Could your digital agency be more profitable? Many agencies have an unidentified problem that affects their profits and hampers growth. Today I’m revealing the unseen problem damaging agency profits, and identifying four actionable solutions.
The Profitability Problem
As digital agencies grow, you reach a point where the directors need to transition from an operational role to a strategic one, managing the agency’s team and workload to encourage continued growth.
However, for many directors this is unfamiliar territory: they are used to doing the work, not planning and strategizing. This can mean that agency projects and resources aren’t being managed effectively, which affects the agency’s profitability.
This is because the change from operational to strategic roles require a shift in mindset, from looking in detail at what’s required for each project, to taking a step back and getting an overview of all ongoing and upcoming projects, as well as staff utilisation and resource.
How This Affects Your Agency
To maximise your digital agency profits you need to be able to identify:
- Your agency’s most and least profitable projects, along with common trends such as similar types of work that are consistently very profitable.
- How much time you’re spending on a project compared with how much your client is billed.
- Key skills within your team and how they are being utilised.
If an agency director doesn’t know how to plan, track and manage agency time efficiently, this will impact profits, as well as causing:
- Staffing problems, when the agency’s workload is too large or small for your existing team, and you need to make swift hiring or firing decisions.
- Your agency workload to fluctuate greatly, rather than being stable and predictable which is necessary for growth.
- Resource problems by not managing team skills effectively, meaning that an essential employee is busy working on a different project when they are required for the next stage of your new project.
How to Solve Your Agency’s Profitability Problem
1) Track Time
Even if your agency doesn’t work on a billable hour model, it’s vital that your employees track their time accurately in order to identify your agency’s most profitable projects. Using a resource management tool will allow employees to track their time, and additionally provide agency directors with an overview of how long projects take and how long specific tasks take their team members.
This will allow them to reallocate tasks in future if they have identified an employee who can do a task more efficiently than their colleague, to improve agency profitability.
2) Track Your Resources
By “resources” I mean your employees’ skills, your agency’s time, and your budget. You need to do this across the whole agency and all of your projects to make sure you are using your resources in the most efficient way. This will help you avoid un-billable downtime, project conflicts and staff shortages, which can all affect your agency’s profits.
3) Spend Time Planning
It’s easy to neglect project planning if your agency is always on-the-go with client work – especially if you’re more used to doing the work rather than planning it. It can feel like you’re wasting time, but time spent planning will save you time later on in the project when you’re scrambling to resolve unanticipated problems.
Planning time helps you anticipate the agency workload and ensure you have appropriate staffing levels for the work in the pipeline.
4) Take a Step Back
This is a mindset shift required by directors taking on a strategic role on the agency: it becomes necessary to look at the big picture rather than focusing in on individual projects or tasks.
Your agency may already be using a project management tool to allocate tasks and keep projects on track, but a resource management tool will enable you to get an overview of your agency’s time, workload and staff so you can identify what you can change to improve your agency’s profits.
Download our free eGuide to learn more about making your digital agency profitable.