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6 ISSUES MDs FACE


SIX ISSUES MDs FACE

Insights from UK MDs of agencies, consultancies and other project-based businesses

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DRIVING PROFITABILITY

This topic currently has 6 articles.


1. Having the tools to improve profitability

How do you make a business more profitable? There’s so much we can talk about on this subject.

Saving staff time, for a start. It's number three on Synergist's '7 Ways to Increase Agency Profits'and its Consultants' version. It’s a key reason why agencies get a system. Michelle Earl, Managing Director of Earl & Thompson, said after installing Synergist:

“Many of the tasks which had taken weeks in the previous system could be reduced to hours, and...would certainly improve productivity and profitability. The system allows us to see exactly where we are with every job in terms of profitability and progress.”

For the record, the other six on the list are:

  • Staff Utilisation
  • Job Health Monitoring
  • Better-Informed Decision Making
  • Resource Scheduling
  • Accurate Estimating
  • New Business Pipeline Management.

Each of those is a huge subject in itself, and all are tool sets that Synergist provides. For now, let’s focus on the old thorny issue of identifying which jobs are contributing results to your agency and which fail to do so. Kent Valentine of Draw told us:

“Proper data... pulls everyone together, shows which projects are going to be profitable and which aren’t”.

John Wilford, MD of Rave, used much the same language:

“Thanks to Synergist, the agency now knows which jobs are profitable and which aren’t”.

And Lisa McLaren, Director of Finance & HR of Clickthrough, made a point about profitability being linked to integration:

“Before we went with Synergist, our time wasn’t integrated with revenues. We couldn’t track capacity or client profitability. We used lots of spreadsheets. Information was never up to date.”

So profitability depends on having information that’s up to date. And that depends on team members entering data. And that, in turn, depends on how easy it is to use the system. After implementing Synergist, one company told us:

“There’s definitely more job ownership and responsibility given to users, and because it’s so easy to use, everyone is far more likely to add new information as they go rather than have a last minute rush at the end of the month. This leads to greater accuracy of up-to-date information, happier clients and ultimately more profit for the company.”


2. Knowing when to let a client go

Let's start with why service providers are let go, because it's instructive here. According to HubSpot’s ‘Why You Get Fired’ there are several areas of the agency-client relationship that you should continually qualify:

  1. B.A.N.T. Budget, Authority, Needs, Time. The fundamentals of a business relationship.
  2. G.P.C.T. Goals, Plans, Challenges, Timelines. The deeper, longer-term issues needing to be grasped.
  3. Shared common values and attitudes.
  4. Personnel, Skills, Technology. Will you have the pieces in place at that time to succeed with the project?

Lots of small mistakes, or one big one? HubSpot say that it’s almost never a major mistake that leads to you getting fired; it's a lot of little things that add up over time.

What about chemistry? PR Week once wrote that “Agencies fret. Like an insecure lover, they live in constant fear of being dumped.” A report which revealed that 51 per cent of agency respondents thought personal chemistry is what matters most in client/agency relationships. However only 19 per cent of clients thought so. For clients, results come first. Chemistry may not be as big a deal as you think.

Firing can go both ways.

So, on to businesses firing clients. It obviously does happen. Lisa McLaren, Director of Finance & HR of ClickThrough Marketing, installed Synergist and told us that they then made a discovery:

“Synergist showed us that we had been grossly over-servicing one big client for a long time.

“Before Synergist we had never been confident enough to risk letting a client go. But now the data is clear. We know the time spent, job history, our capacity, everything. Previously, we acted like the client had us over a barrel. We don’t do that anymore.

“For any agency, decisions like this are really hard if you don’t have all the facts. They are so much easier when you do.”

Simon Butler, co-founder of Purestone (recently becoming part of the Lewis Pulse group) also thinks that turning work away is made practical through information. He gave us his perspective on this:

“We felt sure that we’d been over-servicing a particular client, but with our [previous] system we couldn’t prove it. It was obvious we needed to know profitability by client, by project and by project type, plus connect with our financials.”

They then installed Synergist:

“It tells us that we need to turn some jobs down. And we have done that. It’s based on knowledge. You know you’re right in those circumstances."


3. Improving estimates

Do many people enjoy creating estimates? It’s maybe not the world’s most thrilling task, but the risk of getting it wrong is considerable. Underprice, and you lose money even if the project is delivered perfectly. Overprice, and you can scare a client away, perhaps for good.

Of the two, it’s underpricing that is surely the more common problem. There are many reasons given:

  1. There’s often a tight deadline. When in a hurry, there's the temptation to err on the low side because you worry that your prospect/client could go elsewhere.
  2. If business is slow at the moment, it’s tempting to pitch slightly low to help win it.
  3. It’s hard to quickly pull together elements of previous jobs for comparison because there may not be a perfect match, and what information you do have is scattered.
  4. There may be some flexibility in the job because certain aspects are open to interpretation. If the job is won, you hope be able to steer the job to meet the budget.

But let’s see what difference a serious system could make. With Synergist the estimate is a financial model of the job, fully connected to the rest of the agency management system. So:

It pulls together all previous estimates and quotes into one place, making it easy to compare jobs and learn from previous experience.

It prompts the user to consider the details of what’s required to do the job, whether basing it on a template, an existing job or from scratch.

It displays the estimated cost and recommended charge for doing the job, based on either standard or client specific rates, and hence the margin you work on.

The estimate can then be automatically reformatted to build a quotation.

It can be quickly edited and sent to the client as a PDF in your brand via email (created automatically in your standard email package).

When you win the job, the estimate / quotation becomes the budget for it, allowing the various components to be allocated to people or teams.

It gives you a live view of how the budget is being used, allowing you to identify problems for early rectification as the job progresses.

It allows you to record agreed changes to the job ensuring clear records and accurate billing.

Using the system helps address all four of those common underpricing issues, because:

  1. It’s fast to do.
  2. You can accurately build in whatever margin you want.
  3. Even if you don’t have a perfectly-matched previous job, you have all the information of all jobs at your fingertips, so finding useful parallels is speedy.
  4. You are far less likely to get in a position of quoting for work that lacks clarity. Synergist makes it easy to communicate the elements and phases of the job and the subsequent progress on it. Clients greatly value this transparency.

Another bonus is that the system becomes ever more valuable over time, as more and more job intelligence is built up. Phil Robinson, Founder and CEO of ClickThrough Marketing, installed Synergist and told us:

“Time is completely visible now. It’s helped us improve future estimating and quotes and a lot more. What it gives us is phenomenal. It’s given us efficiencies from beginning to end”

And Kent Valentine of Draw said, after implementing Synergist:

“We used to spend masses of time searching for information or pulling together reports or estimating work or doing invoices. Such a waste. Now, that’s all cleaned up. It leaves more time for client focus.”

A final thought. Such a system makes it far easier for team members to create estimates themselves instead of relying on one person. David Ladds, Director of Bladonmore said:

“We don’t need an estimating department, we need everyone to be given the tools and the data to estimate their projects accurately.”

And Steven Hunt, the founder of the Liverpool consultancy in his name, said:

“Another benefit is that today, everyone can estimate fees. It doesn’t just fall onto my desk.”


4. Reducing over servicing

The Agency Works carried out research showing that 66% of agencies in the UK are over-servicing. Jay Neale, MD, says:

“It highlights a dangerous cycle of recruiting people to eventually over-service clients.

“This over-servicing has become the bedrock of financial challenges for agencies today. Frequently clients are demanding work that costs time, effort and resource, yet agencies are not getting the financial recognition for their work. 66% of the agencies that took part in the research saw their biggest financial challenge as over servicing; 48% saw their biggest challenge as increasing profitability.

“Over servicing and reduced profitability go hand in hand, resulting in this vicious cycle of driving new business to increase the profitability, which in turn is over-serviced and subsequently, becomes unprofitable.

“The real challenge is to manage the over-servicing and to increase the profitability before driving more new business.”

Here are the views of five managers on the subject of over-servicing. All now use Synergist. First up, Phil Robinson, Founder and CEO of ClickThrough Marketing:

“Synergist showed us we had been heavily over-servicing. We also see patterns in the over-servicing now. For example, by client type. Very useful.”

David Ladds, Director of Bladonmore, said:

“Over-servicing isn’t automatically wrong, but you need to know exactly where it’s going on.”

After implementing Synergist, Chief Executive Julie Clare of Clear Communications told us:

“Clear has been able to reduce over-servicing considerably.”

Liam Herbert, MD of JBP London, said:

“The system has highlighted and helped prevent over-servicing”.

And Steven Hunt, founder of consultancy Steven A Hunt & Associates, told us:

“Sometimes a client asks a favour and wants some extra work without paying more. Our engineers like to help where they can. It’s natural. But we just need to know where it’s happening, so we can monitor it. And that is what happens now.

"So our engineers can now sit down with the client and show what’s happening, and they can articulate exactly when an extra fee is needed. And clients respond to that. It’s in the open. Whereas before, we would just leak away those extra hours and lose them.”


5. Saving time

What’s the real impact of saving time? Is it the money saved? The productive time released? Or faster access to information?

We discussed it with no less than six business managers who use Synergist...

Kent Valentine, Director of Draw, told us that it’s all about releasing more time for clients:

“We used to spend masses of time searching for information or pulling together reports or estimating work or doing invoices. Such a waste. Now, that’s all cleaned up. It leaves more time for client focus.”

Steve Lawrence, Operations Director of LHM Media, emphasised the speed involved:

“We can immediately see the state of net sales. It only takes a second. We can now get live results like that at any time of day.”

Deep Sangar, Production Manager of Clevercherry, also picked up on the speed angle:

“It tells me immediately about the state of every job, the requisitions, the time remaining, the time quoted, everything.”

Paula Murray, Financial Controller of Leith, told us that their previously laborious month-end procedures took 10 days of long hours, and are now completed in 5 days even though the volume of work passing through the agency has almost doubled.

“The time it has freed up is now used to monitor the reports available from Synergist. This means we can now act on the information we have, rather than just collecting it, which has allowed us to improve significantly the efficiency of the whole agency.”

Several focused on the avoidance of pain. Andy Wainwright, Fifth Ring’s Operations Manager, told us:

“The biggest impact has been the huge reduction in tiresome and repetitive administration tasks, which has resulted in a considerable time and cost saving for the agency.”

He went on:

"Given the time saved on administrative tasks alone, I would not be surprised if the investment has paid for itself already, and we have yet to use all its capability."

It’s one thing to reduce pain. But can an agency management system actually deliver pleasure? Matt Fairweather, founder of the agency in his name, thinks so:

“Having made the decision to install Synergist we have not looked back. It is far quicker and more user friendly than the previous package, and reporting at the end of a month is a pleasure rather than an extended, time-consuming chore.”

But can the time saving be quantified? Let’s return to Steve Lawrence of LHM Media. When we asked him if he could put some numbers on time saved when using Synergist compared with their previous system, he did some analysis calculated that 41 hours per month were being saved across the company compared with their previous system. Costed at £90 per hour, that equates to £3,690 saved per month.

 


6. Reducing cost overruns

Why do clients terminate relationships? A 2015 report by SoDA showed that in the agency sector Cost Overruns came second, beaten only marginally by Needs Outgrew the Agency’s Abilities. So cost overruns are dangerous: at stake is the real risk of losing clients. 

When we met Alexandros Iakovidis, Managing Director of Europe Economics, he told us that they had been juggling spreadsheets for a long time. This had caused ‘all sorts of difficulties’ for the successful consultancy.

When he viewed Synergist he realised that it would replace the vast majority of the spreadsheets and help the team find information much more quickly than before. But what was particularly crucial for him was its ability to identify projects that were overrunning. 

After implementation, what were his main observations? He said:

  1. We have seen a reduction in project overruns.
  2. It allowed us to have a more timely view of costs and profits.”

Steven Clark, Financial and Commercial Manager of Tayburn, mentioned cost overrun tracking as part of the overall landscape that Synergist tracks for them now:

“Synergist pulls everything together. We track income, work in progress, cost overruns, margins, time utilisation, profitability analysis – everything comes from Synergist”.

By the way, Steven has strong views about the impact a management system can have on a company. He said:

“If Synergist was somehow taken away from us, it would be worse than us having a fire. We have disaster recovery for fire. But not having our system would bring delays in everything we do, and we’d lose the visibility everybody wants.”

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