Most creative agencies will agree that client over-servicing can be an enormous profitability choker, not to mention highly strenuous on team productivity. Despite this notorious status however, over-servicing continues to be a persistent problem for many.
Agencies struggle with an almost latent fear of losing clients if they don’t over-promise. But this can lead to over-servicing- in other words an overworked team and lost profits.
We’ve recognized specific ways you can switch this dull narrative for your agency to a new scenario that will enable you to protect your agency’s profits and keeping your clients happy.
Over-servicing is bad for your agency and your client
Running an agency can put owners in quite a tizzy- sometimes the focus on retaining clients is so immense that we forget to ask ourselves, “Is this client even worth servicing?”. Having a client on retainer does not necessarily translate into also having a steady inflow of profits. If you do not have sufficient systems in place to track over-servicing, you’ll never know if a client is doing you more harm than they are good. Your staff could very well be wasting their time and effort in trying to please an unprofitable client, all while losing precious billable hours that could have otherwise been utilized elsewhere, profitably.
Moreover, over-servicing doesn’t just bring with it monetary harm, but potential harm to staff morale as well. For instance, if your team recognizes that a certain client needs constant over-servicing, with time they could view this client as invaluable. Your staff may seize to put in the necessary effort into maintaining a healthy relationship with the client. This could bring into question the quality of servicing your agency offers thereafter, and subsequently, your agency’s reputation.
How to check and stop over-servicing
1. Track time!
We can’t stress this enough- your agency needs to track time and do it accurately! Like we said before, if you don’t know where your team is spending their time, you could be losing crucial billable hours or in other words, agency profits, without ever knowing.
It is important to note however, that simply tracking time won’t do the trick- it needs to be done reliably. If your team is still using spreadsheets to track time, it might be valuable for you to consider automating the process. If you’re new to the virtues of time-tracking, here’s a free eBook we recommend you read- you can thank us later.
All you need to know is that the right time tracking system will allow you to track time in abundant detail, make the process uncomplicated, and enable you to identify exactly where inefficiencies lie so you can dig deeper to find out why.
2. Underselling your services
An important consideration is to ask yourself if you’re undervaluing your services. Discounting your services or going the extra mile for certain clients is well and good, but only if your clients truly appreciate it. If they are exploiting your services despite a favorable discount, you might want to revisit your pricing structure (and your generosity!).
Agency managers can look at the average budget spend by account executive. This helps track which account executives are the best at managing budgets and client expectations versus those that may need some support.
Additionally, looking at ‘Profitability by Client’, as illustrated below, will help determine which clients are more valuable than others, to your agency.
3. Lack of expertise causing inefficiencies
It is common for agencies to start out as specialists and then broaden their offerings to accommodate additional services. This is usually a business decision with the hope that the newly added array of services will make the agency seem more desirable to prospective clients and ultimately ring in more opportunity. Unfortunately, more often than not, agencies add services to their offerings that they do not have any prior experience or expertise in. In fact, hiring trained staff for such services is a step that agency owners sometimes decide to by-pass. They instead, have existing staff pick up the new trade.
This can cost agencies heavily. In an effort to please clients, agencies take on tasks they do not have expertise in, which lend to severe inefficiencies in the workflow.
An effective way to identify this at your agency is to determine profitability by job type, like the one illustrated below- you’ll know which job types are making you the most and least amount of money. As a rule of thumb, you would want to maintain Profitability by Job Type at 10% of your Adjusted Gross Income.
Determine what your specialization is and be realistic with your clients about what your team can and cannot achieve. Taking on too much can cost you more than it can add value to your business. If you do intend on positioning yourself as a full-service creative agency, be sure to have sufficiently experienced staff on your team to offer each of the services you promise. At the end of the day, it is better to do 1 thing remarkably, rather than 10, ineffectively.
4. Recognizing Billability vs Utilization
An extension to tracking time is knowing if you’re under-billing your clients. Your clients don’t pay your agency because you are cheap. They pay you because they like you and your team is good at what they do. To make sure that is the case, we recommend you determine of all the time your agency collectively logs in its time sheets, how much of that is spent on doing things that can be billed to the client, versus how much actually is.
The recommended ratio is 75% billability vs 60% utilization. If your agency is trailing behind significantly on these numbers, client over-servicing could be a likely culprit.
This is another reason why your agency needs an automated time-tracking software. For instance, Function Point’s reporting system allows you to calculate the percentage of billable hours of your agency over any period of time without any manual spreadsheet work.
5. Set expectations upfront
The devil might be in the details, but when it comes to setting proper expectations with your client, we like to say ‘God is in the details’.
Over-servicing is one of those mischievous menaces that can sneak its way into an agency’s deliverables if terms and conditions aren’t clarified upfront. We recommend that defining retainer scope clearly and in detail right from the get-go should be a must for every agency. If these aren’t hashed out clearly enough during initial discussion, you leave gray areas for clients to unintentionally (or intentionally) benefit from.
For instance, if you haven’t discussed the number of revisions a particular deliverable will undergo, your team will likely be spending all their time and effort trying to produce the “perfect” deliverable.
It can be hard to suppress the urge to please our clients and give them what we think is an exceptional servicing experience. That is why you need the right tools to help you check over-servicing and ultimately break out of the habit.