Get paid for results. Clients respect agencies who are willing to put their money where their mouth is. Being paid on results is an idea whose time has come.
Here is a step-by-step example of a results-based agency compensation program.
The secret to making money on blended rates is to get the client to agree to a satisfactory blended rate. This is in most cases, lower than the rate normally billed by top management, but higher than the rate normally billed by other staff members. After the client is on board, the agency pushes as much of the daily service responsibility down to mid and lower level employees as much as possible.
|How To Blend Rates:|
|Total agency payroll||$200,000|
|Divided by # of anticipated billing hours on the account||7,000|
|Time 3 (for overhead)||x3|
|Equals the agency blended rate||$85 Per hour|
Progress billing means you bill the client for work completed on a monthly basis whether the project is completed or not. This technique of speeding cash flow, if it is sold and administered correctly, can be acceptable to the client.
When an agency progress bills, invoices should look something like this.
|ACME Advertising: Project/Job 2012 Annual Report|
|Initial project estimate 5/2/2012||$13,500|
|Please pay this amount by 7/15/2012|
|Total billed to date||$9,756|
|Remainder in budget||$3,744|
I have always recommended you conduct a half-year agency financial review. By this I don't mean a cursory look at financials, but a complete study along with appropriate adjustments. The best way to do this is to gather your partners, key employees, etc. and move off-campus for a half-day uninterrupted meeting. At this meeting you should study the financials, examine current new business opportunities, and review the agency's vision and mission statements. This gets the agency back on track, if necessary, and focuses your efforts for the next six months. Following are some markers you can use for guideposts.
First and foremost, look at the billings. Have you met projections? How do you compare with last year at the same time? Remember to look at your work in progress. Your real billings for the period must include charges you've incurred but haven't billed to the client. Sometimes there are significant hours and outside charges logged but not yet billed to the client.
Also check the following additional markers:
If you're off on a number of these markers, please call. We should talk.
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