The Hidden Value of Non-Billable Hours
It’s the start of a brand-new year—and what better time to discuss your growth goals and how you might achieve them? From conversations with many of you, I know it’s been difficult to spend any meaningful time executing many of these goals in the past. This is frustrating, especially because your agency is so adept at executing marketing plans to help your clients achieve their individual goals.
The question that continues to haunt you is this: why are you unable to treat yourself the same way you do a client?
The central issue, I have learned, is that your agency is not set up to manage non-billable activities. Think about how closely you manage billable time. From working on client deliverables to calculating project profitability, your agency is adept at managing billable activities. On the other hand, non-billable activities—like training staff, attracting new talent, developing new services, or developing thought leadership—tend to be a disorganized jumble of activities. As we welcome in 2023, let’s take some time to focus on some of these non-billable activities.
RETHINKING TIME
It is helpful to think of billable time as your agency's current income; meanwhile, non-billable time is the future of your agency. However, inspired by David Maister, I often advise agency leaders to stop thinking in terms of billable and non-billable hours. Instead, we can view it as three new categories: income time, investment time, and admin time.
Income time describes the period when you are working on behalf of your clients. Investment time is the time you spend on the future of your business. Lastly, admin time is pretty much everything else, e.g., internal meetings, emails, talking with your colleagues, collecting your thoughts, and other administrative tasks. Now, armed with this new language, let’s start to think about how we might invest our time.
Managing Investment Time
First, we need to call out and acknowledge your penchant for client time over investment time. When a client says “we need this now,” you’ll often delay the important (investment) for the urgent (client).
To clarify, I am not saying that you should not accommodate client requests. You are, after all, in the business of providing marketing services to clients.
However, we must acknowledge that you have constantly underinvested in your future to incur additional billable hours today. See how the change in language makes it hit differently? When it’s a choice between billable and non-billable work, any rational person would choose billable work. But when it’s a choice between getting paid today or putting yourself in position to get better work tomorrow, the decision is not as simple.
In essence, this is a human struggle. Not many of us want to incur short term discomfort (saying “no” to a prospect that is not a good fit) to achieve a long-term goal (working with right-fit clients).
Next, we need to figure out how much time you have to invest. We’re going to need to make some assumptions:
Assumption 1: Your agency bills out 60% of its time, leaving you with 40% of non-billable time.
Assumption 2: Each person in your agency has 2,000 annual hours to allocate to billable and non-billable work.
Assumption 3: Based on the above assumptions, each person spends about 1,200 hours (2000 x 60%) on billable work. This leaves 800 hours for non-billable work.
Assumption 4: You can take 25% of your non-billable hours and invest 200 (800 x 25%) annual hours into an internal project.
Based on these assumptions, you have about 200 hours every year to invest in your growth goals. Multiply that number by the amount of people in your agency, and you begin to see how much time is wasted instead of being invested in projects that will yield better business in the future.
For example, a five-person agency has about 1,000 (200 x 5) investment hours per year that should be managed on an internal project.
I’ve broken this math down to coaching clients in the past, and they’ll usually tell me that they nor their team have the bandwidth for any additional work. In response, I present them with a challenge: tell or show me what has been developed with all their non-billable hours. You can guess the answer — the time has usually been squandered by over-servicing a current client (i.e., giving more time to a client than you originally budgeted for).
Where to Invest Your Time
Now that you realize you may have upwards of 200 hours annually to invest in your future, you’re probably thinking about where you should invest that time.
For starters, I recommend you work on four projects each with a 90-day timeline. At the end of Q1 (or 90 days), version 1 of the project has to be launched. Of course, you will iterate and make it better over time; but at the end of Q1, you will have invested 50 hours individually to help complete an activity that sets you up to reach your growth goals.
One year from now, you will have invested 200 individual hours and completed four projects that are aligned with your growth goals. Some of you will want to create timelines longer than 90 days. Do not do that. The shorter cycle ensures that your plans get implemented. First build your agency muscle of completing internal projects before you extend past the quarterly timeline. At the end of your 90 days, you should have a review process to capture learnings for the next project.
Here’s an example: Let’s say one of your growth goals is to increase your Agency Gross Income by 15%. One of your quarterly projects could be focused on making you a visible expert, thereby increasing your visibility with potential buyers. In practical terms, this could mean creating a speaking tour where you show up to industry trade shows, conferences, and podcasts. You should invest your time for outreach — establish your connection with all the people and platforms you want to leverage, and increase your visibility.
In this example, you would have invested 50 hours into targeted outreach to help you achieve your future goal of increased business. If you’re interested in a more personalized plan of where you should invest your time, reach out to me about my agency coaching service.
Key Takeaway
Many agency goals go unfulfilled for one simple reason: there is not a marketing process in place to achieve them. Your billable/client time has a process. Moving forward, your non-billable/investment time must also have a process to make those goals a reality.