All creative agencies would like to become more profitable- who wouldn’t? One of the best ways to increase profitability for your creative agency is through improving your recovery rates. Simply, this means looking at the percentage of your team’s time that is actually spent on paid client work. The lower the recovery rate, the lower the agency’s chance of turning a profit.
The vast majority of creative agencies are made up of several different departments and functions. The recovery rate of each one, and indeed the rate of each team member within them, will naturally differ slightly. However, one of the functions that consistently seems to have the lowest recovery rates is client servicing. This may seem strange- surely the vast majority of their time is spent on client work, and so recovery rates should be good? But, this is often not the case, which this article will explore further.
So, how can you improve client servicing chargeability and make it a more profitable function for your agency? This article sets out some ideas to help you get started.
Why are recovery rates so bad in client servicing?
Typically, a project will require the use of several departments within a creative agency in order to deliver the results that the client needs. A common theme that I’ve seen within creative agencies is that all of the departments are allocated a timeframe and budget for each project, and functions such as client servicing and project management are left with any remaining budget.
The problem here is that what is left is often not enough time for client servicing or project managers to do the work they need to do. They have a huge variety of responsibilities, many of which involve direct contact with the client. So, they have to over deliver on time in order to get everything done and keep the client happy. This is exactly why recovery rates tend to be so bad. It’s not that they aren’t spending most of their time on client work- they are. However, the agency isn’t actually getting paid by the client for a lot of this time, as the client servicing team has to go above and beyond what they’ve been allocated in order to keep things running smoothly and client satisfaction high - which is the backbone of many agencies.
What can you do about it?
This is clearly a problem for many creative agencies. Client servicing or project management of some kind is a must to ensure that clients are kept in the loop with their projects and get the outcome they need and desire. But, there never seems to be enough time or budget to get this important job done properly without over delivering and profitability suffering as a result. The key to improving recovery rates here is looking at how you charge and allocate client servicing.
How do you charge for client servicing?
We’ve already discussed the typical model that lots of creative agencies use. They simply allocate what’s left over once the more creative elements of the project have been divided out. However, this doesn’t tend to be very effective. There are two main options that tend to work better, and each has its pros and cons.
The standard way
Let’s start by looking at the way most agencies tend to charge for their services as standard. This normally involves charging a different rate for each client servicing and project manager role, depending on factors such as seniority and how much the department costs to run. So, each project will be charged out at a different rate depending on the client’s needs. While this is the way that most agencies charge as a standard, it is often still not enough to cover the true costs of client servicing.
Each person in the agency is being charged out at what they are truly worth, proportional to the amount of time they spend on each project. This should have a positive impact upon recovery rates.
Clients may not understand why they are being charged for client servicing, or the value that it will bring to their project with you. In these cases, it is usually best to have an honest conversation with the client about how much value client servicing is adding.
You still may not get the full amount that you wish to charge, but it could help to increase it and shift client perception on what client servicing is worth to them and the outcome of their projects.
Another option that agencies can choose when charging for their services is blended rates. This means that you charge every client a flat rate that encompasses all the different elements of client servicing and project management. This number is usually reached by determining the average rate of your employees and the number of hours or days the project is likely to take.
Clients appreciate being charged a flat fee; it may seem to them that they are getting a better deal as they are getting client servicing and project management for one price. They will also know less about how experienced each team member is, and so may assume they are getting more experienced staff for a lower price, even if this is not always the case.
Getting the balance right for blended rates can be tricky; you need to ensure that you’re charging an adequate amount to increase recovery rates. So, it may take a few projects or more to discover what this amount actually is for your agency. In the meantime, recovery rates for client servicing may still be poor.
Overall, there is no one ‘right’ way to charge for services such as client servicing. Every agency has different recovery rates and issues they want to address, so what works for one agency won’t work for everyone. Indeed, there are many more approaches you can take to chargeability; the two set out here are just designed to show you a starting point and two of the most popular ones.
How do you allocate client servicing?
When trying to improve recovery rates for functions such as client servicing, you shouldn't just be looking at how much you’re charging. The way in which you’re allocating the work to your team members also matters.
To start with, you need to get to grips with what client servicing really means for your agency and clients. What do you actually offer? Who is performing these tasks? Where are there inefficiencies? Can the process be streamlined at all?
A common problem I’ve seen is that agencies have more than one staff member or team under different job titles that are essentially doing the same role. This could include client servicing managers, project managers, producers, and the like. If you’re serious about improving recovery rates and therefore profitability, you need to ask yourself if all of these roles are truly required on every project?
You may find that one person or team is actually able to carry out the job on their own, with more streamlined and efficient processes. Other team members on the more creative side of things may also be able to take on some of the direct client interaction as well.
This may seem like it will put too much work on one person or team’s plate. But, this is where increasing efficiency across the board is so vital for any creative agency that wants to improve profitability. If your agency is not working as efficiently as possible, your profitability will never reach optimal levels.
But how can you streamline these processes?
The first step is to ask your current team members about client servicing. What is working for them, and what could be cut out? This will give you valuable insight from the perspective of those who actually have to do the job.
Secondly, ask your clients. How was their experience with your agency? Did they feel as though they were kept in the loop? Were client servicing or project managers attentive, or did they seem distracted by other projects? Would they prefer to have just one point of contact in the agency? This will also give you needed insight into what you can do to help your agency become more efficient overall.
Then, you may want to consider working with an outside expert in this very topic. With a fresh perspective and insider knowledge on how to approach these issues, you can go above and beyond simply reviewing client servicing chargeability, and improve your agency’s efficiency and profitability as a whole.
To find out more about how I can help you and your agency improve recovery rates and more, please click here to go to my service page. Or, just get in touch today by clicking here. I provide a bespoke package to each agency that I work with, that focuses on your specific issues to come up with a plan to reach and exceed your goals, whatever they may be.