VeraSage

No Timesheets?  Is it Possible?

Ron Baker - 01/30/2007

The following is an E-mail I received from the CEO of an Advertising Agency on January 26, 2007 that has begun to implement Value Pricing, and has had stellar success so far. As usual, at this point in the transition, the questions arise: “What about timesheets? Do we need them?”

The answer is unequivocally NO! Warning: this is a long post, but if you’re interested in why timesheets don’t matter, read on.

Ron,

I left you a voice mail message earlier this morning, but thought you might prefer to save the long distance phone charge and respond by e-mail.

We are a member of the AAAA’s and MAGNET—and I’ve heard you speak through both organizations. Tim Williams is a consultant and friend.

We have come a long way with value pricing and have actually moved from a history of getting around $80,000 of gross income per employee to our 2006 level of $130,400 per employee. Tim Williams tells me he knows of agencies who get $150,000 to $170,000 per employee. We aren’t planning on moving to a completely consultative business model, so I don’t know if we will get to those levels or not, but we don’t think it impossible to get to the $145,000 level with our projections for our gross income in 2007.

In recent industry news, some big New York agencies are claiming “We sell ideas, not time!”

So, does this mean they really have eliminated the use of timesheets?

OR

Are they still using timesheets internally to track the manpower/resources needed to provide the thinking and services and then selling that thinking and those services based upon their perceived value to the client? (Which is what we are currently doing).

We sincerely want to motivate our people to achieve what we want to accomplish.

We want to create great creative ideas / strategy / work that help our clients build their brands and sell more!

So, we don’t want to send the wrong signals to our people that we care more about billing 75% of their day than a great idea. That said, I still need some kind of measurement to know what our “costs” are so we can sell value and measure margin. Is it possible to do this AND eliminate timesheets?

We buy into the concept (got this from you) that people buy things based upon perceived value—not caring how much time it takes to do it.

Having said that, if someone buys a $65,000 automobile based upon value, I know the manufacturer knows how much it cost to make that car and what their margins are.

So, if you would, please share your thoughts or observations on what you’ve seen other service business firms doing.

Thanks for your time and perspective!

[Name withheld on request]

CEO of an Advertising Agency