1. Nail your project estimates
Creating accurate project estimates is the first step in your profitability plan.
Not only will it help you track progress, but it’ll also help you when you’re negotiating a project’s budget.
Here’s a five-step process to follow:
- Collect the information needed for the project
- Outline project phases and tasks
- Calculate the cost and length of time for each task
- Calculate the total cost of the project
- Identify if you have enough resources to complete the project
Starting with a project that has a tight profit margin will doom your project before it ever starts.
2. Define your project success
Every project should have a scope document which should include the following:
- Scope – what are you doing and why?
- Time – how long will it take?
- Cost – what is the budget?
- Quality – what is expected?
The ‘quality’ of a project is subjective and will vary depending on your project and/or industry. But it more or less boils down to defining what needs to be done. For example, this can be the number of features on a website, the quality of a video, or the number of social posts per month.
Make sure you have every client sign a Statement of Work before starting a project. This should contain the project scope, but it is a binding contract you can use as your safety net if the project starts to go a little off course.
3. Watch out for sneaky client requests
No matter how well you communicate the project plan to a client. They will always throw in a few additional requests.
“Can you just add this in? It won’t take that long!”
You want to keep your clients happy. So it’s pretty easy to get into the habit of accepting additional requests that fall out of scope. But this will quickly lead to your project profits vanishing into thin air.
4. Have regular check-ins with your team
Running profitable projects is not a solo gig. Checking in with your team regularly to get an update on their progress will help better safeguard your profits.
How often should you have check-ins?
This will depend on your time and the complexity of each project, but here’s a rough guide:
- One a week with your whole team
- 2-5 a week with each individual within the team
The goal of your weekly team meeting:
- Set weekly goals and follow up on task assignments where appropriate.
- It gives your team a chance to raise concerns about hitting deadlines.
The goal of your weekly individual meetings:
- Checking in with the progress of tasks.
- Giving feedback.
- Flagging any issues that might make you miss a deadline.
- Course correct them if needed.
Regular check-ins with your team should help to safeguard the project’s profit from taking a hit.
5. Have regular check-ins with your client
The agency landscape is a battlefield. Many agencies offer identical services. So it can be hard to stand out.
What can set you apart from the competition?
Making sure your customer service is second to none.
It doesn’t matter how many new projects or clients you can win. Your business will suffer long-term if you don’t know how to handle your current crop.
Here are four ways to improve your client service:
6. Better understand your team’s utilization rate
Remember I mentioned team utilization rate earlier? Figuring this out will help to give you a better idea of where you can maximize your team’s billable hours.
What is an employee utilization rate? A utilization rate measures the difference between what your team records as time and what percentage of that time is paid by the client (billable).
For example, if you record seven hours on a client project, but only four are billable, the utilization rate would be 57% (4 / 7 x 100).
Working this out across your entire team will give you a good idea of your “billability.”
You can do this by looking at your team’s timesheets and
calculating them manually. But if you’re using Toggl Track, you can view this
within your reports dashboard for quick access to it without a need for
additional calculations.
Even if you don’t bill by the hour, you probably create many of your estimates based on how many hours a task/phase will take.
So understanding how many of those hours are spent on
billable tasks is critical. And for most agencies, the gold standard is that
75% of your total available hours should be spent on billable tasks.
