It is quite common for creative agencies to bill clients under a monthly retainer agreement. In fact, it’s preferable to billing clients under a time and materials contract. The agency gets paid up front on a recurring monthly basis, so they know the revenue will be there and can manage their client projects accordingly. And the client receives a chunk of time granting them access to designers, developers and other creative types.

When a creative agency enters into a monthly retainer contract with a client, they are selling units of time — a precious and limited resource. Therefore, the time spent on each client project needs to be closely tracked and managed. If your creative agency is going over — or coming in under — the hours contracted to each client, you need to know.

How you manage the time allotted under a retainer agreement depends on your agency’s billing methods. Some agencies will allow their clients to roll unused hours over to the next month. Other agencies will bill for overages and expire unused hours. And some agencies simply just wipe the slate clean each month and start afresh with a new bucket of hours. Do whatever works best for your agency.

More important than how you are billing a client for a monthly retainer is whether or not you are tracking your time. Tracking your time on each monthly retainer can answer the questions that commonly plague agencies. Are you going over, or coming in under, the allotted hours on any monthly retainers? What is the actual hourly rate on this project? Can creative team take on another monthly retainer?

Are you over or under the allotted hours?

The worst thing that can happen to a monthly retainer is repeated overages. One month is okay. Every month? Not okay. If a client is taking advantage of your agency, or if you underestimated the amount of time required, it needs to be addressed. The upside to a monthly retainer is that it can be renegotiated each month. The number of hours and the dollar amount are subject to change. The downside is the client may decide not to renew the monthly retainer.

Tracking your time on monthly retainer agreements will quickly identify which client projects need to be addressed. It may be a simple conversation with the client, explaining to them that the number of requests needs to be reduced to more accurately reflect the agreed upon hours. But it may also require renegotiating the contract to reflect the reality of the client’s current workload.

What is the actual hourly rate on this project?

When you repeatedly go over the agreed upon number of hours, without billing for the overage, you dilute the value of your billable time. Your team can only work so many hours in one day, so it makes sense that you would want to bill the highest reasonable amount for that time. The data you accumulate from time tracking will tell you exactly how much you are billing per hour.

Time is the most valuable asset your agency has to offer. Each hour over budget on a project dilutes the value of the hours already worked. Go over on enough projects and this dilution of time will start cutting into profits. For example, if my hourly rate is $100 per hour on a monthly retainer for 50 hours, a 5 hour overage reduces my hourly rate to $90/hr. Ouch. As with any small business, it does not make much sense to do more work if you are not getting paid for it.

Can you take on another monthly retainer?

Working with clients on a monthly retainer is one of the best ways for creative agencies to regulate cash flow and build recurring revenue. They are so effective, in fact, that you will find yourself wanting to take on more and more of them. But, should you? Can your creative team take on more hours, or do you need to consider hiring someone?

If you’ve been tracking your time, you will know how many hours your team can bill, on average, per month. Just pull up a report in your time tracking app and run the numbers. If your team of four can bill 600 hours a month, and you’ve already committed to 550 hours a month, you will need to be careful how many more hours you commit to a new monthly retainer.

Monthly retainers are a great way for a creative agency to bring in recurring revenue. But if you aren’t tracking how much time your agency is spending on these contracts, you may find yourself struggling. Projects may lose money by repeatedly going over their monthly budget. The team may become overworked and start falling behind. You might diminish the dollar value of your billable time.

All of these potential scenarios can be easily avoided, simply by using online time tracking software. Want to get started tracking your time? Try a free 30 day trial of our online time tracking app, Intervals. 

Photo credits: Train tracks and trucks by Horia Varlan

Estimating and tracking your time is not easy, at first. It’s difficult to know how much time a project might take, and how much you should charge for it. Fortunately, estimating and tracking your time is an easy discipline to adopt.

Start out with your best guess and track against that. The next project, guess again and track. You will begin to notice some repetition as you break down each estimate into smaller deliverables. Patterns will present themselves, making it easier to more accurately estimate future projects.

One advantage of using online time tracking software is the wealth of data you accumulate. Time tracking data is an invaluable asset for making intelligent, informed project decisions. More importantly, time tracking data will tell you how you are performing compared to your original estimates. Here is how it works using Intervals, our online time tracking software.

First, you break down your estimate into smaller pieces. How much time will be spent in meetings? How much time doing web design? How much time doing web development? Breaking down a project into smaller estimates makes it easier to estimate the project as a whole.

The above screenshot shows a project with a budget of $14,000. So we’ve broken down our estimates by the different types of work we expect to perform. We add hours to each bucket until our estimate matches our client’s budget.  Then we start tracking our time on the project.

As you make progress on the project you will begin accumulating more and more time tracking data. Intervals is able to compare this time tracking data against your original estimate, in real time. Quickly find out if you have gone over the budgeted hours for meetings, web design, web development, or the project as a whole.

In this example, we can see that our budget is only at half, but we’ve already gone over our hourly estimate for engineering hours. Perhaps the project was front-loaded with engineering, or perhaps the requirements changed. We are still safely within our budget. At this point we can decide if we should pull hours over from other buckets, or if we need to dial back on our engineering hours. The data won’t tell us what to do, but it gives us the information we need to make that decision ourselves.

This is just one example of how comparing estimated to actual time tracking data keeps us better informed and able to make smarter decisions in the earlier stages of a project. With this data we can keep projects under budget and on time, and alert the client and our team to early warnings. Data is good. Data is powerful. Use it to your advantage the next time you need to track your time on a project.

We are committed to updating Intervals with improvements as often as possible. This April update introduces a new person activity feed, redesigned timer buttons, and a new calendar for selecting dates. Read on for more details.

View a person’s recent activity from their profile page

We recently introduced an activity feed to each project that allows you to see what’s been going on recently with a project. We’ve now extended this feature over to people’s profile pages. See what’s been going on recently with any member of your team.

To see this feature in action, click through to any person’s profile and notice the new Recent Activity box in the left column. Here you will see a few recent entries. To see more, click on the “View all activity” link.

From the person’s feed page you will be able to filter their activity by date and type. Need to know what your designer was working on last week? The person feed will tell you.

Redesigned timers

In light of some more subtle design changes we’ve been making to buttons throughout the interface, we decided to revisit the timer buttons. We’ve redesigned the timer buttons to be easier to click, take up less space, and provide a more intuitive time tracking experience.

A new calendar for selecting dates

There is a new calendar for selecting dates on the home calendar, list views, reports, and other areas scattered throughout the interface. Click on the calendar icon to select a date and you will immediately notice a cleaner, more intuitive, redesigned calendar.

Use the arrows to move the calendar from month to month, or click on the month name to jump to forward or backward a few months.

Optimizations and foundational work for upcoming features

In addition to the updates mentioned above, we’ve also completed a round of bug fixes and optimizations to help Intervals run faster. And we’ve overhauled some of the underlying code in the application to prepare for some new features coming up on our road map.

There was some heavy lifting to do in preparation for these upcoming features, but, we’ll soon be introducing a much more fluid calendar with more interactive projects, milestones and tasks.

Meanwhile…

We hope you enjoy this round of updates. Please feel free to send us any comments, questions, or criticism, by clicking on the “General question?” link at the bottom of any page from within your account. We love hearing from you. Meanwhile, we’ll be working on the next batch of features and improvements we have planned.

The role playing realms of Dungeons and Dragons, and its infinite number of analog and digital spin-offs, all played an influential part in my becoming an entrepreneur and co-founder of Intervals. The obvious conclusion is that Dungeons and Dragons stretched my imagination to consider all possibilities, regardless of how outrageous or impossibly fantastic they might seem. While that is true, a limitless imagination will only take you so far in a startup.

Dungeons and Dragons was a game of strategy. Its fantasy worlds were subject to rules and laws of their own, limitations to make the experience more realistic. Role playing within the confines of these limitations is what really taught me how to run a startup. Because if there is anything I have learned as an entrepreneur, it is that your success will depend on your resourcefulness in the face of limitations.

My favorite incarnation of the Dungeons and Dragons genre was a computer game published in 1985 called The Bard’s Tale that I played on the family’s Apple IIe computer. The game allowed you a party of six characters whom you would take through towns, catacombs, and castles battling monsters and collecting treasure. My ten-year-old self didn’t realize it at the time, but playing the game was giving me an experience that would later inform my 30-something self in running a startup. The struggles I encounter running a startup typically hearken back to one or more of the same three lessons I learned during my countless hours of playing The Bard’s Tale.

Lesson One:
You have to spend your share of time in the dungeons

When you first start playing The Bard’s Tale your characters do not have any experience and can only fight weaker monsters and take on smaller quests. So you start out doing dungeon crawls through the cellars and catacombs below the city, fighting any monsters you come across to collect experience and treasure. The stronger and more experienced you become, the larger the challenges you can take on.

There are very few overnight successes in the startup world. You aren’t going to be one of them. Building a successful startup takes time. A lot of time. We all have to work our way up from somewhere. It’s the experience we gain along the way that forges our abilities to run a startup. The battles we faced in the past may seem trivial now, but they weren’t at the time.

Just like in the game,  the challenges never get much easier. What does change is our ability to take on more difficult challenges. What others might dismiss as impossible, we are willing to risk, because we’ve successfully overcome similar challenges already.

Lesson Two:
You need the right blend of characters on your team

The Bard’s tale allowed you to have six characters in your party, but only three of them could engage in hand-to-hand combat. This left you with three characters that might have been useless, if it wasn’t for the fact they they could still use magic spells. I had three fighters, two spell casters, and one character in reserves.

Each character had different qualities that made them unique and essential to the team. And while the fighters in the front demanded the most attention, the magic users were indispensable due to their abilities to heal, protect, and illuminate the path ahead for the entire party.

Running a startup requires a team with a diverse set of skills. Specialization is good, but coverage is more important. Everyone on the team has to be willing to go outside their area of expertise for the benefit of the business. A startup requires a team with the specific skills necessary to succeed, but also diverse enough to cover seemingly menial needs — from general bookkeeping to human resources. Running a startup requires a team talented enough to produce amazing work, and humble enough to go pick up a late afternoon round of coffees.

Bonus lesson: There were no ninjas in The Bard’s Tale. There shouldn’t be any on your startup team, either.

Lesson Three:
Sometimes it takes a few tries to complete a quest

Each level of The Bard’s Tale, from the deepest catacombs to the highest castle towers, contained a quest that had to be completed before moving on to the next level. Sometimes it took a few attempts to pass a quest. Inevitably, you would fail to acquire a key, a trap would catch you unawares, or the monster at the end would best you. You would fail, learn what you did wrong, and try again, until you completed the quest. In fact, the earliest quests were the most difficult because I lacked the patience and experience necessary to overcome failure.

When you are running a startup, the odds are against you. Failure is almost certain. While you may or may not fail on a grand scale, you will most certainly fail at smaller things. You have to accept failure and learn from it if you are going to succeed. If you allow failure to define you, there will be no pushing past it. Failure to do something right is not actually failure, it’s a lesson in how not to do something. You won’t be able to figure out the right way unless you try again.

The final quest in The Bard’s Tale is to defeat Mangar in his tower, where he is protected by 396 barbarians. When you enter the room, the game says:

You face death itself in the form of, 99 Barbarians, 99 Barbarians, 99 Barbarians, and 99 Barbarians.
Will your stalwart band choose to (F)ight or (R)un?

There are times when running a startup feels just as impossible as defeating 396 barbarians and their boss. But after several tries I quickly deduced how to defeat the barbarians and use the right combination of items to defeat their boss, Mangar. There will always be obstacles in our path threatening to bar our way. Navigating around them is up to us. When it is six against 397, as it often is when running a startup, do we fight, or do we run?

Photo credit: !!!! scogle

Task management software provides a great foundation for managing projects, and many creative agencies may find it to be all they need to successfully deliver projects on time and under budget. In my experience, however, online task management software is more effective when coupled with project management features.

Managing a project successfully using only tasks depends more on the size of the project and the teams ability to self organize, than it will your adopting the latest and greatest task management software. Some pros and cons to consider…

The benefits of a task-only approach

Some projects are small, simple, and straightforward enough they don’t require more than a typical task-based workflow. These types of projects can be broken down into a handful of tasks to be completed by one or two people. You will typically come across these projects in a freelancing scenario, where the project is small enough for one person to both manage and complete the work.

Repetitive, straightforward projects are also good candidates for a task-based management process. These are sometimes referred to by agencies as “Bread and Butter” projects. These types of projects aren’t glamorous, they don’t stretch our creativity, but they do pay the bills. These projects are familiar, making it easy for the team to manage the process and stay organized with a simple task management app.

Why task management alone may not be enough

Most projects your agency encounters will require more project management features than a standalone task management app can provide. Features that will help prevent scope creep, prioritize one project over another, analyze current projects, estimate new projects, and get paid for the projects you’ve already completed.

In other words, the ability to make smart business decisions plays an important role in project management.  Let’s take scope creep, for example. If our project management software includes time tracking, we can run a report to see the number and value of hours we’ve put into a project — right up until that moment the client asks us to change something.

Instead of responding with a resounding “no” or the dreaded change request, the project manager might be able to accommodate the request because another task came in way under budget. Or they may still say “no” and resort to the change request because the project is already over budget. Either way, they made a decision based on where the project stood at that time, not based on where they thought it would end up when the contracts were signed.

A project is more than the sum of its tasks

Managing a project using tasks alone is a myopic methodology. Sure, it gets the project done. But it doesn’t take into account the necessity of historical data for making better project management decisions in the future. If you can discipline your team to track their time and document their work on each task, you will have a wealth of data that can be used to estimate projects more accurately.

If you can track project payments and expenses, you can prioritize projects for those clients who pay on time. If you can generate detailed reports you can quickly respond to client questions regarding how and when their money spent. Putting in a little more effort while working on tasks translates to a lot less effort when making overarching project management decisions in the not so distant future.  

Photo credit: VFS Digital Design, mcginnly