My company sells our optimization services in packages so we really don't have to 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. It's only been a few weeks but 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 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 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 deal of time writing articles and blog posts as well.

This is important information to know, and not just to have a better picture of the bottom line. This effects our clients as well. The more time we spend on unbillable activities the more we have to compensate by adjusting package pricing.

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 isn't factored in as an office expense then we're actually not profitable, assuming that we do the full number of estimated hours each month.

Now let's say that some accounts needs more work for a couple of months to deal with certain issues. This now puts us in unprofitable territory and now we are actually losing money, unless we increase the hourly rate we need to maintain on each project, which in-turn increases package prices. Of course, the advanced the services provided (good copy takes longer to write than poor copy, good links take longer to get the junk links, etc.) the more time needs to be spent on each client, again effecting overall package price.

But back to the billable hours. 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 worked on each client. 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. 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 rations, 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 spending more time on their account, that time itself is less valuable if we let our knowledge stagnate.

You've got to learn to know and know to grow.