How profitable is your flagship client?
Often your flagship client has been with you for years, they provide a steady and reliable income and act as a draw for other clients within their industry. Great, hey?
Well perhaps not. Do you know how profitable your flagship client is? Not how much income you get from them but how much of this income is profit?
Every quarter, our implementation partners The Agency Works, produce an Agency Food Report. In their latest report (March 2017) they discovered that 58% of agencies see over-servicing as their biggest financial challenge. This figure has been steadily growing quarter-to-quarter.
Could you be making assumptions about how much profit you’re making from your flagship client, or are you caught in a web of over-servicing?
Often these key clients come first. The odd job here or there is pushed through and if they have a quick amend or two or five, it’s easier to ask the designer or developer a favour than to raise a job and formally schedule the work - isn’t it great when you can tell a client you’ll get it done right now?
In principle, there’s nothing wrong with a little of this. Too much formality can take the warmth out of a relationship and stop it from feeling like a partnership. But are you making an educated decision about this extra work and the value of the client and measuring the two against each other?
If you’ve deliberately taken on a loss-leading client for brand kudos, you still need to know the value of the relationship and therefore, exactly how much they’re costing you against their value.
But more often than not, agency over-servicing isn’t a considered agency expense, it’s simply accidently happening due to work not being logged and the assumption that a flagship client gets what they want.
What’s scary is that if your flagship client has been successful in attracting similar clients then you may be assuming they’re profitable too. Before you know it you could be actively targeting unprofitable client types.
We’ve spoken to lots of our agency clients over the years. We see agencies implement Synergist, start tracking profit at job and client level, and they’re surprised at who their most profitable clients are. Once they have the numbers to tell them which clients and job types are most profitable, it’s the backbone to significant and stable growth.
One such client is a digital agency who have successfully doubled in size over the last 2 years. They identified the issue of client profitability and looked at how information was being recorded within each job.
“Everyone can access Synergist which means I can see what everyone is logging. This has been fundamental in getting visibility on where jobs are at proﬁtability-wise as all the information we need is in one place. I can easily see time spent on a job vs what has been estimated, as well as what people are working on and how long it’s taking."
"We have a general job for each client. This is used to record general meetings and calls. We look at this year-by-year so we can see how much effort we’re putting into each client. Before, we couldn’t see this, and specific jobs were beginning to look unprofitable because all this ad hoc time was being recorded in an unrelated job. Now client services can see what work has been allocated to each job."
"Our growth has happened quickly so it’s great that we can forecast on a client and new business side. We can also put a direct split on this and see which is stronger. We have:
- client projects
- clients on maintenance retainers, and
- ad hoc amends for clients.
"I can report on job proﬁtability to the board based on these job types and specific clients. So they know which area of the business is most proﬁtable."
They are not alone. Many of our clients are using Synergist to make sure they’re not making assumptions about client profitability. We also spoke to Steven Clark, Financial Director and Commercial Manager at Tayburn, a 40-strong, Edinburgh-based agency who’ve enjoyed profit for 36 consecutive years. Steven identifies with some of the common issues discussed in this blog:
“Clients are cute, as every agency knows, they subtly ask for amendments here and there, which used to get nodded through for free. But the extra work really mounts up. Our system didn’t make it easy to track those changes, causing big problems.
With Synergist I know what’s going on in every job. Costs are captured in real-time so there are no surprises. And the team see how many hours are allocated to a job and how many hours are left.
W.I.P is so good. Most design agencies don’t have a clue about where they’re up to on time spent and costs incurred to a job. They have a huge amount of money tied up and they don’t know exactly where, until it’s too late.
Synergist gives us scalability. It’s all about growth. It makes growth more manageable."
Steven Clark, Tayburn
Can Synergist help you?
Synergist allows you to get as much detail as you need at-a-glance. So you can look at top-level information on cost vs profit or time vs estimates via a handy dashboard function.
If everything looks healthy, great. However, if you spot an issue, you can use Synergist to dig deeper and identify what’s happening. You can fix the problem, then use the knowledge to make sure you don’t make the same mistake again.
And you don’t have to spend valuable time pulling off reports and looking at the system. Once you identify what you want to know, you set up auto reports and alerts. You’ll get complete knowledge on which clients and jobs work best for your agency, a great place to grow from.
If you’d like to hear more about how Synergist can help your agency drop us a note, or book onto one of our bitesize webinars delivered by our implementation partners The Agency Works. If you'd like a more detailed introduction, The Agency Works are also more than happy to arrange a short and simple one-to-one demo.