Handling Capacity — Contributed by David C. Baker, ReCourses

Too many times our clients have called and said something like: "We are so busy, it looks like it's time to add someone. Can you help us think through the right person to add, and how their role should be structured?" We usually back up and say: "Let's walk through whether you really need someone. First, why are you adding someone?" "Well, we are very busy." The conversation continues in that vein, as we probe for the real reasons. Often the principal feels like they are being pushed toward growth because clients need more stuff. That's not a good reason. You don't want to let growth happen to you (growth is defined here as adding employees, not increasing revenue. If you can add revenue without adding employees, go for it). That's not to say that you shouldn't grow, but rather that growth should follow careful consideration. One way to make sure that growth makes sense is to follow a stepped decision making process that first leads you through the alternatives. Next time you are tempted to add staff, walk yourself through these steps.

First, do you have some lower level clients that should be phased out? It's easy, and natural, to become attached to clients who might have been a good fit for your firm in the past, but whose needs have not kept pace with your abilities. Unless a particular client is of a sufficient size to a) make money and b) do effective work, consider moving on. This might involve sitting down with them and explaining the situation, giving them a chance to provide you with more opportunities in the relationship. If that isn't possible, introduce them to a smaller firm. The fact that a particular client doesn't provide you with a lot of volume is not as important as providing you with profitable work. That's the key, and if they don't fit, phase yourself out of the relationship, providing additional capacity for your overflow work. This is always the first thing to consider before adding staff.

Second, make sure that you are charging for all of your time (either in the estimating or the invoicing stage). There's no point in adding staff in order to subsidize even more clients!

Third, raise your prices. Money is a wonderful filter, and it makes sense to be less busy at a higher rate than to be busier at a lesser rate. Raise your prices before adding people, too, so that your client base will have a chance to settle in. You'll find out who is going to stay around and who isn't.

Fourth, make sure you can fund this growth with cash, whether that will cover build out expenses, employee acquisition, new workstations, or the increased overhead from this point forward. Spending cash will be a good discipline and also ensure that you can cut back if that growth decision needs to be reversed.

Fifth, ask yourself whether you are comfortable inching more towards management and away from "doing." Your role will change just a little bit with each new employee (particularly when you expand beyond 5 total employees for each senior person at the firm).

Finally, if you are comfortable with growing after stepping through this five-part checklist, go for it. But remember that "no" can be a beautiful word.

This article has been provided by ReCourses. For more information, please visit their web site at http://www.recourses.com

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Last month we asked if in your design firm, clients are managing production of their own jobs more or less often. The vast majority of those surveyed indicated that clients are managing production of their own jobs more than they have in the past!

What does this mean to your business? For many firms, revenue from vendor mark-ups earned on managing production represents a significant percentage of total billings.

The Second Wind Network has reported the average agency mark-up for a $1000 outside buy as being $223.

What is your firm doing to compensate and prepare for the trend of clients managing their own production?

Are there cost items that you could be charging back to your clients that you aren't currently?

Are you billing all project management hours on a project?

Consider taking a step back from project and status reports that you're most comfortable with in TimeFox and run a TimeFox Task Report for all clients and projects to see where your billable time is being spent, and if there are areas (project management) where you should be billing more. Run this same report showing detail on all projects to isolate problem clients or uncover opportunities you may be missing.

See what TimeFox customers are doing to handle this coming trend:

"Before TimeFox, we did not bill for project management because it seemed we spent so little time on it. It was a shock to see some projects tally up 4, 5, or more hours of client communications, file preparation, proofing and project management. Our clients were very accepting of our need to charge for this time — especially since every minute is justifiable in our reports."
Ken Jurina, Top Draw

"With TimeFox, we work more efficiently by focusing on billable hours. So we are more profitable, and better able to monitor project costs that used to remain hidden, such as hours spent on project management,"
Sean Bickerton, Kulture Shock Media

To view the results of this month's FoxPoll along with last month's, cast your vote using the FoxPoll at the top right of this newsletter.

Event Announcement:
Big Lure Creative Retreat September 24th — 26th

A creative retreat and fishing weekend.

Announcing the first Big Lure advertising/fishing retreat. Friday, September 24 — Sunday September 26 in Door County, Wisconsin. A chance to hang out with other ad agency/design firm principals, fish, golf or sea kayak, and participate in roundtable discussions and campfire chatter. Guest speaker and fishing enthusiast (not necessarily in that order) will be Blair Enns of Enmark Performance Development. Special first year rate $400.

Reservation deadline August 31st. For more information:

• go to www.biglure.org
• contact jeff@mmtadv.com or rick@mmtadv.com
  
• or phone 414-277-7743

If you refer someone to FunctionFox, and they purchase a TimeFox subscription, we'll give you a month's subscription to TimeFox FREE! Refer two new customers; you'll get two months free. If you refer 12 new customers, you'll get a whole year's subscription FREE!

Don't miss this chance to pass the word and realize considerable savings!

Here's how: Ask the person you refer to enter your name/company under 'Referral (Client or Friend)' when they sign up for a free demo at www.functionfox.com/demo/

FoxPoll

In the next 4 months (before the end of 2004) my firm will likely:

• Increase staff

• Decrease staff

• Remain the same

• Uncertain

Click on your answer to participate in the FoxPoll or do so at: www.functionfox.com