A Simple Approach to Managing Team Output and Related Costs

For service-based companies, employee time is the costliest input.

Often these businesses are not able to measure the output of a single team member or multiple team members.

That is why they don’t have a clear idea of what it costs to deliver a single service or a bouquet of services.

But there is a simple way to find it.

When you know these costs you can also identify the services that are cash-cows and also the level of profitability of each service.

So how do you do it?

Simple, get each employee to track time on a simple spreadsheet or use a tool like Toggl or Harvest. Great if they do both. Because it will give you a clear picture of what each employee does and for how long and what work they produce through that.

To ensure adherence, make it part of an agreement with the employee so that the employee knows they will be doing it from day one. Tell them it is something that the business’s success depends on.

Get the employees to track time for 30 days at the beginning of every quarter.

Analyze the data to understand where they spend time to find out the cost of delivery for each service. 

To ensure it is logical, break the service delivery into small parts – for example, a creative agency may be doing strategy, content, and images. Note the employee time that is spent on each of these services. 

So if for 1 client, it may take 3 employees to deliver the service.

If employee 1 is spending 10 hrs/month, employee 2 is spending 8 hrs/month, and employee 3 is spending 7 hrs/month, in total it takes 25 hours of 3 employee time to deliver a service.

Multiply it by employee cost per hour, assuming 100 hours of productive work per employee per month to come up with the cost of delivery per client.

Use it to identify team productivity and your profit margins for each service.

It’s that simple.

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