Within the creative industry, profitability is most often made or lost on the basis of your job quote or estimate. But without a crystal ball how can you plan ahead and estimate accurately?
It will come as no surprise that many agencies struggle to accurately match estimates with actual costs incurred in delivering a project. The outcome of allowing this to happen is the erosion of your bottom line profit.
Use historical project data to plan accurately
The most effective way to achieve accurate estimates is to use comparisons of the project in hand to previous similar projects that your agency has worked on. Your agency management system should provide the capabilities to conduct this analysis in a swift and easy manner. Having a comprehensive view of the scope and delivery of previous jobs will form a solid template to create your new quote or estimate. Drilling down further, your new estimate should then be broken into individual tasks, job roles, charge bands and number of hours associated with each task or line item. This gives you a simple but accurate way of measuring hours per task and cost per hour. You can then schedule those hours accordingly amongst your creative delivery team and they can be tracked to the actual hours spent on each task.
The benefits of measuring Actuals
Another good method for measuring job costs is comparing previous project estimates versus actuals. When you are aware that similar projects have run over budget in the past you can simply adjust and increase the estimated project hours to balance the overrun. By aligning the actuals versus the estimates continually you are far more likely to balance them on every job and therefore guarantee profit margins for your Agency.