Workshop 3 Increasing Profitability

Hi I’m Graham This is me before Procurement arrived.

Objectives Everyone goes back to their agency with some great ideas to increase profitability We share our wisdom with those unfortunate enough not to be in this brilliant group

Topics we’ll explore P ositioning P ricing P rocurement P roductivity P erformance P resentation

A quote to get us started “If you have an apple and I have an apple and we exchange apples then you and I will still each have one apple. But if you have an idea and I have an idea and we exchange these ideas, then each of us will have two ideas.”

P ositioning What business are we in and how do we conduct ourselves?

Do you want to be hired for what you do…or…what you know? Agencies that get hired for their “hands” are valued and compensated differently than agencies that get hired for their “heads”. Would you prefer “supplier” status or “advisor” status? Tim Williams

PROFITABLE AGENCIES MAKE A CONSCIOUS CHOICE AS TO HOW THEY WILL GROW THEIR PROFITABILITY AND BUSINESS Kingston Smith W1 Culture People – recruitment and retention Agency Positioning Client-agency relationship Approach to new business Commerciality Financial measurement and tracking

Change Management You may have mapped where you are but do you know where you want to be? Do you know how you will manage that change? How do you move from “hands” to “heads”? What choices do you have to make to build the right client relationships, develop the right people and instil the right culture? Will it make you more profitable?

Increasing Profitability What were the key learning's from Tim’s presentation that could help you increase your profitability?

P ricing Are you missing out on revenue opportunities?

Price better by 1% and earn 11% more profit* Tim Williams/McKinsey & Company Here, in order of effectiveness, are the best ways to improve your bottom line. 1. Improve your pricing1%Profit improvement of11% 2. Reduce your variable costs 1%Profit improvement of7% 3. Increase Revenues1%Profit improvement of4% 4. Reduce fixed costs1%Profit improvement of3% *Study by McKinsey & Company

How progressive is your agency when it comes to pricing? How ready are you to move from cost based pricing to value based pricing? Take the simple test. Devised by Tim Williams

A Declaration of Value If you accept the premise that your agency sells the value it creates rather than the hours that it works, your goal is to commit your senior team to a “Declaration of Value” Tim Williams

P rocurement Love it or loathe it but it’s here to stay. Do we thrive or strive with procurement?

Video

The two big lessons from Rosie Doggett, Procurement Advisor to Marketing Clients UK Procurement people MUST make 10% savings so a canny agency will factor that in. The majority of procurement people are highly educated, supremely numerate and extremely well trained in negotiation skills - good agencies should invest in getting their people who deal with procurement trained to negotiate professionally.

Tips from ISBA for dealing with Procurement Do not try to marginalise Procurement. Invite Procurement into the agency on a secondment to help them understand language, core activities and skills. Invite Procurement people to present their side of things to the agency. What is Procurement all about, what do they want from agencies, how can Procurement help enhance the relationship? Encourage them to create win/win situations and act as the client guardian of the client/agency relationship. Help them recognise that client behaviour can often produce inefficiencies and impact the way the agency works and charges Ask for their advice in reducing agency costs.

Best Practice What lessons have you learned about Thriving with Procurement?

P roductivity Is it possible to give your agency a leap forward in productivity by finding much smarter and more progressive ways of working?

OPERATING PROFIT PER HEAD, THE KEY MEASURE OF PROFITABILITY AND PRODUCTIVITY COMBINED, IN DM/SP DECLINED BY 2.4% LAST YEAR IN THE UK Kingston Smith W1 Employment costs consumed 62.3% of gross income - considerable above the suggested maximum of 55%

Operating Profit per Head by Discipline (UK 2012) Kingston Smith W1

Operating Profit per Head Compared to Agency Groups 2012 Kingston Smith W1

How do we make that leap forward in productivity? Have we got the right people? Do they take responsibility for revenue and profitability? Are we afraid of employee churn? Do our senior team demonstrate the right behaviours? Do we manage our human resource effectively? Do we have the right incentives in place? Are we making the most of technology? Do we have disciplined and effective processes? Do we tolerate over-servicing and scope creep?

A Focus on Productivity Gains Let’s write down 3 things we have done to improve productivity, or suggest 3 things we should do in the future.

P erformance Setting goals and measuring and reporting against KPIs

People who work in accounting departments often work 12 hour days creating reports that nobody cares about. This gives them a very bad attitude. Do not attempt humour around them. DILBERT

We are the Board of Directors of a rapidly expanding agency network and have just acquired a new agency. We have to ensure that the business is well managed. We set KPIs in 5 aspects of the business. What are they?

P resentation Sharing our ideas

Our Top Tips for Increasing Profitability We have 5 minutes to impress everyone with our insightful genius

And Remember….. If you make money every month it’s hard to lose it at the end of the year. Carl Spielvogel