Get Super-Profitable in 6 Steps: Step 4 - Ground Rules
As accountants specialising in creative businesses, The Wow Company has worked with hundreds of creative agencies over the years, from start-up to £5m turnover. They regularly look at what their top performing clients are doing, so we asked them to share their unique insight into how to create a super-profitable agency.
Setting ground rules makes projects run more smoothly.
Step 4 - What Are Your Ground Rules?
Last month, we looked at the impact of technology on your project profitability. This month, we focus on some of the ground rules you can implement that will make your projects run more smoothly and more profitably.
Computer says yes!
It’s all very well having great technology, but it’s more important that you have internal processes in place to make the most of the software you use everyday. How often do you review project profitability? At what point does someone flag up if a job is running behind? Who is responsible for ensuring projects run profitably?
We see our top-performing clients getting the whole team involved in increasing project profitability. Timesheeting is an essential part of this, although it is often met with resistance from staff. The key is to explain how completing their timesheets will help them demonstrate their worth to the business. How will they justify a pay rise without them? If you can get the internal systems right and get the whole team focused on project profitability, then it won’t be long before the technology will give you the answers you want.
Be boring
Before you start a project, unless you properly scope out exactly what work you're going to do (and what you're not going to do) it'll only come back and bite you on the backside further down the line. We know it's boring, but a day spent scoping a project and getting it signed off by a client will save you two days later on in the project, or will mean that you can bill for these two additional days, where previously you'd be working for free.
It’s also important to be really clear what exactly the client gets (and doesn’t get). Is it a complete website fully loaded with content, or is it a template CMS which they need to configure and add content to themselves? It’s also really handy to be clear about who does what and when. Having clear deadlines with clients increases efficiency, as everyone strives to get things done before key dates, as opposed to endless tinkering, resulting in lost profit.
Tweaking nine to five
As part of your scoping document, it's important to be clear about how many rounds of amends there will be. This avoids the situation where clients are constantly tweaking. If you state at the outset that the fee includes two rounds of amends then, when they request the third round, it's chargeable. Simple as that.
It’s also worth grouping any change requests together. If you have clients that send you these every 5 minutes, it's incredibly costly to make all these changes individually. You have to stop what you're doing, switch projects, make a small change and then switch back. A much better way to do it is to get your clients to send you amends all in one go. If they still send you things every 5 minutes, you'll need to have the internal discipline to group all these changes together - it'll save you tons of time (and money).
Pay as you go
If you don't charge clients for amends, they'll have you flitting between different shades of blue for an eternity. By having a minimum fee for any changes, e.g. £250, you'll force them to think about how important it really is to "make the full stop a bit bigger." When there's a price tag attached, there's a good chance they'll decide it wasn't that important after all. And if they do want to make the change, then at least you get paid for it.
When making these changes, don’t forget to bill throughout the month as you do them. Don’t wait until the end of the month to send the invoice - that’s wasted days when the invoice could have been processed by your client and the money sat in your bank account. Get them to pay as you do the work.
Top tip for more profit: Be upfront - It's important to let clients know how you work right at the outset. If you lay down the ground rules in your initial project scoping document, you've got a great chance of ensuring your projects are profitable.
Looking to increase your profits?
If you’d like to discuss the difference a proactive accountant could make to your profitability, call Wow on 0845 201 1580 or email info@thewowcompany.com