Two Steps to Improve Agency Margins by Eliminating Freelancer Overruns

September 1, 2016

Posted by Chris Hering, Director, Vertical Market Lead, Advertising, Media and Publishing

It's a refrain we hear again and again, “if it weren’t for the freelancer rates, we’d be well within budget.” It’s painful to hear that delivering a successful product to the customer can mean sacrificing margins and the business.

Client demands are pushing agencies to the edge of margins for their project work and that means hitting deadlines any way possible. Often the ‘any way’ means enlisting the crack resource down the street that charges at a rate of $140 per hour for the pleasure of being the savior to the project.

Does it have to be this way? We’d argue it doesn’t. We all have seen the loss of retainer work in the industry. And the less retainer work, the more pressure on project work when clients are negotiating rates by time and by deliverable. That means that the error margin in estimation needs to be tighter. Wholesale changes in staffing are going to blow the budget. Advertising software(opens in new tab) and project accounting software(opens in new tab) can help.

Making your PMO little P & L’s:

What I would argue needs to happen is two fundamental changes. Your managers need to understand not only hourly burn, but dollar burn. Sure, salaries are always problematic, but there are ways to get around them by using banded costs—heck, even the most difficult resources know the star needs more pay. By exposing costing at the staffing level at the start of the project, your agency can empower staff to do more to control the cost.

Once companies acknowledge and take ownership of this responsibility, new and better conversations about the trade-off between client satisfaction and profitability come into play.

The next step is to have a viable resources strategy where staffing reflects the reach of your firm. In other words, do you have cheaper people doing nothing right now? If they’re not doing nothing, is what they’re doing billable? Properly managing resources demands this comprehensive view.

NetSuite SRP

NetSuite Services Resource Planning module brings the complexity that is your PMO into the hands of your finance AND your project team. With role-based control your people only sees what they need to see to make the right decision for the project and their team.

Learn more about how NetSuite is helping advertising and digital marketing agencies(opens in new tab).

NetSuite has packaged the experience gained from tens of thousands of worldwide deployments over two decades into a set of leading practices that pave a clear path to success and are proven to deliver rapid business value. With NetSuite, you go live in a predictable timeframe — smart, stepped implementations begin with sales and span the entire customer lifecycle, so there's continuity from sales to services to support.