Your Business Using an End-to-End Agency Management System
How profitable is your agency? What do the upcoming few quarters hold? We cover how to get the most out of your agency management system so you can future-proof your business.
No one can fully predict the future of their business. Multiple tools and spreadsheets will be no help in predicting the future either, though. In the rapidly shifting digital world, the right agency management system will synchronize your entire team.
Your agency management software needs to tell you how well your resources are being utilized, how profitable your agency is, and what the upcoming few quarters hold, to some extent. Because that’s where all your agency’s most important decisions will come from—your business insights.
In the following chapters, we cover how to get the most out of your agency management system so you can future-proof your agency business. This guidebook is meant to provide information to all—from agency novices to agency leaders.
What Is End-to-End Agency Management?
The term end-to-end agency management refers to leading and running complete workflows that happen within an agency business. Managing an agency end-to-end means having a 360-degree view of your organization—from sales activities to billing projects.
What Is an Agency?
The core business of every agency—regardless of the industry it serves, be it full-service or specialized—is to provide services to other businesses.
Since agencies offer services to clients, much of their success depends on meeting client expectations. Also, what’s common for most agency-type businesses is delivering services through workflows. In agencies, workflows are typically called projects.
So, you might believe that the success of projects relies on project management. But there’s much more to project management than delivering tasks quickly and efficiently. The success of most projects relies on your agency’s ability to deliver them in a way that positively impacts your agency’s overall financial picture.
Will you make money from that project or not? Will your teammates burn out in the process? Do you have more work scheduled after this project, or will you deliver it and have nothing left to work on? An end-to-end agency management system helps you answer all these questions and keep your business afloat.
Examples of agencies and service businesses:
Software development agencies, marketing and advertising agencies,
design agencies, public relations agencies, etc.
Professional services companies (software implementation services,
architecture bureaus, construction firms, real estate agencies, etc.)
Consultancies (business strategy, IT, human resources, financial,
The core business of every agency—regardless of the industry it serves, be it full-service or specialized—is to provide services to other businesses.
Aspects of End-to-End Agency Management
Generally speaking, the biggest overall challenge in agency management is optimizing project management workflow. Your business will want to make sure that:
You have a dedicated virtual space for sales opportunity tracking and customer relationship management
You know how much you should charge for your services so that you make a profit
You have upcoming work scheduled in the sales pipeline and resource management areas of your tool
Agency project management is handled in one place, which is especially important because of remote team collaboration and client-agency collaboration
You are able to monitor key metrics, such as utilization, in real time
Each and every employee is tracking time, both billable and non-billable
Your workflow is streamlined, optimized, and all your teammates know what they are working on and why
Business intelligence and reporting are available in a few clicks, not in a few hours or days
Every completed hour of service is billed to your clients
In the following chapters, we’ll cover all the key aspects of agency management: from project workflows and resource planning to monitoring your profitability and billing clients.
Running an Agency
Because effectively managing operations is the pillar of successful project management and a foundation for increasing agency profit margins, running day-to-day operations in an agency platform is key for your agency’s success.
In the next five chapters, we’ll cover the pillars of running your business in agency project management software:
Customer relationship management
Project management workflow
Profitability and financial metrics
Billing and invoicing
Customer Relationship Management
New business acquisition is a crucial component of successfully running an agency. After all, if you don’t have new projects coming in, you will quickly see the consequences on your bank account.
When your agency management system has an embedded sales solution in it, you can forecast revenue, and planning resources gets easier. Not only will an embedded sales funnel let you quickly turn won deals into projects, but it’ll also help you save time on passing new customers onto project managers. With a detailed history of communication with prospects and new clients, you’ll have much more transparency in managing customer relationships.
When everyone in your agency has access to details regarding initial sales deals, you’ll avoid major issues like misalignment, overpromising, or lack of consistency within your team.
To balance your incoming workload and forecast potential hiring, agencies typically use different sales management techniques. Part of the reason why is to streamline CRM and resource planning with upcoming project management. At the start of a relationship with a customer, sales managers will work with the prospect to get a clear picture of their vision and priorities. Then they come up with a strategy that would work best.
After that, sales managers will consult operations or project managers about their strategy to make sure that they can deliver within the proposed time frame. The sales team will then collate and communicate with the client and move the deal along in the sales pipeline.
Still curious? Click here to learn more about managing customer relationships.
Win Rate, Average Closing Time, and Lead Time
Sales managers use sales metrics to track progress towards sales goals. Sales data shows individual, team, or business performance and sales pipeline metrics show the health of your sales pipeline.
What’s the average length of the sales cycle, your average customer value, or conversation rate by sales funnel stage? You can measure these metrics for individuals and/or for the team. With these numbers, you’ll understand what’s working in your sales process—and what’s not.
— Win Rate
If you get 500 leads per month and on average, 50 leads per month buy your services, your monthly average win rate is 10%.
If you keep track of your win rate over time, you can understand whether your sales team is overachieving or underachieving. If your win rate is dropping, pay closer attention to your sales processes and make some changes in order to raise the win rate.
— Average Closing Time
1. Find out your total number of days for all sales combined.
2. Divide your total number of days for all sales combined with the number of deals you won.
3. Voilà! You now have your average closing time.
— Agency Lead Time and Customer Lead Time
In the context of agencies, lead time is the period of time between a customer’s service purchase and the agency completing the service purchased. This info is mostly useful to your Sales department when talking to potential clients about when you can start working on a new project. Agencies can minimize lead time by hiring new people. If Customer Lead Time reduces, it can mean winning more business.
Customer Lead Time is the amount of time it takes for a customer to receive a service from the time they requested the service, i.e. placed an order. Lead time is an important metric to take into consideration when talking about customer satisfaction, as customers usually want services delivered as quickly as possible.
With the demand for embracing new technologies and meeting time and budget restrictions, after laying the foundation of your operations, you need to manage resources and track employees’ productivity. As utilization is one of the most important metrics in an agency business, knowing your resource utilization rates in real-time is essential.
Project Management Workflow
When compared to other businesses, one of the biggest challenges that agencies face is optimizing project management workflow. Why? Quite simply because the complexity of delivering projects grows with the size and number of projects that agencies have on their plates.
Since project management and delivery typically requires suddenly needing to hire cross-functional teams, onboard, align, and manage them, your agency’s most valuable resources are your people, their knowledge, and skills.
What’s more, delivering complex projects such as creative or technological services almost always involves several stakeholders. Those stakeholders regularly have a say in the output of each project.
— Team Collaboration
Collaborative workplaces see increased levels of trust, a more engaged workforce, and better performance. But running a collaborative team environment is not simple at all.
In terms of team collaboration, remote working is a concept embraced by businesses around the world. The benefits of remote working that many employers may not have considered before are reduced overhead costs, increased flexibility, and greater employee satisfaction.
Here are some keys for making your remote team collaboration more effective for your company:
Resource planning makes it simple to understand who’s doing what
and for how long, and if work is getting done on time
Scheduling enables you to plan your teammates’ time in advance, quickly enabling you to see who’s overbooked, under-booked, on vacation, or out sick
Utilization reports help you get a clear view of your team’s effectiveness, while profitability and utilization dashboards help you identify blind spots and bottlenecks that consume your agency’s time and money
Task management gets all your team members in one place, where you can then assign work and collaborate with colleagues, external partners, and even clients. It’s easy to keep track of deadlines and any ongoing changes with task and to-do lists.
Trust is also a crucial component of team collaboration. When working remotely, using a platform that will help you effectively manage your entire team is just as important as taking time to understand how your teammates are doing on a personal level, and organizing team building activities.
— Client-Agency Collaboration
The future of long status update emails and meetings with clients is inviting them into your agency management tool to collaborate. Simply onboard your clients to the projects you’re working on for them, and let them monitor your progress in real-time.
— Managing Distributed Teams
As of 2020, remote working has become the new normal. To save time that you and your teammates spend on switching between different tools to find updates on projects, tasks, budgets, and resources—use one tool to virtually manage your entire business, anywhere.
— Centralizing Your Agency’s Communication and Collaboration
If you’re looking for ways to improve your team’s collaboration, what you need are fewer tools and a fast user interface. Ensuring optimal collaboration depends on enabling effective communication. When all your projects and tasks, time, and resource management are centralized and available in real time, everyone is more focused on priorities, and projects can run smoothly.
— Streamlining Workflow
Agency projects typically involve processes that have a similar workflow. Creating a template for your best practices and setting them up in stages in your agency management system will lay a foundation for your agency’s growth.
Still curious? Click here to learn more about how to streamline workflow.
— Monitoring Profitability and Financial Metrics in One Place, in Real Time
In today’s competitive market, profitability is one of every agency’s top priorities. You need to focus your agency’s energy on increasing profitability to be able to run a more stable company. Agencies often struggle with understanding where time was spent: billable, or non-billable projects? Using an agency management system gives your agency control over non-billable hours and the ability to focus on billable projects.
— Gaining More Transparency, Predictability, and Visibility
When using an end-to-end agency management system, you can predict your agency’s revenue based on project budgets and scheduled resources. What’s more, your agency can allocate existing or plan to hire new resources using Scheduling features. With Scheduling, predicting the completion of a project within an agreed time frame is easier, as you can drag and drop resources before and during a project as your team makes progress.
I feel like consistency and predictability has been very hard to get in our world. Some clients have a release every six weeks for years, other clients have one-time, three-month projects. Being able to take all that variability and put it into a consistent process allows us to actually manage it with transparency.
— Saving Time on Billing and Invoicing
In the agency world, billing projects can easily become problematic because of the complexity and duration of certain projects and not having information linked with invoices. For this reason, using a platform that connects tracked time on projects and services with invoice building is a timesaver for project managers. Also, using a platform like Productive, you can create unique invoices that combine various projects and budgets if they belong to the same client and are in the same currency.
— Scaling Your Agency
Your agency is most likely pursuing growth that is sustainable, predictable, and scalable—growth that won’t negatively impact the quality of your services. To achieve scalable growth in services, people, and profitability, you need to streamline your workflow in an agency management tool.
Scaling your agency brings organizational challenges. Example: Your agency wins a new deal and you’re kicking off a new project. Initially, starting a new job and hiring new team members to deliver it may seem like sustainable growth, but onboarding new people without properly managing resources can create operational issues. Scalable growth requires standardized processes, centralized and effective communication, and a platform that enables productivity.
— Using an Agency Management System
Using an agency management system instead of just a project management tool helps improve business intelligence, enables better overall workflow management, and accelerates company growth.
In the next chapter, we’ll talk about overcoming project management challenges by successfully managing your agency’s resources.
When we talk about resources in the agency world, we’re mainly talking about human resources.
The term resource planning is an industry-standard way to say planning out work for your team, to your best advantage. Resource management is when you pre-plan, schedule, and allocate your teammates to maximize efficiency.
Unlike other types of businesses, agencies’ profitability rates heavily rely on the utilization of their resources.
Is there a resource that’s underused? Is any teammate overbooked? Answering these questions is much easier using a scheduling tool that links your agency’s services and time tracking to specific people.
Naturally, there are other types of important resources in the agency business, too. They can be broken down into two groups: tangible and intangible resources.
Overcoming Challenges With Resource Planning
While planning offers insight and optimal utilization, the planning process itself is a major challenge for agency owners and project managers. Shifting deadlines and evolving priorities make resource planning incredibly complex for agencies.
Project complexity and the inability to always accurately predict how teammates will master certain tasks make it difficult to forecast how long each project will last. Because timelines and client requests can change daily, it’s easiest to keep track of changes in one software.
The Importance of Time Tracking
When implemented right, time tracking is good for everyone in an agency, including your creative team members who typically dread it.
For a lot of workers, time tracking is not considered fun. From the uneasy feeling of being watched, questioned, and potentially micromanaged, to dealing with technology hassles—many creatives even see this simple obligation as a task that degrades their work.
But reasonable project managers understand that not all creative hours are the same. If you have a tool that offers you multiple options for tracking time, “clocking” doesn’t have to have all those negative associations. Read some of our tips on getting rid of the psychological barrier of time tracking.
The key behind time tracking is building trust. If you foster open communication in your agency, time tracking will be less of a burden for your teammates because they will know that those few minutes of their time will provide the entire business a wealth of information. Not only will you be able to optimally manage resources with a truthful answer regarding where billable and non-billable time was spent, but financial metrics will be clearer, too. In the end, this small, daily habit will help management make great business decisions and can shape the future of your agency.
Pro Resource Planning Tips
With centralized planning, you can remove overhead from other employees and allow your agency to scale your operations team while improving service quality and speed of delivery.
1. Choose a Single Point Person
When it comes to planning, it’s important to choose a single point person to lead the charge. Planning efforts should be organized around one person, which offers several advantages:
Planning is far more efficient because one person has a strategic overview of the entire workload
Everyone has a single point of contact for all things related to planning
There’s a clear line of accountability
Avoid conflicts that emerge when project managers do the resource planning
Resource planning should be overseen by one point person for several reasons:
2. Forecast Team Availability
Many agencies will follow gut feelings to tell them if and when they need to hire for upcoming months. Yet, why wonder if you can forecast and schedule upcoming work using an agency project management system? With rapid changes in project management, you need to have a clear perspective on current and upcoming work. Forecasting and scheduling will tell you whether your agency needs to hire new talent or contractors in the near future.
— Leave Management and Onboarding New Teammates
Imagine your employee gets sick, goes on vacation, or even quits their job in the middle of a project. Or think of what it’s like when your agency hires new staff members. It takes them time to adjust to the new company and projects. For reasons like leave management and onboarding, allocating and managing resources can get pretty tricky, and you can end up losing precious time on projects if all your resources aren’t managed in one place.
3. Keep Track of Your Key Metrics
Planning in advance will show you a key metric you need to follow for future-proofing your business: forecasted utilization. Because agencies revolve around delivering services to clients, billable utilization, also known as “client time”, is a crucial rate to follow. For example, software development agencies aim to keep their billable utilization rates at around 75-85%. You might already know your overall profit, but drilling it down to profitability by client is necessary to see if you’re charging your clients correctly.
Those were some of our pro resource planning tips from industry experts, now let’s move on to the important stuff: your agency’s key metrics.
Profitability and Financial Metrics
In the agency and professional services world, staying profitable is a balancing act. Once your agency resource management has been set up for success, you can focus on the crucial mission every company needs to work towards to thrive in the long term: increasing agency profit margin.
Let’s take a look at what you need to simultaneously balance while facing customers and internally during the pre-sales, sales, and delivery phases of a project:
Even while you successfully manage expectations and project delivery, having the right pricing strategy is what will end up setting your agency apart from your competition. As an agency, you need to determine and often reevaluate how much to charge for your services to ensure profit margins are steadily rising. To do that, you’ll need to:
To know where your agency is losing money, the first question is always whether or not your teammates are consistently tracking time. When looking at how to track productivity, time tracking is the alpha and omega of monitoring and calculating profitability.
4Site Interactive Studios
As a professional services firm that works for non-profits, our margins have always been tight, so we’re constantly looking for ways to improve our efficiency. Whether it’s through communicating with clients through Productive by adding them to our projects, or understanding where we consistently over or under-estimate our work. Now, we can see a lot of that information built right into the UI of Productive. And we’ve entered in all our cost and overhead information, so we look forward to seeing the numbers for each of our employees.
Another cost that greatly affects agency profitability, especially because this business model generates many non-billable expenses, are overhead costs. Overhead is any agency expense that doesn’t directly generate revenue. These costs are unavoidable. However, you can reduce overhead by monitoring it and reevaluating certain non-billable costs as investments, and including them into your service rates.
Let’s say you’re a marketing agency. Tracking time and knowing your utilization and actual profitability will also help you calculate your average marketing agency hourly rate.
In order for a company to be profitable, a worker must cover the annual cost of his annual salary, times three. This is popularly called one salary for you, one salary for the company (overhead), and one salary for the boss (profit). The fact is, agencies have a lot of hours that are non-billable, which still need to be covered. All these hours that add up should be covered by the so-called Times Three Model.
Still curious? Click here to learn more about how much to charge for your services.
— Managing Costs
Overhead costs are all your agency’s costs that don’t directly generate revenue, yet greatly affect your agency’s profitability.
Typical expenses that fall into any agency’s overhead bucket are rent, utilities, cleaning services, office supplies. However, unlike different industries, agencies and service providers have many variable costs that are inevitable for their long-term growth. To make sure marketing and sales activities, event and networking organization, training, education, and similar expenses don’t drain your agency’s profit, it’s key to reconsider whether you should bill these services, i.e. factor otherwise non-billable costs into service rates as overhead costs, too.
Examples of agency costs are facility costs, salaries of non-billable employees, licenses, phone plans, equipment maintenance, travel expenses, and more.
If you monitor your overhead costs (and otherwise non-billable activities) in an agency management system, you can factor your agency overhead rate into your profit calculations.
As we get into how Productive factors overhead costs into profit margin calculations, let’s cover the major expense categories that agencies are faced with: project expenses and salaries.
Project expenses: unique costs for every project. Examples are software licenses, advertising budgets, or travel expenses
Salaries: usually your agency’s biggest expense, and the main reason why high billable utilization rates per employee are paramount
— How Productive’s Overhead Algorithm Works
In Productive, overhead costs fall into two categories:
1. Facility cost: utilities, office space rent, equipment, etc.
2. Internal cost: the expense of time spent on internal work
Productive uses a proprietary algorithm that calculates your agency’s overhead as a combination of facility cost and internal projects. To give you an understanding of your agency’s true profit per project, Productive’s algorithm calculates overhead costs per hour. It does this by adding the overhead costs on top of each employee’s standard hourly cost rate. In this way, the tool spreads your agency’s overhead across all your existing projects.
In agency businesses one KPI does not exclude another—or should any get ignored, for that matter. You need to be able to see your agency’s financial performance in real time, at any given time. When you have company-wide views of your expenses, revenue, profitability, and utilization, you’ve got everything you need to check your agency’s pulse.
The truth is, we can quickly get a pulse for where we are, at any given time. One way to get a pulse on the business is to get the monthly financials, but for the monthly financials to come in, it takes the Accounting department about 15 days after the month ends before we get a picture of how we really did that month. Whereas, with the financial tools that Productive offers, you can check it on a daily basis. We have clear visibility at any given time.
Still curious? Click here to learn more about how to calculate overhead costs for an agency.
Most agencies need reports that give them a real-time glance of their key metrics:
Actual Utilization by People
Invoiced Revenue by Client
Invoiced Revenue by Months
Forecasted Unprofitable Budgets
Profitability by Client
Time off usage by people
Check out the different report templates Productive offers here.
— Using Custom Fields in Reports
Custom fields allow you to zoom in on a specific metric or set of information that isn’t available in a report template by default. By adding a custom field to a certain report, you tailor it to your agency’s needs. Adding custom fields to your reports gives you more flexibility to monitor various metrics, analytics, numbers, and graphs that show you the pulse of your agency.
You can use custom fields to set up reports that will generate real-time metrics that are important for your agency specifically, for example:
Utilization and billable metrics of production teams
Forecasted utilization rates of production teams
Employees late with time tracking
How many hours are delivered per which team (in-house vs. contractors)
Generally, you should be able to add a custom field to:
— How To Group Your Reports By Category
You can add a custom category to any one of your reports to help you separate insights based on key business areas. Example: you can add categories for utilization or profitability, and then group more specific reports within each key metric “bucket”.
Metrics Your Agency Should Track
Professional service businesses need to keep track of certain metrics at all times. Those are utilization, how much time you’re spending on billed vs. client time, how much you’re working overtime, and your most vital digit: profit.
Utilization is defined as the amount of billable time can you pull out of the total available time of an employee. Utilization rates show you the percentage of time an employee is spending working on tasks for client work compared with the total amount of time that an employee is available to work.
What Does Utilization Tell You?
Because this metric gives you insight into how effectively your employees are working or being applied to different projects, utilization is one of the most important metrics for any agency-type business.
How Do You Measure Utilization?
To calculate your agency utilization rate you need to track your employees’ time on a daily basis. The easiest way to monitor both billable and nonbillable hours is by clocking hours in a time-tracking tool. When your employees track their time with a tool that links time tracking to project budgets, you can automatically see exactly how many hours they spent on client work (billable hours) and how many they spent on, for example, admin or networking (non-billable hours).
What If Your Utilization Rate Is 100%?
If you have an agency utilization rate of 100%, that means your billable employees spend all their time working on client projects. But don’t pat yourself on the back just yet—a 100% utilization rate isn’t necessarily a good thing. In fact, it probably means you don’t invest in employee education and research, let alone allow time for team-building. In the long run, a 100% utilization rate could be harmful to both your employees and your business.
On the other hand, if your utilization rate is very low, this could tell you two things:
LOW UTILIZATION RATE CAN INDICATE THAT:
Let’s say you’re developing a new website for the client and you give your employees extra non-billable time for research. With these additional research hours, your employees can renew their knowledge and explore new technologies, which will ultimately bring value to your business.
Internal time is an investment. That goes for Marketing, Sales, HR, Administration, research and any other non-client-facing roles or work done in your agency.
Extra Credit: Are You Giving 110%?
After defeating a competitor, famous athletes will often tell reporters on the sidelines, “We won because we gave 110%!” While that sounds impressive, when it comes to utilization rates, extra credit isn’t always a good thing. If your agency utilization rate is more than 100%, your employees are probably working overtime.
2. Billed Vs. Client Time
What Does Billed Vs. Client Time Tell You?
Billed vs. client time often indicates the quality of an employee. It shows how “billable” your employee is. Measuring your staff utilization rate can help maximize the profitability of your projects. The goal of analyzing employee utilization is to gain a clear perspective of each employee’s workload. This information will allow you to make smart, well-informed decisions for your agency.
How Do You Measure Billed Vs. Client Time?
Basically, a high utilization rate will generally show how “healthy” your company’s processes are. However, you shouldn’t try to compare your company’s utilization rate with a competing agency. This rate will be different for each company, depending on approaches and processes.
What Does Overtime Tell You?
Overtime is the amount of time someone works beyond normal working hours. Long-term overtime leads to unsatisfied employees who tend to start looking for other solutions and will eventually leave a stressful job.
According to another study, 41% of PR employees work 49 to 79 hours a week. To make matters worse, 84% have to take work-related calls or respond to emails during out of office hours. What’s the result of all these overtime hours? One in five of these employees quit their job every year. (PRWeek)
How Do You Measure Overtime?
Companies often try to squeeze a six-month project into a three-month timeline. This is why it’s critical to plan in advance and create a realistic project delivery assumption. Keep in mind: these plans aren’t written in stone. If changes occur in a project (and there will always be some changes along the way, such as sick leave, vacations, unexpected issues, etc.), revisit your plan and adapt. Dedicating a couple of hours to walk through a project plan each Monday and revamping it if necessary is a good way to avoid employees working overtime.
In our experience, we’ve seen many clients not spending enough time planning or properly measuring results. As soon as these clients started scheduling and measuring results through Productive, they saw a significant upward shift in employee satisfaction.
The bottom line: an agency can’t expect to be effective without a good scheduling tool. The right tool will allow you to properly schedule tasks because it helps you understand the important details—who’s sick, who’s on vacation, or the number of projects each employee is currently working on.
With Productive, you know exactly who works on what, and for how long. Using the Scheduling feature, you see which employees are working overtime and you can easily calculate the overtime average for your entire agency. With this valuable insight, effectively distributing workload, preventing burnout, and boosting employee satisfaction become easier.
Profit Margin & Average Hourly Rate
— Profit Margin
What Does Your Profit Margin Tell You?
An increase in revenue won’t necessarily get you far if you can’t manage your costs well. Your profit margin highlights your ability to increase revenue while managing costs.
What Is Considered a Healthy Agency Profit Margin?
To keep your agency healthy and thriving, you should be making at least 15% in profit margins at the end of the year outside of your salaries. This keeps agency businesses running.
How Do You Calculate Profit Margin?
Calculate your total monthly expenses (salaries, contractors, rent, supplies, etc.).
Let’s say your monthly expenses are $150,000 and your goal is to invoice $170,000. That leaves you with a profit of $20,000 at the end of the month, or $240,000 at the end of the year.
The first thing you have to do is track your profit margins for each client.
In Productive you can define hourly cost per employee and your employees can track time on projects. For calculating your margins you have to take paid holidays and sick leave days into consideration.
An employee with an annual salary of $50,000 and $12,000 in benefits costs you $32.29. To calculate net margins, you need to estimate your overall expenses per year. Keep in mind that all indirect costs (costs that are not the result of producing services) are overhead.
Property (office, related taxes,…)
Utilities (office expenses, phone charges,…)
Indirect business costs (bank charges, legal fees,…)
Human resources, office managers, marketing managers
Staff development (conferences, events,…)
— Average Hourly Rate
What Does Your Average Hourly Rate Tell You?
Agencies often bill their services per hour or by a fixed total rate. They also bill different services (graphic design, illustration, creative copywriting) by different hourly rates. The rates usually vary based on market demand and the experience of the person working on the project.
On the other hand, more and more agencies have a “blended rate”, a rough average rate for all their services and skill levels.
Mixing it all together has its pros and cons. The pro is definitely that you could be able to sell more of your services and have more clients, which is good for your portfolio. Cons for the agency (and a pro for the client) is they will get even senior-level staff involvement at an average rate.
How do You Calculate Your Average Hourly Rate?
1. Keep track of the hourly rate of every hourly employee.
Junior designer: $25 per hour
Senior designer: $50 per hour
Account manager: $30 per hour
2. Sum up the total hourly compensation and divide it by the total number of hourly employees.
Billing and Invoicing
Billing is rarely as easy as it should be, especially in the agency business. Your customers may forget to pay, misplace the bill, or simply put off the payment until the last moment possible. Unlike selling different goods that usually get paid for on the spot, service providers typically have ongoing contracts or long-term projects that aren’t as quickly billable. Before you know it, your agency’s revenue is fading—all because of missed due dates on invoices you’ve already sent out.
What Is an Outstanding or Overdue Invoice?
An outstanding or overdue invoice is when you’ve sent an invoice to your customer but it hasn’t been paid yet. Usually, past due invoices appear on a customer’s accounts payable report and may carry a late fee that customers need to pay in addition to the overdue invoice itself.
What Does Unpaid Invoice Mean?
Just because an invoice is unpaid, that doesn’t mean that the invoice is outstanding or overdue yet. An unpaid invoice is an issued invoice that has yet to be paid by the customer.
Pro Tips For Writing Overdue Invoice Emails
What If You Want to Invoice Multiple Budgets At Once?
In Productive, you can create unique invoices that combine different Projects and Budgets, as long as they belong to the same client. The benefit of multi-budget invoicing is that you have the flexibility to organize your budgets and finances in the way it’s easiest for you and your clients.
Adjusted Gross Income is the number you get after you subtract your adjustments to income from your gross income.
Agency Profit is the difference between the revenue your agency earned and the amount of money your agency spent on expenses.
Agency Profit Margin is the ratio of a company’s profit (sales minus all expenses) divided by its revenue. The profit margin ratio compares profit to sales and tells you how well your company is handling its overall finances.
Agency Project Management includes the five stages of project management developed by the Project Management Institute (conception and initiation, planning, execution, performance and monitoring, project close) delivered by an agency business.
Agency Utilization Rate is a percentage that shows the amount of an employee’s available time used for effective, billable work. An employee’s utilization rate is a key metric for agencies to track. It’s a measure of billing efficiency that helps the company understand if it’s billing enough to cover its costs plus overhead.
Agency Costs are facility costs, salaries of non-billable employees, licenses, phone plans, equipment maintenance, travel expenses, and more.
Agency Resource Management is the process of planning, scheduling, and allocating employees’ time for client projects.
Agency Resource Planning is the process of systematically organizing resources to achieve the optimal use of an agency’s time and people.
Average Closing Time is the average amount of time it takes for a customer to purchase a service from an agency, calculated from a sales representative’s first contact with a prospect until the date when the deal is closed.
Billable Utilization, also known as “client time”, defines the time that an employee spent working on projects that are billable to clients.
Client-Agency Collaboration is an approach to project delivery that’s based on transparency and regular communication between an agency and a client.
End-to-End Agency Management encompasses running complete workflows that happen within an agency business: from sales to billing projects.
Internal Cost is the expense of time spent on internal work (e.g. education, working on internal projects).
Lead Time in the context of agencies is the period of time between a customer’s service purchase and the agency completing the service.
Overdue Invoice: when you’ve sent an invoice to your client but it hasn’t been paid yet.
Overhead Expenses are all your agency’s costs that don’t directly generate revenue. Overhead costs of an agency typically include facility costs, salaries of non-billable employees, professional services, licenses, and plans.
Overtime is the additional time an employee works, beyond normal working hours.
Profitability by Client is an agency metric that shows how much of your agency’s profit comes from which one of your clients.
Project Management Workflow is the process of ordering tasks and activities between key milestones in an efficient and meaningful sequence.
Project Expenses are unique costs for every project.
Sales Pipeline: a visual snapshot of where prospects are in the sales process. Sales pipelines show how many deals sales representatives are expected to close in a given time frame, and how close sales representatives are to reaching their sales quota.
Unpaid Invoices are issued invoices that have not yet been paid by a client.
Task Management in agency management is where you assign work on tasks and collaborate on projects with colleagues, external partners, and clients.
Time Tracking is a system of recording work done by employees to ensure that those employees are compensated accurately.
Win Rate is the percentage of closed deals that became customers divided by the total number of deals in your pipeline.
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