We sell our optimization services in packages so we really don't keep track of "billable" time. But my organization fetish has recently let me to start having my employees keep track of exactly how much time is spent on client activities vs. other work activities. Since we began this tracking the results have been quite revealing.

The office average appears to be about 2/3 of our time is spent on actual client work. Now granted, everybody is required to spend at least an hour a day on educational activities (i.e. blogs, forums, SEO/marketing books, and other industry related research), which is currently a little more than 1/3 of that "unbillable" time at a minimum. Of course, more time is encouraged, as necessary for job growth, improvement and keeping up with the industry overall, but it's also important, for profitability reasons, to spend adequate amount of time on billable activities.

While some team members had a higher percentage of billable time, by far I spent the least amount of time on billable activities, less than 1/3 of my time each week. This makes sense, since it's my job to run the office, develop policies, procedures, etc. I also spend a good deal of my time writing proposals, talking with prospective clients, staying dialed in to the industry and guiding each of the team members in their roles as they work on billable activities. I also spend a good chunk of time writing articles and blog posts as well.

The time spent on billable activities is important information to know, and not just to have a better picture of the bottom line. How our time is spent affects both us and our clients. The more time we spend on unbillable activities the more we have to compensate by adjusting package pricing, but the less time we spend on billable activities, the less we are actually doing for our clients.

For the purposes of this discussion, let's give a hypothetical. Let's say that we built our packages based on how many hours we estimate goes into a project each month. We take that and then assign an hourly rate that allows us to stay profitable based on salary and office expenses. If the unbillable time must be factored in as an office expense in order to stay profitable.

Now let's say that some accounts need more work from time to time than others. Assuming we put in the full number of estimated hours on all accounts and now we have to put in overtime on others, we are in unprofitable territory and are actually losing money unless we increase the "hourly rate." This in-turn increases package prices. Of course, the more advanced the services are that we provide the more time needs to be spent on each client, again effecting overall package price (good copy takes longer to write than poor copy, good links take longer to get the junk links, etc.)

Until I started calculating actual time spent on actual client work I made assumptions that were incorrect. I assumed that, aside from the occasional in-office meeting, that a larger portion of our time was spent on billable activities. That assumption was wrong. And it's not that time is being wasted, its just a simple matter of accurate tracking of what everybody does throughout the day.

The biggest surprise was my time. I knew I spent a good chunk of time on unbillable activities but was amazed by how little I actually performed billable work. After all, as the project manager I do know virtually everything there is to know about each campaign, each client, each project, etc. But then, my job is to run an effective business and that can't be done if my time was spent doing all of the actual client work myself. That's what I hire my team for. My job is to run the ship, develop the systems, make sure everybody does their job and ensure total client success. And that's the way I like it.

Knowledge is power. This new knowledge I'm armed with, knowing billable/unbillable time ratios, is extremely important to the overall success of the business. There is much more to company financials that just tracking where money comes and goes. Knowing how time is spent and figuring out what is important and what's not is crucial. I know it's important for everyone in this office to spend time on educational activities. Without that they would be less successful in their jobs. That too affects the clients.

While we may be able to spend more time on their account that time is less valuable if we let our knowledge stagnate. But its also important to be spending enough time on each client account. A healthy balance to both is necessary to ensure success.