Rethinking Billable Time in Creative Agencies: Striking the Right Balance

Managing projects and tracking billable time effectively in creative agencies can be challenging. It’s essential to ensure that employees are productive by working them properly and ensuring that the agency remains profitable. In this blog post, we’ll explore various aspects of billable time, discuss some possible solutions, and provide insights into striking the right balance for success.

The Issue with Billable Time

Billable time is often tracked by counting the hours an employee spends working on client projects. However, this approach can be problematic for several reasons:

  1. People are not productive for every hour they’re on the clock.
  2. There’s no contingency time for when things go wrong.
  3. It can lead to burnout.

One possible solution is to calculate staff at a maximum of 80% per day, as it’s unrealistic to expect people to work more than 6.5 out of 7.5 hours. This number should be even lower for roles such as people management and marketing, as these individuals spend time promoting the business or working with the team internally.

Time Tracking for Managers and Delivery Staff

Managers often jump between jobs for short periods, making time tracking more difficult. One approach is to book delivery staff in slots of days or half-days and establish a minimum block for managers to account for all the time they spend on client work. This strikes a balance between asking people to log an hour for something that takes a few minutes and acknowledging the time they spend thinking about and working on client business.

Creative agencies can also benefit from implementing a project management tool that allows for easy time tracking and provides visibility into team members’ workloads. This can help managers distribute work evenly and prevent burnout while ensuring client projects are completed on time.

Solution 1: Task-Level Time Tracking

Tracking time at the task level helps the agency avoid future underbidding projects, identify profitable clients, and maintain overall profitability. However, agency owners and managers must have realistic goals for the percentage of time that can be billed to clients. Billing eight hours a day typically requires 10-12 hours of actual work. Aim for 70-75% of billable time for employees and 60% billable time for the agency as a whole, including non-billable employees.

Using time-tracking software that integrates with project management tools allows agencies to gain insights into which tasks are more time-consuming and which team members are more efficient. This data can be used to improve project estimates, allocate resources more effectively, and identify areas where team members may need additional training or support.

Solution 2: Value-Based Pricing and Sprint Methodology

Instead of focusing solely on billable hours and utilization rates, consider adopting a value-based pricing model. Analyze the value a project creates for clients and capture a portion of that value for the agency. This approach can lead to more significant revenue increases and a more sustainable growth trajectory.

Additionally, consider utilizing a sprint-based project management approach. This method involves working in two-week cycles, allowing for more flexibility in adjusting project scope and more frequent releases to showcase progress to clients. This can increase utilization, motivation, and help teams focus on single large projects.

This methodology also encourages regular communication and feedback between the agency and the client, ensuring that project expectations are aligned, and adjustments can be made as needed. This collaborative approach can lead to stronger client relationships and a higher likelihood of repeat business.

Solution 3: Results-Based Approach

Rather than tracking time and billable hours, focus on the results your team can deliver. Different people have different skill sets and will take varying amounts of time to complete tasks. Judge and charge based on results, not the hours spent on a project. This approach can lead to higher motivation levels, as team members know they will be recognized for their accomplishments rather than just the time spent working.

This results-based approach may require a cultural shift within the agency, as well as open communication with clients to manage expectations. It’s essential to set clear goals and performance indicators, so the agency and the client can accurately measure progress and success.

Solution 4: Educating Clients and Managing Expectations

Sometimes, clients may be resistant to the idea of value-based pricing or a results-based approach, especially if they’re used to paying for time spent on projects. Agencies need to educate their clients on the benefits of these methods and manage their expectations throughout the project.

Emphasize the value your agency brings to the table, and explain how focusing on results rather than hours will lead to better outcomes for their business. Share case studies and testimonials from other clients who have experienced success with this approach, and offer complete transparency in costs and deliverables.

In conclusion, managing billable time effectively is crucial to running a successful creative agency. Adopting a combination of task-level time tracking, value-based pricing, and results-based approaches, along with implementing sprint methodology, can lead to increased profitability and sustainability. Educating clients and managing their expectations is also key to success, as is focusing on employee well-being and development. By striking the right balance in these areas, creative agencies can thrive and enjoy long-term success in a competitive industry.

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