Using Online Time Tracking Software to Identify Seasonality and Predict Trends

| January 22nd, 2013 | , , ,

Most creative agencies use online time tracking software to keep track of billable hours. After all, tracking time with an online app is a great way to generate detailed reports when billing clients, to show the client how their money is being spent. This is great for your client, but, what about your creative agency?

It turns out that online time tracking software is also a great tool for analyzing the performance of your creative agency. In this article, we’ll use Intervals and it’s Trends report to illustrate how time tracking data can be used by creative agencies to identify seasonality and predict trends. In other words, we’ll be looking back on past data to find patterns, and then projecting those patterns forward to predict and prepare for trends.

Identifying Seasonality

Seasonality is difficult to identify, especially for creative agencies, where erratic cash flow is the norm and projects come and go so quickly. If we are tracking the time spent on each project, the resulting data may reveal some patterns. The downside is that it may take some time to accumulate enough data make analysis possible. The upside is that anything is better than nothing, and even a little data can help the decision making process.

Seasonality is important for a creative agency to understand because it will help with business decisions, such as who to hire and when. And while some agencies may have obvious seasonality, others may not. For those creative agencies that aren’t sure when the projects are going to come in, time tracking data may reveal when to push and when to hold back.

Using Online Time Tracking Software to Identify Seasonality

The above Trends graph shows two years of time tracking data at a web design agency. Each color represents a different client. As we can plainly see, the blue client has been consistent during this time. Their projects peak around the  new year, but overall they are a consistent source of billable work.

In contrast, the red client had a lot of billable work early on, but the work was sporadic and dissipated over time. The green client gradually increased in billable work — while the red client was phased out — resulting in more consistent billable work that increases in November and tapers off after the new year.

The bird’s-eye view of the data shows our billable work peaking from November to February, with a small surge during July. And it shows that billable work decreases significantly from April to June. This web design agency was able to use this data to identify “seasons” of high and low volumes of billable work, which lead to making better business decisions going forward.

Predicting Trends

What about the future? Can we make any predictions from this data? I believe so. I’ve projected the data out one year to visualize what we might expect. We have two existing clients, blue and green, that are going to increase their billable work during the holiday season and a little into the new year. Unless we lose one of those clients, it’s nice to know we can rely on them for consistent revenue.

Using Online Time Tracking Software to Predict Trends

Next, we need to find more work during the months of April, May, and June. For whatever reason, these months are the lightest in billable hours. These months would be a good time to bring on new clients, or drum up some new projects from existing clients. It might also be a good time to reduce commitments to subcontractors and freelancers, and perhaps tell our team to go on vacation.

What about the red client? They are an anomaly, a disruption, and should not be considered a reliable source of revenue. The red client is an example of the web design agency taking on a large project and then knocking it out over a short period of time. These types of projects can be taxing on the team and cash flow. We won’t include the red client in our predictions because we’ve learned our lesson and will avoid similar projects going forward.

Reliably Foreseeing the Future

Tracking your creative agency’s billable hours using online time tracking software results in very useful data. But it is important not to read too much into the data. Seasonality is highly subject to change due to factors beyond our control, and trends are difficult to predict. But that does not mean you shouldn’t try to identify seasonality and predict trends.

Time tracking data will help you grow your creative agency, but it can’t make decisions for you. Leave room in the decision making process for experience and intuition and your creative agency will prosper. Ignore the data altogether and you leave the future of your creative agency in the hands of the gods.

 

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John Reeve

John is a co-founder, web designer and developer at Pelago. His blog posts are inspired by everyday encounters with designers, developers, creatives and small businesses in general. John is an avid reader and road cyclist.
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Michael Payne

Michael is a co-founder and product architect at Pelago. His contributions stem from experiences managing the development process behind web sites and web-based applications such as Intervals. Michael drives a 1990 Volkswagen Carat with a rebuilt 2.4 liter engine from GoWesty.
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