We’ve already shared our tips on pricing and how important that is to your profit. In the second part of our profitability series we are going to share some tips on the tools you need to measure your profit.
The results of The Wow Company’s survey of creative businesses in the UK showed that 18% of companies do not know how much profit they are making. This is alarming. It’s very important that you have steps in place to measure how your business is tracking.
So how do you measure profit? Here are 3 steps to get you started.
1. Work out your billing capacity.
To start, you should work out your billing capacity (your day rate x number of people in your team x days in a month) and then compare it with how much you are actually billing. The results may surprise you.
2. Manage your jobs
If you are a creative business and you want to know how profitable your jobs are, it doesn’t matter if you’re a company of one or 100, project management software is essential. Timesheets, in particular, are one of the most important (and easiest) things you can use to measure profit. By doing timesheets you can ensure you know exactly how much time jobs take, so you can quote and charge your clients accurately and take away the guesswork.
An interesting stat from the survey was the increase in creative companies using project management software from 2013 where it was 53% to 77% in 2015. So don’t be left behind. If your peers are using software to help measure their profit, you should be too.
Below is a selection of the software used by those surveyed to help manage their projects.
If you are in the market for project management software there are plenty of options to choose from, you just need to do some research. Remember: before purchasing software from any company make sure you get a demonstration or give it a test run before purchasing. It’s important you get software that is the right fit for your business.
3. Get the right accounting software
While project management software is there to help you manage your projects, accounting software will show you your true profit and loss. In the past, accounting software has been quite complex and expensive, you may have also needed a degree just to use it. But times have changed, they are now more cost effective and much easier to use.
By far the most popular accounting software for those companies surveyed was Xero. There are other products out there, just do your research and get rid of those spreadsheets.
Having the right tools at hand is important for measuring and increasing your agency’s profitability. For more information check out The Wow Company’s webinar, where Peter Czapp shares some of the results from the 2015 survey.
Slides courtesy of The Wow Company and main image by TaxRebate.org.uk and used under Creative Commons license.
Other articles in this series:
How to increase your agency’s profitability: step 1 pricing
How to increase your agency’s profitability: step 3 the right tools
