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Being a High-Performance Creative Firm
by David C. Baker
No. 5: Implementing for clients. If you’re managing the first
four priorities like you should, there’s virtually no chance that you’ll
have time for client implementation work. But if you do, you’ll
probably be doing the same things that got you into the field in the
first place. That could be copywriting, media relations, design,
advertising or whatever. But never dip your toes in those waters again
unless you're doing a terrific job with the first four priorities.
if there’s more than one person running the firm, you can enjoy one of
the few advantages of a partnership: splitting the responsibilities and
focusing deeper on the process.
Otherwise, use this checklist to make sure you’re being the leader your firm needs.
on the first point about watching the financial performance of a firm,
here are key metrics that should always be part of the financial
Months of overhead cash. Measure monthly
overhead, including compensation, and make sure there is at least two
months of that set aside in checking or savings. What is in accounts
payable or in an available line of credit doesn’t count. And if there is
a single related client source that represents more than 35 percent of
billings, more than two months will be needed. This is one of the most
significant measurements you can make. It’s like altitude in a plane
when you start having engine trouble because it gives you options and
time to implement them. Many firms have managed to operate more on a
hand-to-mouth basis and don’t quite see the need for such a luxury. But
they often find out otherwise the hard way, with sad impact on staff,
clients and themselves.
Fee billings per full-time equivalent employee.
One easy way to measure utilization is to divide your full-time
equivalent (FTE) employee count into the fee base. If there are six
full-time employees and the fees are $660,000/year, the fee billings per
FTE are $110,000, which is the national average. A high-performance
firm averages $160,000/FTE. (Note that you include both billable and
non-billable people in the employee count.)
Salary load as a percentage of fees. The
total compensation load (not including payroll taxes) should not exceed
45 percent of your adjusted gross income (AGI). This does include
compensation as the principal, though you might have to “standardize”
Net profit. The net profit, as a percentage of fees, should be fifteen to twenty percent.
The utilization of all staff, billable and non-billable, should average
60 percent. In other words, if all the time that’s worked is added up,
60 percent of it should be charged back to clients.
The high-performance firm has no debt or capital leases. They fund
purchases with available cash and if they can’t afford to do that, they
wait until they can.
The high-performance firm is positioned to the prospect in such a way
that it's very clear that there are few substitutes for it. There is no “me too” positioning (probably around branding) that serves to scoop up
all the available opportunity without having to say no. The
high-performance firm develops deep abilities from the repeated
application of expertise to similar situations.
The high-performance firm steadily generates valuable thought
leadership material that serves to attract prospects, obviating the need
to have an outbound marketing strategy.
Clear prospect target.
In doing that, they have a specific definition of the qualified client.
They publish this in modified form on their Web site and they use it
diligently in deciding which accounts to pursue.
WORKING WITH CLIENTS
High-performance firms don’t work for small clients. Instead, they have
eight to twelve clients, each of whom is delivering profitability and
the chance to do effective work. By definition, then, each client is big
enough, which equates to ten percent (maybe as low as five percent) of
your total billings.
Internal growth. The high-performance
firm has an internal mechanism, mediated through the account managers,
for regularly growing clients. There are specific tactics for this and
specific, measurable goals to track it.
high-performance firm is leading clients strategically with unbundled
implementation. They estimate it separately on proposals, they have
identified strategists by title on staff and they present it separately
We’ll discuss leadership and employee
management in a future column, but these five steps are a good place to
start in positioning your firm as a high-performance one. CA