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Case Study: Losing money by the hour
A public relations firm found its profits dwindling as overhead rose. When we were retained to restore its profit margins, we began by looking at the two biggest factors in profitability: staff productivity and billing rates.
Like many firms, our client felt there wasn't a need to track hours because it charged a flat retainer fee. However, public relations firms need a system for measuring profitability and productivity; otherwise there is no way to know if money is made or lost on an engagement, as well as the reasons behind it.
We recommended that the firm institute a time and billing system. While the staff began recordings their hours, we worked with management to set an achievable profitability goal, based on industry benchmarks. We established an hourly billing rate based on labor, overhead, and desired profitability.
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