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Agencies can turn processes into profit

As far as business efficiency goes, the marketing and communications sector is proving itself to be a pioneer in the processes of client billing and resourcing.

In our agency survey ‘The Hunt for Profitability’ we interviewed more than 300 senior decision makers from marketing agencies and discovered that an impressive 72% of UK agency time is actually billed to the client.   This makes for impressive reading, I’m sure you’ll agree. But, as an agency leader, how does your firm compare to this statistic? Are you getting paid for almost three quarters of the time you are open for business? If the answer is ‘no' - or even worse “don’t know” - then it is time to review some of your processes.

Small changes to increase profitability:

Luckily, this doesn’t have to mean a major overhaul of your company. It doesn’t even have to mean a large investment. This is because improvement is often achieved by taking incremental steps towards simple, internal integration.

I’d therefore like to propose the following ways of increasing your agency's profitability. Firstly, I have some tips that will have a speedy impact on your business. Then I aim to offer some suggested improvements that will have a more long-term impact on the success of your bottom line. Finally, I’ll wrap up with some advice on how to better manage and streamline your processes for improved results.

For immediate steps to higher margins:

• Clearly communicate how your staff should be booking their time and aim to banish inconsistencies – the ‘Achilles heel’ of many agencies when it comes to accurate time recording. Consistent understanding of the process will avoid building a misleading picture of the business, for instance where half your team book time spent on new business to a ‘pitch’ code, and the other half writing off time to the dreaded ‘admin’.

• Increase the amount you bill through better time keeping to avoid valuable hours getting 'lost'. Offer employees a system that can be easily updated on the go, via their smart phones for instance. Research clearly shows that agencies with employees that routinely track and log time throughout the day will bill more hours compared to those that have to twist the arm of their creatives to account for their time weeks down the line.

Longer-term planning and business development:

• Deploy a system that displays the people resources you have available at any given time – including their skills and experience. That way you can be sure each project is staffed with the most appropriate and cost-effective support. Small improvements in planning work have an exponential improvement on your agency bottom line, for example, it can help you cut back on unnecessary freelancer costs by helping utilise the in-house resources already available.

• Employ a business system that gives you a complete, real time view of projects, showing all client related work - current, past and proposed. Use the comprehensive view to improve decision making in the future to answer questions such as: ‘What can we learn from previous projects? What will work well next time around? Where did we overspend?’

Streamlining and managing workflow

• Update outdated software. Look for documents that are prepared in Word, projects being managed through spreadsheets and resources being scheduled through inadequate project management tools.

• Identify areas where data is replicated in more than one place. An enterprise resource planning (ERP) system will store timesheet, project management and invoicing information in a central hub – making sure duplication is a thing of the past.

• Expand budgeting and pricing responsibility beyond the delivery team to the financial department and senior management and ensure consistent visibility into internal and external business issues that could impact profitability.

The marketing and communications sector is currently strong and well-resourced according to our survey. Furthermore, 78% of agency owners expect to have seen moderate business growth by the end of the year, compared with 2011.

For your own agency, a prosperous future could also be within reach, and it could be as simple as employing a centralised business system and a collaborative working approach.

With a refocus on your own company’s processes, and some small but significant changes, you too can look forward to a thriving future in this exciting industry.

Neil Davidson is the managing director of Deltek UK Ltd, a leading provider of enterprise software and information solutions for professional services firms.

Neil Davidson is the managing director of Deltek UK Ltd, a leading provider of enterprise software and information solutions for professional services firms.