Utilization rates are the key driver to profitability within digital agencies. Yet.. so many agencies don’t put any processes or systems in place to track it (especially those doing less than $5 million in annual revenue).
A healthy agency is said to operate at ~$135,000 – $185,000 per employee, which is certainly easy enough to calculate. However, are you able to answer the following questions at a glance?
Managing utilization is hard.
You need to get your resources tracking (and reporting on) their time, and then put some gates around how you manage it. An ideal agency will run “hot” at 105-110% utilization. This is where you are maximizing your profits, but also can risk burning out your best team members.
When you put resource management processes into place, you will have an immediate way to understand how your entire agency (and team) are operating on the day to day, and gain insight into your revenue, profitability, and team looking into the future.
I designed the Agency Resource Manager to be completely data-driven, automating 95% of your resource management and profitability tracking.
This is your 10,000 foot view of what’s going on within your agency.
At the highest level it’s showing you your total available resource hours (budget), the hours allocated, and each resources utilization rate (also conveniently grouped by departments).
This gives you a snapshot of how you’re doing “at a glance.”
If most of these hours are from Contractors (like they should be in the beginning) than it’s important to note that your utilization rate may seem artificially lower, even though you’re running efficiently from a profitability perspective.
You can use the “Time Period” selector in the upper left corner to filter this forward or backwards in time to see all of your numbers over time.
This is where you setup a department for all the services you provide. You add the name of each department and the rate you bill for (not your cost, we’ll calculate that later).
Next we’ll add in all the resource we currently utilize. This includes Full-Time, Part-Time, and Freelance / Contractors.
For each resource you’ll need to add in:
It’s important to also understand how Resource costs are calculated (so you select the right employment “type”)
What the tool does is now create a unique sheet for this resource, and sends it to the email you input.
This will be this resources task management and time tracking log that they will update. It also creates a copy of that sheet as a new tab within the tool, which is your read-only view into the resources current task load (and status).
They will be sent an email with a link to their unique sheet:
You will need to authenticate their sheet’s connection with the tool (one time only).
Once all your resources are added in, you’ll have a full picture of your team within you Resources tab:
This is where this really starts to get cool.
Next you’ll need to add in the details for each of your clients. The nuance here is you want to add in Clients AND prospects (so any leads you have in your pipeline) as we will set up statuses for each so you can project both revenue (and profitability) but also total hours needed (for staffing) for the coming months.
For each client you’ll add:
*All of this information can be edited at any time.
Once you have your Clients loaded into the tool, you’ll be able to quickly see:
So within the tool you have 2 ways to view tasks:
All tasks in the tool are attached to “Deliverables” – so you’ll need to “Add Deliverables” from the Resource Manager Menu:
A “deliverable” is just a set of tasks grouped into a process. As an agency owner, even if you only sell services, this is how you “productize” them so they are standardized and can actually scale.
Let’s add in a Deliverable for one of our common products at FTF; the website quality audit.
One of the most important aspects I’ve discovered working with agency owners is almost none of them charge enough for their project management time. The tool is setup to help build this into your core operations, which is best done by:
Once you’ve gotten your deliverable templates all loaded in, we can start assigning some tasks to resources.
Once tasks are assigned, they’ll automatically push into each individual resources TimeLog sheet:
Then as your resource add in their incurred hours (via the light yellow column “Actual Hours”) and update the “Status” of each task, it will push all of that data back into your master Agency Resource Manager Dashboard.
Which then automatically updates in your Dashboard:
This is probably the slickest part of this whole tool.
The projections tab pulls together all the information across all the rest of the datasets to give you an “at a glance” view of what your production schedule currently looks like.
It shows all the “planned” hours that are assigned to each department and drives projections based on probability percentages that you set within the “Contract Statuses” tab.
The default contract statuses and conversion probability percentages are made up of 10 stages:
These can all be edited to match your exact sales process and pipeline conversion percentages.
When you add a new client (or prospect) into the tool it add in both their contract values (hours and price) but also then aggregates all the data for all the tasks that are assigned across all resources for that client, multiplying both the projected hours and the projected revenue by the conversion percentage correlated to the stage of the contract.
What this means is when you have a new lead, you should add the financial details and the production details, i.e. the estimated scope of work in terms of deliverables and tasks, into the tool.
Once all of your data is loaded into the tool, keeping it up to date is actually quite easy. Whether it’s you (if you’re the owner), your head of operations, client services, or project management – update the sheet Friday afternoon and then use it to run a weekly utilization meeting with all of your department heads every Monday or Tuesday.
I promise you’ll be amazed at how quickly you start to dial in your profitability.
Drop them below in the comments and I’ll answer every one.