How to boost your profits:- Your utilization ratio is the magic metric!
Smart businesses in the creative sector already know that the key to making a profit is keeping all your billable people fully utilized.
Most agencies and design shops look at profitability per employee, and while this is gives an overall contribution per colleague $ figure for the agency, it doesn’t get to the monthly, weekly or daily rate.
A good account handler can have a great quarter but the remaining ¾’s can be just average. You don’t want to be propping-up expensive staff at the expense of everyone else in the Firm.
How to get at the real numbers
OK, so how do you measure this metric? It’s a very simple piece of math:
Divide your working hours into your billable hours and the resulting ratio should be around 80%
You may have a good time sheet system in the agency, or perhaps another billing tool.
Measuring the results is pretty easy- the key fact is managing the outcome.
Without an agency-wide view of resource utilization your agency has an incomplete picture. You can’t forecast your needs to meet client demands, or spot the trends in your billing without an agency wide view of resource utilization.
How can you get your people to bill out 80% of the working day?
For some agencies its really tough, especially those firms that can’t measure their metrics. It requires a discipline from account handlers to meet their personal goals, and that only comes from a ‘can-do’ culture with a supportive management ethic. Some firms simply don’t have the required volume of active clients at the moment, what with the Economy the way it is.
Don’t ignore the issue.
If your firm has no way of knowing how well it is performing then you can’t make the decisions you need to find new business and seek out more work.
All you are left with is crude cost-cutting tools, or at worse layoffs.
The temptation to look at overheads and just take a scalpel to them is not the only way out of a recession of a progressive business.
Agency efficiency and performance is there for the taking- you just have to look in the right places and use the best tools available to help you get there.
Paprika delivers software that will give your creative organization the tools it needs to pull in those profits!
Find out now by booking a demo