There aren’t many people who look forward to filling out a timesheet, and I’ve wondered for a while if there’s a replacement.
First of all, let’s look at why agencies initially don’t like to track time. Often, agencies are created by an agency person who decided to go off and start their own agency. But they want it to be different, to free themselves of the shackles of the processes from their previous place, to have a better working life.
And at first, it’s great. But then, they realise they’re working 70 hours a week and not earning any more than they were before. Which is when the penny usually drops. They need to track where their team’s time is being utilised.
It’s my view that most agencies don’t pay enough attention to non-chargeable time, but it’s a huge amount of money in the business that you’re not going to recover.
A designer might be spending, say, 10 hours a week on internal projects or new business. But to know this, you need to track it. And this is where the ‘do we really have to?’ comes in. And the answer is ‘yes you really do’.
Time sheeting and utilisation rates might not be the most glamorous-sounding tasks in the creative world. But it literally benefits everyone in the business. Otherwise you could have creatives working all hours to complete a job that then goes over budget — deflating for all involved. And you can find yourself scratching your head wondering why you aren’t growing as planned — when you’re asking your teams to spend half their time on new business instead of fee-earning work.
What to track?
I usually recommend five internal categories of: admin, meetings, new business, marketing and non-recoverable client time. Then add in sickness and holidays. I think keeping your categories top level is a good idea — the more granular you make them, the more open they are to interpretation.
This can give you a good idea of what the demand is on your agency. If you know how much time is spent on new business and marketing, for example, you can figure out how long it will take you to grow by your desired amount. There’s no good or bad, right or wrong — it’s simply working out how you can grow over time.
It’s also a good control mechanism in the agency. Sometimes a canny account manager wants to make sure their job doesn’t go over budget, so asks a team member to log time as ‘admin’. You can see then who is doing over and above the amount of admin — hiding the costs of a project is ultimately not doing anyone any favours.
Calculating your achievable income
Ultimately, tracking allows you to see which clients and what type of projects are the most profitable. As you move on from there, you can start to look at capacity forecasting to see what revenue’s achievable with your current staff.
You need to do some basic maths to start with. For example, if you have a design team with 10 people working an average 40-hour week with a 75% utilisation rate, that’s 300 chargeable hours a week. Multiply that by your hourly rate and then by 47 (for working weeks) and you’ll have your projected income from that team.
But… then it can become a bit more complex. To make this figure recoverable, you need to make sure you’re selling 300 hours a week. Otherwise, each designer might be working at 75% utilisation on client work, but you might not be getting paid for it.
Ask yourself: does your proposition enable you to sell 300 hours, week in week out?
You then move on to driving capacity and growth. If you want to grow your business by a third, some of your key people aren’t going to be doing client work, they’ll be doing new business or pitching. And only by planning and accounting for this can you realise this growth.
Consider your agency’s DNA
I’m often asked about ‘average’ utilisation rates. But this doesn’t really translate into the agency world. Some places have a very relaxed culture, teams chatting over breakfast and so on. And this can be really motivating and get the best from them. You could flog them to achieve an average, but who’d want to work there? You don’t want to fundamentally change the culture of your agency – otherwise you’ll be waving goodbye to your talent.
When you get a brief, regardless of the client budget, ask yourself how long it will take to deliver and what will it really cost. If the client budget is below your calculations, you have to look at which of the ‘three Fs’ the job fits into. Fun, fortune, or fame. Less money is obviously not fortune. But maybe you think it will be great project to work on, or good for reputation. Crucially, never reduce your estimate of hours to equal their budget. This will just throw your capacity out of kilter, creating a cycle of negativity for anyone working on that job, as it will inevitably go over budget. Better to say it will take longer than their budget allows, and take a commercial decision based around this. The skill here is to then make sure you don’t go over your own allocated hours!
Is there an alternative to timesheets?
If you’re happy to run your agency based on gross and net profit and KPIs, there’s an argument you could do it. But for your agency to grow you need deeper understanding so you can make strategic change. Who are your best clients? Which are your most profitable projects? Without monitoring, you won’t know any detail here. Using people’s time wisely is one of the best, and ultimately most profitable, things you can do.