How to measure the effectiveness of a digital marketing agency? The answer is agency utilization rate. There are many helpful metrics, but it is probably the most important one. Basically, it shows how much time your employees spend on billing work. It seems easy, but there are some significant points you have to know. If you are a digital marketing company owner, you might want to learn how to calculate and improve your agency efficiency. So, let’s make it clear and talk about AUR in detail.
AUR is a metric that shows how many hours your employees spend on clients’ projects vs. the total available hours for performing their duties. It is often referred to as staff or employee utilization rate. Hours spent on clients’ projects are a billable time that brings you money.
It is a metric that is essential for evaluating your performance. It’s a valuable metric both for your assessment and to provide an objective measure of how effective your marketing campaigns and online activities are.
Then, if you use employee utilization rate, you will be able to:
And last but not least: utilization rate calculation may help you save time and money, which is the main goal for every business. If you don’t measure your company efficiency, you can’t organize workflow correctly. It can be a problem for clients and your business alike. As businesses are constantly seeking ways to cut costs and grow revenues, they are turning to the use of agencies to help them achieve this. While utilizing it is a great way to find cost savings and to get projects done faster, contractors may also introduce a lack of accountability in the final result. If a company chooses to outsource a project to an agency, but it fails to complete the project on time, the company may be left with no recourse.
For calculating employee utilization, you need to use:
In other words, you have to know how much time your employees must spend on work by contract and how much time they are actually spending on the clients’ projects tasks.
The formula is:
(billable working hours / total working hours) x 100
As a result, you get a percentage of AUR.
That’s how do you calculate utilization rate. But let’s consider a little background information for those of you who are not familiar with this formula. Two main things influence the result: the total hours allocated for organization processes and time for a vacation. Exclude them when calculating.
Example. Your email marketer is contracted to work 40 hours a week. He spends 10% of his time on organizational tasks, so the number of his total working hours is 36. At the same time, this employee spends on client-facing tasks just 30 hours a week. According to the AUR formula:
In this case, you’ll get the 83.3%. What does it mean? Raw numbers tell you nothing. Let’s figure it out.
You may think that percentage of staff utilization must be 100%. But the ideal AUR is 85-90%.
In some organizations, it reaches 100% or much more. In this case, your employees can face burnout very fast. Then you will have to deal with the consequences, such as low work quality. If the AUR is too high, you should review and improve the business processes. There are three solutions:
But on the other hand, a low result isn’t enough as well. Your sales managers have to focus their attention on the departments which have AUR below 60%. The following reasons could cause a low rate:
However, in most digital marketing agencies, the average AUR is +/- 60%. It’s not that bad, but trying to achieve the perfect result is always a great idea.
As an owner, you must understand how effective are business processes in your company. With the calculated agency utilization rate, you will be able to figure it out. AUR is an essential metric for every business that offers services to clients. And it doesn’t matter how many staffers are working in your agency, 10 or 100. Using this metric, you can make the right decisions that will help your company become more successful. That’s why you have to know how to calculate utilization rate. It’s worth it.
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