Many agencies throughout the world are accustomed to billing their clients a flat fee for their work — commonly referred to as a fixed-price project. The amount charged is based on either the project’s perceived value or the estimated amount of effort. For most of these agencies, it would seem there is little to no need to track their time, after all, they aren’t billing hourly. And the truth is, they probably don’t need to as long as the business is running smoothly.
Agencies that don’t bill hourly, however, may be overlooking the benefits of time tracking. Time, not money, is the agency’s most valuable resource. Time also happens to be non renewable, so it has to be managed wisely. And, the first step toward managing time is tracking it. Here are three benefits to tracking time on fixed-price projects that will keep even the most successful agencies moving forward.
Profitability at the Project Level
Running a profitable agency is no easy feat. It requires constant attention be paid to incoming payments and outgoing expenses to keep cash flow positive. One disadvantage to fixed-price projects is that some of them are profitable and some of them aren’t, but the agency doesn’t know which ones are losing money. In addition, pricing a fixed-price project is not easy, and typically takes a few iterations to get right.
Time tracking can solve this conundrum by revealing the financial value and amount of time people are working on each project. And once you know that, you know if the project was profitable or not. The key to increasing your agency’s overall profitability is to do everything you can to make each project profitable.
Time tracking data will show you why a project lost money, so you can avoid a similar fate on the next one. For fixed-price projects, increasing profitability typically requires a more tightly defined scope to keep time under control, or a price increase to make up for the extra work.
Teams are often uneven. It’s just one of the realities of working on a team. In my experience, it’s not because any one person is lazy or one is an over-achiever. I’ve been on self-organizing teams that are imbalanced because of a lack of communication. And, I’ve been on top-down managed teams that falter under unorganized leadership.
Regardless of how a team is structured, time tracking data will quickly reveal imbalances that, left unchecked, could compromise the success of the project. For example, one person might have taken on too much work, or may be stuck on one particular task.
The key is to use time tracking to identify any problems that are effecting the team dynamic and address them early on. A well organized and efficient team is the underlying foundation of every successful project, and therefore the agency.
Project Schedules Based on Historical Data
It’s one thing to know how many days, weeks, or months, your agency might take to deliver a fixed-price project. When you’re juggling multiple projects at once deadlines can be fluid. Time tracking provides a critical component for scheduling work. It tells you exactly how many hours were required to complete similar work in the past, so you can give your clients more accurate estimates and schedules going forward. This is especially true when scheduling fixed-price projects that are repetitive in nature.
Time tracking data will also reveal seasonality, or trends, in your historical project work. For example, you may have a client in the tourism industry that pulls most of its revenue in during the summer. After working through a few projects, the data will show that most of the time spent on their projects is in the months leading up to summer. Equipped with that data, you can safely schedule a few more fixed-price projects for other clients in the spring, safely knowing that you won’t be overwhelming your team.
You don’t have to bill hourly for your services to take advantage of the benefits of time tracking. To get started, sign up for online time tracking software, like Intervals, and try it out on your next project.