Building Better Agency Efficiency: 7 Insights From an Agency Expert
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Last month a few of us at Function Point attended Second Wind’s Certified Agency Operations, Workflow and Efficiency seminar at the Gleacher Centre in Chicago. While there’s not enough room in a single post to fit all the information we learned from the two days, we’ll share some of the best insights we gained from the seminar.
Building an Agency that Stands Out
The Second Wind Seminars focus on agency operations and innovative ways to maximize agency effectiveness. This seminar was led by Laurie Mikes, who has spent 17 years keeping her finger on the pulse of the industry and is the current COO of Second Wind. In her presentation, Laurie highlighted that many agencies struggle to piece together an effective schedule for all their pro cts, and that the stress around meeting client deadlines and losing billable hours is still as prevalent as ever.
Here are 7 insights from Second Wind for building a successful, sustainable agency:
- ROWE (Results Only Work Environment) increases company efficiency and helps attract and retain top employees. With ROWE, employees are measured solely by results and not by the number of hours they work. This gives them the flexibility to decide when and how they’re going to meet their goals. ROWE is possibly the future of work culture as companies hire more remote employees and specialized freelancers.
- Agency mistakes cost way more than just money. A typical Second Wind member makes about 5% profit on each project. If that’s true, then a $10,000 printing mistake, involving a reprint at the agency’s expense, costs $10,000 off the agency’s bottom line. That means for every $10,000 mistake, the agency must sell $200,000 in new billings to recover the lost $10,000 profit.
- To keep a competitive edge, agencies are moving away from the Waterfall Process to an Agile process. Agile was developed as a way to handle projects that evolve as production happens. Instead of planning end-to-end, you plan as far as you intend to deliver in each phase. With Agile, the focus is on collaboration and response to change, while promoting constant communication. Our marketing team recently starting working in an Agile environment, here’s where you can read about their experience.
- ‘Markup’ should be called ‘Warranty’, because that’s what it really is. Markup is earned by the agency for taking responsibility until the job is delivered satisfactorily. Account Services is the profitable markup at 92%, compared to only 10% with traditional media.
- Key Adjusted Gross Income (AGI) ratio guidelines: You never want to have one client making up more than 25% of your AGI, and no more than eight clients comprising more than 3.125% of AGI. All payroll (including taxes and benefits) shouldn’t be more than 50-55% of AGI, and you should employ 1 full-time person per $140,000 to $170,000 of AGI.
- Agencies lose 20-30% of their billable hours each year. With the increasing complexity of the industry, agencies are faced with the challenge of earning more billable hours in the same 24-hour period. The answer is to increase efficiency: create better estimates and workflows, and have more effective client management and software/systems. This leads to more predictable results, more billings, and more profits.
- Creative briefs are the launching pad for strong creative minds. Having a complete creative brief sets the standard, so instead of just asking “is it good?”, creatives can ask “does it fulfill the requirements of the creative brief?” A creative brief also allows agency creatives to start from a comprehensive understanding of the client so they can keep their focus on finding creative solutions.
Thanks to Second Wind for providing two days full of great conversation and valuable information for us to take in. It wouldn’t have been a complete visit to the windy city if we hadn’t also taken in some of Chicago’s best sights, and pizza. Thanks, Chicago!