Every Creative business needs to think about the most effective way to create profits from the work they do. Where should you start first and what is the simplest way to know if you are billing as much revenue as you could be? You certainly don’t need to have a fancy accounting system to tell you whether you are getting this right.
There are three basic calculations you need to work out. Check them out as this could be the difference between making a profit in 2010 or just getting by…
Step 1. Figure out how much $ you should be billing based on the people in your business. E.g. John Smith should be billable to a client at least 30 hours of his working week. Ensure you work out everyone’s billable time and this becomes your TARGET revenue. Remember that some roles are less billable or not at all.
Step 2. Each week, log how much time everyone said they DID work that week. E.g. John Smith said he clocked up 25 hours against clients this week. This is your NOTIONAL revenue (ie what you should have billed to the client). It is best to get your staff to keep timesheets no matter how painful!
Step 3. Establish how much $ you did BILL to your clients that week/month. This is your ACTUAL revenue.
Simply compare your TARGET v NOTIONAL v ACTUAL revenue. What’s the goal? Keep aiming to get your ACTUAL closer to your TARGET. This will build your profits over time.
Where can I get hold of a tool that helps me with this? For those of you who want to measure this easily and quickly, we have created the perfect and simple spreadsheet that lets you track your target, notional and actual (weekly and monthly) revenue. All you need to do is spend 15 minutes per week updating the time spent on clients to receive the most important report you can do in your business.
Check out our Staff Utilisation Report available for only $250.