Staff & Clients – What’s their worth?
One reason business owners go out on their own is because they are good at what they do and don’t really want to work for someone else in the long run. Or perhaps there is an untapped market and they can see their niche being valuable to others. Or maybe an opportunity arose where they could buy into an existing business giving them a kick-start into the business owners world.
However, one thing many business owners recognise is that they are not necessarily that good at the books or reporting on various aspects of the business such as projects, clients and even staff. So quite often, these end up in the too hard basket and as the business grows, issues around these grow as they’ve often been left to the wayside.
The problems this creates are substantial and can affect cash flow. But what it means is, you don’t really know where the business is at financially. You don’t know how much your clients are costing you, whether your staff are meeting targets (if any are even set) and whether your projects / jobs / etc are profitable, break even or costing you more than you thought.
So how can we help you find out if your staff are worth their value, if your clients are worth keeping or if you should charge more and improve your bottom line? We review your systems or implement new ones to gauge your costs, invoicing, and create reports that reflect these and other components to identify areas of weakness and strength, changes in patterns and what needs improvement or refinement.
Staff – what are they worth?
We try to identify time, costs and billings to give you a net profit for each staff member. This is achieved through the below:
- We take a look at your internal processes to see how you currently look at this metric. We may tweak it to suit our methods or if you don’t have one, we create our own
- We need to know how much your staff are paid including superannuation and what the fixed costs of your business are
- We also need to know if annual and personal leave have been taken in the respective period
- We review invoicing based on each particular employee’s time billed
- And from all this, we can identify the staff member’s overall profitability and what their KPI’s should be (at a minimum)
So when we have identified the cost of the staff members and worked out their profitability for a certain period, we are then able to identify what’s missing or the potential lost income for the business. Have your staff met their KPI’s? Maybe. But are they doing the bare minimum to ensure they are meeting them or are they doing above and beyond? Are they doing this regularly or only every now and then. Are they worth what you are paying them, or are they worth more (or less)? What can be done to improve the situation so they are more profitable and you are making more than you are losing?
Clients – how much do they cost me?
The reality is, most businesses don’t look at how much time they invest in their client relationships – billable and non-billable time. But when you do, and your timesheets are all up to date, you can see at detail how much your clients are costing you and whether or not they are worth as much to you as you thought they were.
This comes down to internal processes – timesheets need to be processed for all time spent on clients whether it’s billable or non-billable time. From this, we can identify the time-sinks, and when we take the staff’s costs into consideration and the invoices raised to the clients, we can see a true profit (or loss) of the client for a given period. This can be for the client overall or particular projects for the clients. We also want to ensure that any expenses incurred for the clients are also included, especially if they are not invoiced on to them.
When you look at the above in detail, you might find that the clients with the least amount of interaction are more profitable than those with the most interaction and highest invoicing – and with this, may need to change your interactions to ensure your low-contact clients feel as valued as your high-contact clients.
How does this improve my bottom line?
When we take the staff and client metrics into account, we can identify areas that need improvement and after implementing changes, the business should see a higher profit at the staff and client levels but also in the profit & loss report by way of higher invoicing and/or reduced costs. We like to keep an eye on these metrics monthly so as to identify changes with staff patterns and identify if there are particular areas that need refinement.
These particular metrics are generally more relevant to time-based businesses, but we can also apply some of the methods to those that aren’t time-based businesses.