Building a Profit Culture: What Does a Profit Culture Mean for Your Team
One of the myths is that more profit in your business only benefits the directors and senior stakeholders. What it actually, and should mean, is more opportunities to expand, to build team size and office size. See below for a great video from Simon Sinek describing what profitability means for a business.
What a Profit Culture Looks Like: No work for free
This was covered more widely in our second session, but it is the notion that no work should be done for free. A way to engage the team in this is by splitting them up at random. The objective is to get together on a regular basis and talk about work that you’re potentially giving away for ‘free,’ work that you’re unable or unwilling to charge the client for. It is peer-to-peer accountability to call each other out and ask, “could we be charging for this?” It’s all too easy to fall into the trap of thinking “it’s just a five/ten-minute job,” but these all add up and it’s time that you could be billing for.
Key Statistics on Profit Culture
Of course, implementing a strategy for building a profit culture will require time. Below are some interesting statistics regarding said strategy, taken from The Wow Company’s annual Benchpress Survey.
75% - the percentage of agency owners that want to spend more time on strategy.
10 hours - the amount of extra time each week most profitable agency spend on strategy, compared to the average.
20% - the amount of agency owners who have a clear vision for the future of their business and know what it will look like in three years’ time.
28% - the amount of agency owners who have written objectives for the next twelve months.
If you’re struggling to find time to implement your profit strategy, try the following steps.
Building a Profit Culture: How To Communicate To Build A Profit Culture
KPIs and dashboards
When it comes to creating a profit culture within your team, one of the best ways to communicate your goals and progress is by sharing your KPIs via dashboards. Due to the necessity of working from home, and with companies shifting to a more ‘hybrid’ way of working, dashboards are an easy way to share this information when it can’t be communicated in person.
It might be that you look at compartmental dashboards, so that different teams only see the information that is relevant to them. Naturally you may wish to be careful how much of your finances you share, but meaningful figures and goals are a good way of engaging the team on the journey that you’re going on. For those that are not engaged at a wider level, breaking figures down per client can help individuals take a vested interest in what they’re contributing towards the business.
Lagging vs. leading indicators
When knowing which figures to share, it’s beneficial to have a mix of leading and lagging indicators. Leading indicators are the day-to-day figures that correlate to where you’re going to be in a week/month/years’ time etc. Lagging indicators are figures that tell you about the work you’ve already done historically; they give no insight for future performance.
Move towards predictive reporting rather than historical reporting. If certain figures aren’t on track, things can be implemented in real-time to try and correct them. For example, how much content that’s produced, how many LinkedIn messages are being sent, these are all ‘leading indicators.’ By working out how much of something you do and what return you expect to see on that, whether it be replies from messages or content downloads etc, these leading indicators can keep you on track to consistently reach your goals and hit your targets.
Make the figures easy to access
Directors are ‘forced’ to spend a lot of time working with the numbers, but for the rest of the team, it may be difficult to understand when it’s not part of their day-to-day responsibilities. As such, it’s important to make them accessible. Even a simple approach like red/amber/green in terms of progress can be enough to make more people engage. Try to limit the KPIs on a dashboard, 8 for example, making it easy to digest and avoid making the process overwhelming. Make them as things they can action within the month, and not just ‘last month, this is how well we did.’ Team members are more likely to engage if there are actionable tasks.
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In terms of which metrics to include on these dashboards, number one should be your gross profit margin. Gross profit margin is calculated in a way to allow you to benchmark against other agencies. We covered how to calculate this in our first session. Another useful metric is billing capacity vs actual billing.
This can be worked out by calculation how many billing hours you have across the team over a certain period (week/month.) If you work on a blended rate, you just times this by the number of hours. If you work on a tiered rate, it takes a little more calculating (which The Wow Company can help to do.)
Of course, we can’t and don’t work 100% of that time (people have breaks etc,) but if you can relate time to monetary value, you can see what is actually billed vs what can be billed. For example, it may be that you have the capacity to bill for £50,000, but only build £20,000 in that time period. Being able to compare numbers will allow the team to engage in conversation about where they might be giving away time for free, and how they could plug that gap.
Other metrics can be included that are ‘nice-to-haves’ rather than essentials can include things like recruitment KPIs if the business is hiring (number of interested people, interviews, live ads etc) and ‘Net Provider Scores’ – a score calculated through surveys about how customers perceive your business. Learn more about how to calculate Net Provider Scores here.
All sessions in our agency profitability series are now available to read on our website.
Session Three: How To Manage Your Agency Projects For Profitability
Session Four: How To Maximise Profit From Your Existing Portfolio