after the win: profitable growth

Background

★ Founded Internetrix in 2000 in Australia★ Grew to a multi-million dollar agency;

clients included Prime Minister & Cabinet★ Became increasingly frustrated with how

hard it was to run the business★ Created AffinityLive to make it easier to

run a growing professional service business - building on hard-won lessons in agency land

★ AffinityLive launched 3 years ago - venture backed and HQ in San Francisco

What We'll Cover

1. Agency Economics 2. Time is Money

3. Blind Sweat & Tears 4. Cash Costs of Growth

Agency Economics

Agency Economics

Wages, Salaries, Benefits & Contractor Costs:

$60K - $65K

Sales, Marketing, General & Administrative:

$20K - $25K

Profit: $15K (EBITDA)

Sources: Spire Research & SPI Research

Where does the money go? For every $100K of new business:

Agency Economics

Costs are mostly fixed based on time/hours

People are a fixed "sticky-up" cost

Other overheads are mostly fixed too Revenue earned by

doing work for clients

But Revenue is variable

Time is Money

★ Research study on time tracking across hundreds of agencies in late 2014.

★ Even for firms billing on a fixed-price basis, not knowing where time is spent is a critical issue.

★ The largest source of "time leakage" are:○ Email○ Meetings○ Forgetting

★ Study featured in Harvard Business Review in January 2015

Emails Leaking Hours

★ 350 hours of time per year 'leaked' to email (using McKinsey study of 2.6 hours per day on email)

★ At a charge-out rate of $150/hour, this costs over $50,000 per employee per year.

Meetings Leaking Hours

★ 213 hours of time per year 'leaked' to meetings (using Verizon study of 3.1 hrs/day in meetings)

★ At a charge-out rate of $150/hour, this costs $32,000 per employee per year.

Forgetting Leaking Hours

★ Moving from weekly to daily time entry cuts time leakage by 80% (from 23% to 5%)★ On average, 172 hours of time per year 'leaked' to memory loss (Ebbinghaus Forgetting

Curve)★ At a charge-out rate of $150/hour, this costs over $25,000 per employee per year.

Costs & Consequences of Leakage

★ Amount of time leaked is staggering: 4.6 months a year!

★ If all that time was recovered as billable, it means over $100K in lost revenue (and profit!) based on a $150/hour charge-out rate.

★ While it is unlikely all of this time can or should be charged out, not knowing what happens with 38% of your largest cost each year is clearly crazy.

Solution: Automatic Timesheets

Automatically populate timesheets based on emails between staff and clients - no more forgetting what they worked on!

Synchronize meetings & appointments from calendars into the timesheet too.

Study: Blind Sweat & Tears

Blind Sweat & Tears

★ Research study on time tracking across hundreds of agencies in early 2015.

★ Professional service firms make the vast majority of their revenue through 'projects'.

★ Study found the following:○ 80% of projects are <6mths; 60%

<3mths○ The most common projects are the

worst managed (75% using nothing at all)

○ The most common projects use manual or budget tracking at all (70%)

○ Communication is most significant determinant of success, but dominated by email, meetings and calls.

Big Enough to be Dangerous

★ 80% of projects are <6 months; 60% are <3 months - average length 2 months.★ Profit margin for the year = 2 months; these projects are definitely big enough to be

dangerous.

Mismanagement of the most common

★ Longer projects are better managed, but most common projects very poorly managed.

Tracking Budgets - Two Thirds Run Blind

★ Almost 70% use manual or no budget tracking at all (over 26%)★ Project profitability isn't something managers can see without manual effort & calcs (if at

all)

Schedules - Manual Cat Herding

★ Handling (frequent) changes in project scope, deadlines and even personnel is commonplace but most professionals aren't able to respond quickly and easily - causing stress & conflict.

Communication - Critical but Manual

★ Effective Communication by far the most important part of running success client projects.

Communication - Critical but Manual

★ Email is by far the most important, followed by meetings & calls.★ Only a quarter of respondents communicate/collaborate within project management

software.

Solution: Track Budgets & Profitability

Solution: Automated Scheduling

See a list of all projects, tasksand retainers

Drag and drop work onto individual user schedules (pushes to calendar)

Workloads auto adjust as tasks are completed or deadlines change.

See where you have unallocated work to schedule

Solution: Bring emails into projects

Clients & Partners

Staff & Contractors

Cash Costs of Growth

Cash Costs of Growth

★ Professional service businesses have a distinct disadvantage - you can't use vendor credit terms to fund growth (since costs are payroll).

★ At the same time, many clients expect you (as their vendor) to extend credit on their terms.

★ The consequence - you have to rely on retained profits to fund operations.

★ Growth makes this problem more acute (up-front costs of recruiting, onboarding time) and the "big win" can actually be a death knell.

★ Deposits are critical to successful growth & then bill for work done, not milestones met.