of a job. Say no. It’s not fair when you work two months on a project, send the client a bill, and then have to wait 30-60 days for payment.
4. Get Your Money When It’s Due
Make your bills due and payable on receipt. Many clients will process your invoice immediately if your policy is clearly outlined at the beginning of your relationship and it’s reinforced on your invoices. Invoices still outstanding after 40 days? Get on the phone and call. You shouldn’t have to wait to be paid for the work you did a month ago.
5. Track Your Time Accurately
Even if you’re a one-person shop, this is important. If you don’t do it, you’ll never know how much time each job REALLY takes. In tracking, you’ll be surprised by what you learn. Here’s the story of one company that was able to increase profits substantially when its president analyzed how its people spent their time.
Suburbia, a marketing and advertising company with a staff of 18, tracked their time and expenses religiously over the course of a year. At the end of the year, they analyzed the data they’d accumulated and were surprised to find that most of their clients were unprofitable. A comparison of how much had been billed and how much time had been spent for the 54 clients they worked with over the year showed that only 14 of them paid the true cost of the work. The company began to refer some projects to others and, when some additional projects were completed, gave some clients their files and suggested how they could manage from there.
The result? Fewer clients, but those were profitable ones. Also, because they had effectively reduced their workload, they knew they didn’t need to replace two staffers that left the company. Their profits soared, and they had a banner year.
How Do You Ensure Profitability?
The time you spend working on these five points won’t make you a financial genius, but it will help you know where you stand, understand where you’re going and give you the chance to make sure there’s a bit of money left over at the end of the month, when you get there.
How does your agency ensure profitability? Share your additional tips in the comments below.
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