Case Study
Unknown employee utilization causing unknown or inaccurate client profitability. A growing internet marketing company was not tracking its employee utilization and could not calculate and analyze the profitability for each of their clients. This challenge is not an uncommon one that many services and consulting-based companies face.
We calculated the total cost of each employee. We started by implementing a structured time-tracking system. Using that data, we were able to create monthly utilization reports calculating every employee’s total cost. The cost incorporated the employee’s wages and additional expenses such as payroll taxes and benefit costs.
We determined employee utilization rates. Comparing the total cost of each employee to the hours worked that were actually billable to the company’s clients (i.e., revenue generated) allowed us to determine each employee’s profitability for the company. Having this information available allowed the company to identify underutilized employees and areas that were not profitable more easily.
We analyzed profitability by client. We achieved this by comparing the employee’s total costs incurred per project to the revenue generated for each of those projects. Through this analysis, the company was able to identify which of their clients were and were not profitable and why.
After evaluating employee utilization and client profitability reports, the company reorganized its personnel to maximize each employee’s utilization. They also set employee utilization goals, tied those goals to compensation plans, and adjusted pricing for low-margin clients.
At Signature Analytics, we understand that striking the perfect balance between employee utilization and client profitability is essential for a thriving business. Here, we outline our top best practices to help you maximize both factors and ultimately increase your margins.
1. Accurate Utilization Tracking for Better Cost Understanding
Develop a process to accurately track employee utilization, allowing you to better understand your costs per employee. This information helps you make informed decisions about staffing, training, and resource allocation to optimize your business performance.
2. Incentivizing Efficiency with Compensation Plans
Structure employee compensation plans that reward efficiency and drive profitability. By aligning employee incentives with your business goals, you can create a motivated and high-performing workforce.
3. Delivering High Value Amid Increased Costs
When raising costs for clients, ensure that your team continues to deliver exceptional value. Maintaining a strong value proposition keeps your clients satisfied and loyal, even as prices change.
4. Identifying Workflow Inefficiencies
Take a proactive approach to identify and address workflow inefficiencies. Streamlining processes and eliminating bottlenecks will lead to improved employee utilization and enhanced client satisfaction.
5. Harnessing Technology for Automation and Standardization
Leverage technology to automate and standardize repetitive, low-value tasks. By freeing up your employees’ time, you can focus on higher-level activities that add value to your clients and drive profitability.
6. Analyzing Client Profitability
Regularly analyze the profitability of each client to understand how they contribute to your bottom line. This analysis can help you identify opportunities for growth and areas that need improvement.
7. Purging Loss Leaders
Identify and eliminate clients or projects that consistently drain resources and negatively impact your profitability. By focusing on more lucrative opportunities, you can boost overall performance.
8. Adjusting Pricing for Profitability
Reevaluate your pricing strategies to ensure they align with your clients’ needs and your profitability goals. A well-designed pricing structure can help you achieve better financial results.
9. Understanding Client Lifetime Value (LTV)
Finally, assess the lifetime value of your clients to guide your customer acquisition and retention strategies. By understanding the long-term value of each client, you can allocate resources more effectively and drive sustainable growth.
At Signature Analytics, we’re committed to helping you optimize employee utilization and client profitability. Reach out to our team of experts to learn more about our tailored solutions and start transforming your business today.
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