How to Ensure You’re Not Overpaying for Agency Work

Many organizations debate whether they should keep a marketing project in-house or outsource it to a marketing agency. One of the big factors that often comes up is how projects are scoped and managed within an agency. In this blog, I will explain how our agency, and many others in 2018, are moving towards the approach of tracking employee hours on client jobs.

Let’s start with scoping:
The statement of work/contract that an agency sends to a client is based on the estimated number of hours that the agency anticipates spending on the project. The agency creates this forecast based on their understanding of the project tasks and the amount of time each employee time each task requires. We use a tool called Function Point to help with employee timesheets, estimates, timelines, and jobs (other agencies use similar tools such as Workamajig, Workfront, FunctionFox, etc.). These tools allow agencies to look back at similar projects and validate their estimated hours with data.

The projected number of hours is not necessarily disclosed to the client but instead used to determine the price estimate. If the agency goes over the number of scoped hours and there’s no provision in the contract about this occurrence, the agency does not bill the client unless there’s a disclaimer regarding the use of change orders.

There are instances when (potential) clients push back on price and express that they do not have the budget for what has been scoped. The agency will then go through the tasks that have been scoped in the project and determines what can be eliminated to lower the cost for the client. For example, if the original estimate included three rounds of revisions on each deliverable, the agency may propose only two rounds of revisions on each deliverable to cut back the price.

Building honest timelines:
Once the client has signed off on the project, the agency can now look at how many hours the project should take. Based on the number of hours scoped, the project manager/account manager can build a timeline for the client. By basing project timelines on the hours currently spent on all active clients, agencies can manage their workload and allocate time appropriately to the creative department. Reviewing previous timesheets and studying the time it took for past projects allows account services to build honest timelines.

This, however, does not necessarily mean that the project will launch on the date outlined in the timeline. Within agencies, I find that the main reason for project delays is usually due to the time spent waiting to receive client feedback. As a client, the deadlines for returning feedback to the agency should never be over looked. Make sure to review the timeline in detail and let your agency know if it is not a reasonable amount of time for you to provide feedback.

Keeping enough staff on the client’s account:
One of the big benefits of tracking time is that it allows agencies to know when their employees have reached full capacity. If the amount of time allocated for clients are more than the available employee hours in a week, agencies can make the decision to staff up, backed up with data to show they have the work to support a full-time hire. A negative of keeping a project in-house within your organization is that if the project requires staffing up, your organization may not have the long-term need for a developer, designer, SEO specialist, video developer, etc. By using an agency, the agency absorbs the cost of increasing staff without the long-term costs to the client.

At Paris, each person working on a client account is asked to keep track of their time by adding their hours to the client’s specific job number that they are working on. This process is based on the project management software our agency uses (again, we use Function Point). For clients who have a retainer contract, they can either choose to be charged based on hours spent on their projects or a flat fee. We’ve found at our agency that flat monthly fees work best for our clients. Some months, clients will require extra help and we will spend more hours than estimated and some months we spend less hours than estimated; over the life of the contract, it balances out.

Overall, agencies who require employees to track hours have improved client relationships because clients understand the level of service they are receiving. Additionally, deadlines are less likely to be missed and clients receive the benefit of not having to hire temporary staff. In my next blog, I will discuss the benefits of having a retainer vs. project-based relationship with an agency.