Know-How Exchange : Advertising/PR

Hi Kevin,

Well, you've actually identified a few questions/issues above...

WHAT ARE YOUR COMPETITOR'S HOURLY RATES
This is really a critical question that you need to answer. As an agency, you need to know what your competitors are charging. This information can come by way of industry affiliation (i.e. if you have a close relationship with one of your competitors - very rare), clients, and/or employees. Your sales people may have worked for a competitor in the past - find out what they charged.
I worked for many years @ agencies across Canada. All of my agencies worked with Tier 1 clients across North America. The going rate for my type of agency was $200 - 250/hr.

ESTIMATING PROCESS
Generally speaking, agencies provide estimates based on a few variables:
1. hourly rate
2. team assigned to the project
3. estimated time spent
Also, generally speaking, estimates are broken out into phases - a) brand consultation / project management, b) design development, c) design refinements, d) design application, e) production artwork, f) printing / finishing (among many more, like retouching, brand stewardship, etc). Each of these phases may have different hourly rates attached to them based on the seniority of the team and the "going rate". The key is determining your hourly rate! You need to understand what you need to charge to keep your employees, your lights on, your business running and still make a profit.
Some agencies have rate cards, but I'm not an advocate of these as they make your business seem like more of a commodity than a valuable partner. I firmly believe that projects should be quoted based on the job's specific scope. However, you may have a rate card for back end work like production (that requires less strategic thinking and more doing).

PROJECT EFFICIENCY
One of your points concerns me greatly...if you've estimated $2,400 for a brochure design, yet spent 57 hours working on it, you have significant issues that you need to resolve immediately. A) you're not quoting effectively, b) you're not managing your costs appropriately, or c) you have a client-issue.

I think I've addressed the issue of quoting above. With regards to managing costs, here's a few recommendations:
1. Assign a team to the project
2. Sit down as a team BEFORE THE PROJECT to do a pre-briefing. Discuss the details of the project and collectively agree to # of hours needed to finish the project. At the end of the day, it should be left to the salesperson's discretion as to what their client can pay (based on history); however, if there is a gross discrepancy between this and the team's assessment, this should be an upper management discussion.
3. Have a briefing with the team and clearly articulate the # of hours they have to spend on a job. You need to make everyone accountable for time spent; however, the salesperson / consultant needs to manage this time. (how are you currently tracking time spent - there are a number of software programs built specifically for agencies that will track time sheets, estimates and billings).
4. Track & monitor time spent during the project
5. Hold a post-mortem after the project to identify issues (which parts of the project are going over budget, what issues are the team members facing that drive over spending, etc). This is not a finger-pointing mission, and should instead be used to identify issues and ways to resolve these issues. These meetings should only be needed in the short-term, until project management is under control.

If this issue is client-driven (i.e. the scope changes mid-project or they are disorganized), you will need to identify the key issue and resolve it accordingly. For example if you are not managing client changes, you'll need to start issuing change orders for scope changes. You need to train clients to understand that they have to pay for these types of changes because your estimate is significantly influenced by hours spent.

Lastly, you asked how consulting should be charge. Here's my two cents. Consulting or strategic development was always difficult to charge for - this was partly because few Cdn branding / design agencies charge for this (although this is a prevalent charge in the ad agencies) and partly because it's harder to tangibly justify consultancy fees. Saying this, I always stayed firm on charging this fee (even if it was discounted slightly). As with all other phases of design development, I based my estimates on # of hours and seniority of the individual on the business.

Hope this helps...