Line Items Webinar Recording

Double Down on Profit: Resource Planning To Maximize Profitability & Client Happiness

Join us for an insightful webinar on Resource Planning for Marketing Agencies, where Jon, our founder and CEO, dives deep into strategies to maximize profitability and enhance client happiness.

In this comprehensive session, you will learn about the critical importance of resource management, forecasting revenue, and effective staffing to drive agency growth. Discover how to structure your team by role and responsibility, predict employee turnover, and set target hourly rates for optimized financial performance.

Webinar Transcript

And welcome everybody to our May line items event. Today’s topic will be resource planning, specifically how it can maximize profitability and client happiness. Before we get started, just some quick housekeeping and agenda items. I’m going to go over who we are if you’re not familiar with what we do and why you should even be listening to us.

After that, Jon, our founder and CEO, will introduce himself in a minute. He will then present today’s topic, and then we will have some final items before opening it up back to Jon for a Q&A segment. If you’d like, feel free to change the name on your avatar, just like I’ve done, to your first name-company name so we get a sense of who’s who in the room. If you would like to network with anybody, connect on LinkedIn, etc., after this call, I will be throwing in the chat a Google sheet for you to fill out your contact information if you’d like to.

For the Q&A segment, I ask that you please hold off on any questions until we get to that point, at which point you can speak, raise your hand, or type your question in the chat. So, who are we? We essentially help marketing agencies grow their cash, profit, and revenue through two avenues. One is Engine BI, our business and financial intelligence software for marketing agencies, coupled with, for those who are interested, an intensive Mastermind group that you’re in a cohort that Jon facilitates with other agency executives.

The idea is through this, as well as through our other brand, Fiscal Advocate, which provides outsourced accounting and finance services for agencies, we essentially help you understand what areas you should be spending your time and money in to drive growth. We use that by leveraging financials, leveraging the data and the numbers. So that’s a little bit about what we do. With that, I am going to hand it over to Jon.

Thank you, Lirjon. Let me share my screen. So, I was joking around about how exciting this topic is, but I think it really is one of the most crucial topics for any professional service company in terms of how you manage your resources. I think you all know it is not easy, but it is the key to not just maximizing profitability but also the key for your renewal rate and ensuring that your clients are happy. So, I’m going to go over just an overview of how to set up your reporting plan and some of the reporting and analytics that you need to think about as you’re doing this.

Real quickly, the first thing is, I talked about client profitability, but it’s also really critical for your employees. If you do not have solid resource planning, you could be burning them out, or you could be on the opposite side, destroying profitability because you are overstaffed and not servicing your customers well. It’s also key to growth. By having the right structure in place, it allows you to build a scalable foundation that you can build upon and build upon from there.

In order to do this, you need a constant investment in forecasting. You have to have a really good understanding of what your revenue is going to look like in the future as opposed to what it is in the past. You need to know this in a very granular way. So you need to know by client, by service line, by team member. How you organize and structure this is really important, and as I just said, you need to know this by team, service, and client level in order to really do this properly.

Let’s just start with what is resource planning. Resource planning is making sure that you have the right resources for each of the services you offer for every single individual client that pays you to deliver work for them and that you’re doing it based on the right roles. You know, so that if you have junior people doing junior work, you’re doing it well. If you have senior people doing junior work, you’re not doing it well. You have to really understand how you are allocating your resources, not just for your clients and your services, but also for the organization. This becomes really important in making sure that you have the right individual at the right level doing the right job.

You don’t want VPs doing junior people’s work, and you don’t want junior people doing VP work. This is just to give you a quick overview. In this scenario, it looks like you need to hire more people. According to the resources needed, you need 19 people in September and 22 in December, so you need to hire three more people. But when you dig into a granular infrastructure, you’ll see that the story might be a little bit different. Here, it looks like you actually need to hire seven people for paid search; however, you need to reduce your account for social media. So, although you needed to hire three people, as you get more granular in terms of looking at this by line of business or by role, you don’t need a director-level anymore, and you need one less manager.


That’s the hard part of this: getting the data organized that allows you to understand not just that you need to hire more people, but that you need to hire a lot of people in one group and remove people in another group. How do you strategically navigate that on a regular basis?

Why is this so important? It’s crucial for your existing clients. They want to make sure that they’re talking to the same people regularly and that they’re constantly staffed appropriately. It’s really important for employee retention. As I mentioned before, if you don’t have a good resource plan in place and you go double your business, you’re not going to be able to staff accordingly. In order to scale, you need to have a scalable infrastructure for resource planning. It’s also crucial for profitability. I see time and time again people not having enough direct reports per manager, having managers do junior people work, and it kills the profitability of the organization.


A few elements you need to analyze in these five different areas: services, clients, level of responsibility, roles, and turnover. I’m going to go into each one of these in detail. You also have to have profitability targets for each of these different elements. You have to identify the resources that are needed. In order to service your clients, you need people and tools. You need to make sure that the resources, the individuals, have the right tools. If not, it might kill your profitability or damage the relationship with your clients. So, it’s not just people but also the tools that go along with it. Lastly, the timing is crucial.

One of the things that’s really hard, especially if you’re growing rapidly, is when do you hire the people? How much training do you give them? Are you hiring them right when you win the job or a month before the job? What happens if you don’t win the job? At Rise, our CFO and our head of client delivery used to always struggle with this. The CFO would look at the forecast and see a book of business that’s potential clients, but you haven’t won it yet. His argument was that he didn’t want to staff it until we won it because if we staff it and we don’t win it, profitability gets killed. On the flip side, the head of client delivery would argue that if we don’t staff it and we win it, how will we service those customers? So there’s always this gap, and there’s a little bit of science and art to navigating that.

Setting up your resource plan starts with revenue. There are really two different revenue components. The first is your existing customers. You need to have a good understanding of whether it’s product-based or recurring-based. All your existing customers, what work is due, what work do you need to do, and then you also have to analyze what you’re going to do from a new customer standpoint. There are two different types of revenue models: recurring revenue, which is often much easier to staff for, and project-based revenue, which is lumpy and you really have to assess freelancers versus full-time employees. When do you win projects? Do you have a machine that is constantly winning projects? Is a big project coming up that is ending? These are some of the different elements you want to look at.


In order to do solid resource planning, it always starts with revenue. What I want you to start off with is your existing contracted revenue of all of your existing customers. Here you’ll be looking at your clients, so you can see client one, client two, client three, client four, client five. You want to do this by line of business and by month. You can see that paid search is ending in May for client one. Then, you want to predict renewals. In this scenario, client one is going to renew, but we think that they’re going to renew at a lot less than what they were originally paying for. Social, we think, we’re going to keep them all the way through. When you do forecasting, it is a guess. You are guessing what’s going to happen in the future, and you’re going to do the best you can at that moment in time.

That’s one of the reasons why it’s so important to do this regularly. We recommend minimally every quarter you go through a reforecast of what you think is going to happen with your revenue because this is going to drive your resource plan.

With your existing customers, you want to predict upsell. In this scenario, we predict that we’ve never had any work for client number three, but we think we’re going to win their social business. We think that’s what the fees are going to be. When you predict your upsells, it’s whether you will win it or not, the amount, and the start date. It’s the same for renewals: will they renew, and if so, for what specific amount?

New business is a little bit harder. There are two elements to new business. The first is named new prospects. Every one of you ideally has companies right now that you are talking to that are going to consider hiring you, and we call those named new prospects. Additionally, whether it’s every month or every quarter, you should be winning new business. The challenge is that you don’t know who those companies are, you don’t know when you’re going to win them, but you have to predict that as well because these are critical elements for your resource plan.

We’ll start with the named new prospects. It’s very similar to upsells: will you win them, yes or no? It’s a binary decision. I’m not a big fan of assigning percentage probabilities or based on stage. My analysis is that when you make these binary decisions, it is much more accurate. You then have to predict the amount. How much new business will you win from each of these named prospects? Then you have to predict the start date. From my experience, most people screw up the start date. They generally have a good feel for whether they’re going to win the client or not, but my sales team has always been a little overly ambitious in terms of starting immediately. However, legal doesn’t really care that they want to start immediately, and the sales cycle gets extended, so that’s one thing to be careful of.

The challenge with unnamed revenue is that you know you will generate a lead and win a new client in the month of June, but it’s really hard to predict the line of business or what type of lead will come in if you have multiple services. Generally, we recommend an attribution model. If your current service breakdown is 50% paid search, 30% social media, and 20% programmatic, we recommend following the same pattern with your blue-sky or unnamed revenue and using that as a model to help with resource planning.

You can see we put that in here, and that gives us an idea of what our revenue by each line of business will be. One thing to note is that I am a big fan of doing resource planning by line of business as opposed to by client. It’s not that you don’t want to do it by client; you want to make sure each client has the necessary resources, but from a staffing perspective, it is much easier to hire knowing you need five paid search people or three social media people rather than breaking it down per client. So I do a lot of the resource planning and analysis by line of business.

From a roles and levels of responsibility perspective, there are a few things to look at. First, you want to categorize the team: are they on the analytics team, the creative team, the paid search team, etc.? Next, you want to be as granular as possible in writing out what needs to be done on an individual basis. For example, if you win a client, let’s use analytics as an example. How frequently do you have to put a report together? Are you pulling the data manually? Do you have to analyze that report? Do you have to put a PowerPoint presentation together? Do you need to provide strategic recommendations? There might also be work to build the infrastructure to put the analytics together. Write down all the tasks.


I don’t care what your titles are, but there are generally five levels to every agency: entry level, manager, director, VP, and C-suite. Once you have all these tasks down, determine what level person is going to do that work. Compiling a weekly report is predominantly going to be done by an entry-level employee; however, a manager will need to spend some time reviewing that person’s work. The next step is to predict how much time each task takes on a regular basis. This becomes the foundation for how much you charge a client and how many resources you need at each level.

Another challenging aspect for agencies is turnover. When you think about how many resources you need, my experience has been that you will never have the perfect amount of resources. You will either have more resources than you need or less. It’s very rare to have exactly the right amount unless you have zero employee turnover and a completely flat organization. If you’re growing or shrinking, you’re constantly battling this. When you dip below the needed resources, it puts a massive burden on your team, leading to burnout and higher employee churn.

At Rise, we created something called rolling hires. Our analysis showed that we would lose about 26 employees a year, four in January and two in all the other months. January had the highest turnover because employees had received their bonuses, it’s a fresh start to the new year, and it’s a time of reflection. We hired 26 people every year, four in January and two in every other month, predicting the turnover. The idea was to never fall below the resources needed. It wasn’t perfect, as we were generally hiring entry-level employees. If an employee with two years of experience left and was replaced by an entry-level employee, it wasn’t an apples-to-apples comparison, but it removed a lot of friction and concerns about having enough resources to get the job done.

Moving on to gross margin targets, this is one of the most important numbers you should know as an agency owner. I want you to have a gross margin between 50 and 60%. If you have 6.5 million in revenue, your budget is 50% of that number. It’s not easy to deliver at a 50% gross margin. I see many companies in the 40s and even the 30s. My general rule is if you’re between 50 and 60%, you should be able to deliver for your customers, invest in your business, and be profitable. If you’re over 60%, most likely someone is getting screwed: you are either burning out your team or under-delivering and not fulfilling what you promised your client. If you have a technology solution or something proprietary that allows you to be over 60%, that’s amazing. If you’re between 40 and 50%, you generally have to choose between being profitable or investing in your business. If you’re below 40%, you’re losing money. This is a really important number for you to understand.

The gross margin targets should be looked at by service. You can see if you’re doing well with paid search but social media is below the 50% mark, and programmatic is at 39%. As you start thinking about your resource planning, you want to do a deep dive into programmatic to figure out what’s going on because something is not right in terms of the math.

A few things to look at: just on a month-over-month basis, you can have wide swings in terms of your gross margin. If you wanted a 56% gross margin to subsidize programmatic with your paid search, you might see it going down. You have to think about your strategy. If it’s only for one month, you might be fine with it, but those are the things to be looking at.

Moving on to target hourly rates, when I talk about your gross margin, you need to understand your cost of service. Your revenue minus your cost of service equals your gross margin, and your gross margin divided by your revenue equals your gross margin percent. In your cost of service, anything related to doing client work goes into your cost of service, including your employees.

Take employee A to employee M, look at the salaries, and start grouping them by the different titles. If you look at an entry-level employee making 60,000 a year, you should be charging $101 an hour. The way you come to that number is by charging three and a half times what you’re paying your employee. I suggest smoothing it out a little bit, so rather than having $101, you have a target hourly rate of $100, $175, or $250, just so the numbers are more logical. Now you have target hourly rates for each of your employees.

The next thing to figure out is your utilization rate. What percent of your time for each employee is billable? This varies based on factors like company holidays, vacation time, sick days, internal meetings, and breaks. In a week, you have 40 hours, and there are 52 weeks in a year, giving you the total amount of time for an employee. Each employee will have some company holidays, vacation days, sick days, and internal meetings, which reduce their available hours.

Next, you want to look at the meetings you create for your organization. If you have a monthly company meeting for all employees, that’s one hour per month per employee not available for billable work. Consider reducing the frequency of these meetings. Team meetings, committees, and breaks also take time away from billable work. This allows you to calculate how much billable time per day each employee has, giving you an idea of their rate per day and the revenue you can generate from them.

The last section is reporting and analytics. Look at how much revenue you are generating versus how much you should be generating. If you take the billable hours per day, you can calculate the total hours available and your targeted blended rate. For example, if your team is making $153 per hour but you’re only generating $91 per hour, you’re not maximizing revenue.

Analyze by team, client, and line of business to identify underperforming areas. Team analysis can show you how different teams perform. Client analysis helps identify which clients might be problematic. Line of business analysis can highlight which services are not performing well and need improvement.

Key takeaways: resource planning is critical for employee satisfaction, client satisfaction, and profitability. It requires constant investment in forecasting. You need a granular understanding of your revenue by client, line of business, and team to ensure you have the right structure in place. Now, I’ll turn it over to Lirjon. I hope this was insightful for some of you.

Thanks, Jon. Can you let me share? There we go. Just some quick final items for everybody, and then we will open it up to the Q&A. I put in the chat a couple of times the networking Google sheet I mentioned at the beginning of the webinar. If you’d like to network with other attendees afterward, feel free to enter your contact information there. If you’d like to learn more and book a meeting about our Mastermind group, our software for agencies, or Fiscal Advocate for outsourced accounting and finance services, you can use my meeting link, which I have shared in the chat. Feel free to make a note of that and book a meeting.

Our next line items event will be on June 6th at the same time, and the topic will be generating more opportunities, which I think we can all agree is something we all want more of. A recording of this webinar will be shared. Lastly, if you have any questions but don’t want to book a meeting, you can reach out with additional questions using my contact information, which is also in the Google sheet I mentioned.

With that, we’re going to open it up to Q&A. You can raise your hand, or if you’re more comfortable, put your question in the chat.

Jon, I have a question. It’s quite specific to Engine BI and a little less strategic. As we are entering or putting our plans together, if we have a client with multiple development projects, I found that Engine BI requires me to merge them if they have the same client and service line. Is that what you recommend?

The only reason I like to keep them separate is that I know what they are. There’s a gear icon on the right-hand side when you’re in the Revenue Management module. You can add a project attribute. It won’t allow you to have just revenue and line of business for the same client because it looks like you’re duplicating it, but if you add the attribute for the different development projects, you can do that as needed.

Perfect, thank you.

Ryan, hi Jon. Thanks for the presentation, by the way. Really insightful. We flip-flop back and forth between binary forecasting (in or out) and a percentage-weighted view. I’m curious about your perspective, particularly on the new business side where there’s more uncertainty in terms of the probability of it coming in or not and being able to assign that to a stage of the process. You know, we’re 10% through the process, we’ve got through an RFP so we’re at 75%, or we’re at tender stage. Does the binary aspect, when holding people accountable for their individual forecasting for clients, really put people off in terms of committing to signing new clients?

So, I would say for 90% of my time at Rise, I did it the percentage method. I would do it based on if it’s in the proposal stage, it gets this percent, if it’s at the contract stage, it gets this percent. When we got acquired by Quad, they brought in a CFO who butted heads with us and wanted us to switch to the binary method. I was very reluctant. What we ended up doing was an analysis of accuracy. This is one company doing one analysis based on our ability to do binary analysis versus probability projections by stage. What we found was that the binary analysis was substantially more accurate than when you assign probabilities just based on stage or your instinctual feeling. That is the main reason why I recommend everyone to do the binary analysis. I don’t have enough data beyond that one data point. The challenge is no matter how you look at it, it is really hard to do, which is why I recommend reforecasting the entire year at least on a quarterly basis. This is to account for the different variables that can happen.

Other questions?

I’m going to ask you guys a question. Be honest. Thumbs up if this was helpful and gave you guidance on how to do resource planning better.

All right, got thumbs up trickling in. Okay.

Hey Jon, it’s hard when you don’t have any questions to know if you’re missing the mark or not.


Hey Jon, let me react to that a little bit. I think it’s fantastic content. For me, it gets deep real quick, so I need to rewatch it and go through some of the exercises myself to apply it to my company and work with those numbers. It’s good content; it gets thick and deep quick, which is awesome. Now I have these guiding principles to help me implement it into my setup, so I appreciate it.

Absolutely. One key point I want to get across is you really need to look at individuals based on title and tasks that they actually do, the average compensation for those specific roles. This can bring up good questions like if your entry-level people are making $120,000 instead of $60,000, can you charge for that time? If not, you might have to look at your cost structure. It really starts with grouping your employees by title level, understanding what you pay them per hour, and knowing their roles and responsibilities. This also ties into how easy or difficult it is to hire different resources. For example, if you need a social media manager and don’t have a large social media business, it might take you six months to find someone good, and they might not be as good as you thought. Standardizing your offering and hiring entry-level employees, which you can do faster, becomes crucial for scaling growth.

If there are no more questions, I will give you 16 minutes of your life back.

Actually, Jon, I have a quick question. You had a lot of great analyses with a lot of detail, creating a comprehensive picture when using it all together, but it probably takes a lot of time to put it together. Where would you suggest starting?

Without trying to be too salesy, that is what Engine BI does: it helps with a lot of this stuff. Taking Engine BI aside, I think the first thing I would do is standardize your title structure: entry level, manager, director, VP, C-suite. Then, come up with your target hourly rates for what you’re paying. Remember the slide where I showed all of your employees grouped by different titles and the average compensation? Start figuring out your hourly rates for each level. Next, map out what an entry-level person does, what a manager does, what a director does. This helps you understand what you can sell and what you can’t, potentially revealing that you might be undercharging for your services. Grouping employees by title, understanding their pay per hour, and knowing their roles and responsibilities are crucial steps.

Perfect, thanks.

All right. Bye everyone, thank you so much.