Over the past few years, I've seen tonnes of articles calling for professional services firms to ditch timesheets altogether in favour of a value based approach.
Whilst these articles make some very good points about the importance of value, they also miss some really crucial points about the value of time.
Let's be frank. Your business is selling the time & availability of your resource pool, who all have individual, billable skill sets. Skill sets which are hugely valuable to your client-base.
I get it, most delivery teams hate timesheets. Project managers hate chasing down delivery teams to actually submit them.
But the truth is you need both time and value.
Not just one or the other.
Value is what you're selling
From the mouth of American business magnate, Warren Buffet:
“Price is what you pay, value is what you get.”
Value is crucial.
Value is how you justify the fact that your fee is 20% higher than the competition. And ultimately, it's how you win that business without needing to underquote & undercut yourself.
Of course, if you're only approaching clients with hours and a cost, you're doing it wrong.
You can’t just whack on a big fee without explaining why, because then you’re just sticking yourself straight back in the pricing game and you'll be underqoting in no time.
The key is to justify your fee is demonstrating your value
Let’s suppose you’re purchasing some branded coffee mugs for the office. Do you expect every quote to be the same?
No, it depends.
It depends on the quality of the print, the quality of the mugs, the speed of delivery and loads more factors which vary from supplier to supplier.
But you end up choosing the supplier with the higher fee because the mugs are higher quality, plus they have a cool service that lets you personalise each mug with the names of your staff.
You didn't go with the cheaper supplier with the fast turn around because the more expensive option actually offered more value.
The truth is, you can't deliver a million dollar project on a $10,000 budget. So you still need to lay your cards on the table and be clear about what can be delivered for the amount that the client is paying.
Trust me, this helps you further down the line with things like scope creep (this article explains this in more detail).
Tracking Time is valuable to your business
The fact is, your resource pool only has so much time in the day.
Let's say your staff work on a 40 hour week. They're available for 47 weeks of a 52 week year.
That's 1880 hours. If they were working flat out delivering projects at 100% productivity, that is.
A more realistic figure to arrive at is 75% of that total, which suddenly leaves you with 1410 hours.
So immediately, you've got a quantifiable limit on the availability of every single one of your resources.
Value doesn't help you manage this. But tracking time does.
It also help you quantify and track project performance.
Let's say you've just won a massive project, which not only has a high monetary value attached to it, but creatively; it's pretty new & challenging, so it's good for business too.
The problem is you're a little under-resourced as you're busy with lots of other projects.
Your resourcing manager works their magic and manages to move a few bits around to get your best pool of resources ready to crack on with the first stage of the project. Which is great, because you won't need to outsource.
However, they're still resourced to various other important projects that month, so their availability is still limited.
You can't afford for them to spend too much time on the new project, because not only will they be over-delivering and driving profits down on this project, but they will also be losing time on the rest of the projects they're resourced to.
You could outsource to solve this, but the cost of doing so will eat in to your profits too.
So if you're not monitoring how much time is being spent on delivery, how do you know of your resourcing decisions will have a detrimental, knock-on effect on your profits?
This is just one example.
The point is, time feeds into your resourcing, forecasting and various other project management decisions.
It helps quantify project performance and ultimately, helps service-based firms run as smoothly and efficiently as possible.
After all, the business buzz word of the 21st Century is 'data'.
I'm not sure about you, but as a business owner, I want as much of it as I can get to help me understand the position my business is in.
Time provides quantifiable data which can help you understand all sorts of things about your business:
- What you're spending most of your time doing, so you can ensure your business is doing the right things. Or at the very least, the things that will actually help you turn a profit.
- Utilisation data so you can fathom how many clients your account managers can handle without having mental breakdowns.
- Which clients are absorbing more time than others, so you can understand why. Are they worth keeping if they're eating up all your time?
- Produce clear, accurate forecasting. Not only to help predict the financial state of your business, but also to help you understand whether you need to consider hiring new staff any time soon
You can’t get that same quantifiable data from focusing on value alone. And this is the point.
You can price up your work in any way you like. To your clients, you are selling your value, and that's what you're delivering. But internally, keeping track of time helps you fully understand where your business is at, as well as where it's going.
Interested in exploring this topic further? Here are a few extra resources:
[list unpublished blogs]