Managing billable time in creative agencies can be challenging. It’s essential to ensure employees stay productive and the agency remains profitable. In this blog post, we will explore critical aspects of managing billable time in creative agencies, offer solutions, and provide insights into finding 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:
- People are not productive for every hour they’re on the clock.
- There’s no contingency time for when things go wrong.
- It can lead to burnout.
A better solution for managing billable time in creative agencies is to calculate staff productivity at a maximum of 80% per day. Expecting people to work more than 6.5 out of 7.5 hours isn’t realistic. This percentage should be even lower for roles like people management and marketing, where employees also spend time promoting the business or working internally with the team.
Time Tracking for Managers and Delivery Staff
Managers often switch between tasks, making time tracking more difficult. One approach to managing billable time in creative agencies is to book delivery staff in slots of days or half-days. Establish a minimum block for managers to account for all the time they spend on client work. This balance acknowledges the time spent thinking about and working on client business without requiring them to log every minute.
Creative agencies can also benefit from using project management tools that facilitate managing billable time. These tools give visibility into team members’ workloads, helping managers distribute work evenly, prevent burnout, and ensure client projects are completed on time.
Solution 1: Task-Level Time Tracking
Tracking time at the task level is a crucial strategy for managing billable time in creative agencies. It helps avoid underbidding future projects, identify profitable clients, and maintain overall profitability. However, agency owners and managers need realistic goals for the percentage of time billed to clients. Billing eight hours a day often 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 can provide valuable insights. These tools help agencies see which tasks take more time and which team members are more efficient. This data can improve project estimates, allocate resources more effectively, and identify areas where team members may need extra training or support.
Solution 2: Value-Based Pricing and Sprint Methodology
Instead of focusing only on billable hours, consider a value-based pricing model as part of managing billable time in creative agencies. Analyze the value a project creates for clients and capture a portion of that value for the agency. This approach can lead to significant revenue growth and a more sustainable path forward.
Also, consider using a sprint-based project management approach. This method involves working in two-week cycles. It allows for flexibility in adjusting project scope and provides frequent updates to clients. This approach can increase utilization, motivation, and help teams focus on larger projects.
Sprint methodology also encourages regular communication and feedback between the agency and the client. This ensures that project expectations align and allows for adjustments as needed. This collaborative approach strengthens client relationships and increases the chances of repeat business.
Solution 3: Results-Based Approach
Another strategy for managing billable time in creative agencies is to focus on results rather than tracking hours. Different people have different skills and will take varying amounts of time to complete tasks. Judge and charge based on results, not hours. This approach can boost motivation because team members know they will be recognized for their accomplishments, not just the time spent.
This results-based approach may require a cultural shift within the agency. Open communication with clients is also crucial 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
Educating clients on the benefits of value-based pricing or a results-based approach is key to managing billable time in creative agencies. Sometimes, clients resist these approaches, especially if they’re used to paying for time spent. Agencies need to manage client expectations throughout the project.
Emphasize the value your agency brings, and explain how focusing on results will lead to better outcomes for their business. Share case studies and testimonials from other clients who have succeeded with this approach. Offer complete transparency in costs and deliverables.
Managing billable time in creative agencies is crucial for running a successful business. Adopting a mix of task-level time tracking, value-based pricing, and results-based approaches, along with sprint methodology, can increase profitability and sustainability. Educating clients and managing their expectations is also key to success. Equally important is focusing on employee well-being and development. By balancing these areas, creative agencies can thrive and enjoy long-term success in a competitive industry.