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FEATURE1 July 2010

Hear me out: Forget about profit and just have fun

Ever had an idea that you know is genius but everybody else thinks is crazy? Here is your chance to share it with the world of research. This month Trish Parker, managing director of Discovery, says agency bosses should stop worrying about profit.

?What’s the big idea?
Making a profit is an overrated activity in my book. But it’s what the managing directors whom I meet spend every waking minute obsessing about – staring at spreadsheets, analysing timesheets, cracking the whip and worrying about how minute movements in their monthly margins are going to play out at the next board meeting. Such people are doing little if any research and they’re certainly not having a lot of fun.

“Adopting the mindset of an accountant the moment you take responsibility for the profit and loss account usually sets in train a whole load of practices that do little for the agency’s prospects in the longer term”

That’s how you run a business, though, isn’t it?
Certainly the received wisdom among my peers is that if you’re the MD of a research agency and you’re not achieving a profit margin of somewhere between 6-10% (adding a few per cent if you’re part of a multinational) you might as well shut up shop and go home. But it’s some way down our list of priorities. When all your attention is diverted to this kind of bean counting, any passion you had for producing brilliant research tends to go out the window. That in itself doesn’t have to be a problem – many of those who run agencies have decided quite rightly to focus on working ‘on the business’ rather than ‘in the business’. But adopting the mindset of an accountant the moment you take responsibility for the profit and loss account usually sets in train a whole load of practices that do little for the agency’s prospects in the longer term. Profit maximisation relies heavily on timesheets, keeping a tight hold on expenses, sustaining staffing levels that are most ‘economic’ and making the absolute minimum investment in people that you can to keep everyone turning up Monday to Friday.

But you want to make a profit eventually, don’t you? Don’t you?
Yes, but in my experience some jobs go more smoothly than others and you can’t always predict which will be the ones that stretch you to breaking point. In the traditional model those jobs that need additional resourcing result in fictitious timesheets and fudged budgets to remain within the given cost ratios. If you add the requisite amount of time, effort and stress to squaring these circles, you can just about keep the accountant happy. But the models of profit maximisation overseen by accountancy practices have never been upheld at Discovery.

So what is your priority?
To maximise the enjoyment of our researchers. They are well recruited, continually trained and have their own personal development plans. As a result they grow, gain confidence, feel empowered and their self-esteem blossoms. They are given their head from an early age and, as a result, they become some of the best. Like any other agency, we believe in managing our resources effectively but, for us, project profitability is measured by feel rather than by formulas. If we need to throw more resource at a project in order to exceed the client’s expectations then we’ll do it – worrying about hammering the profit margin doesn’t come into it.

A warm fuzzy feeling doesn’t pay the bills.
It doesn’t, but this approach leads to happy clients as well as happy researchers. And funnily enough, when clients are satisfied they tend to come back, as well as telling other people what a good experience they had. To complete the cycle, more briefs come our way, which result in repeat purchases and then, quite properly, the profits follow. This (combined with our continuing focus on investing in new products and generally having a good time) helped us achieve record turnover and profits last year, in what for many was a time of austerity. Fifteen years of running a qualitative agency has taught me that, for the most part, any short-term losses are well worth the long-term gains. Rather than comparing each others’ turnover and profit figures, perhaps we should be looking to client and staff satisfaction scores to find out which agencies are really at the top of their game.

Share your vision with us: robertb@researchmagazine.co.uk

2 Comments

9 years ago

With the exception of one point, which I'll come to at the end, I find myself in full agreement with the logic, if not the sentiment in Trish Parker's post (maybe it's my Scots heritage but I find a lot fun in making profits.) The preponderance of accountants and financial analysts, aided and abetted by the ubiquitous HR professionals, in the certain sectors of the research industry has put a huge focus on cost, productivity, span of control, and so forth. In other words, a lot of effort on the bottom-line with the view to wringing more profit out of an existing business. Often totally overlooked - probably because it's 'harder' - is the issue of improving the bottom- line by increasing the top-line i.e. by growing the business! It's the latter point that Trish hits on in her last paragraph. Top-line growth is driven by happy, motivated staff whose work exceeds client expectations. This increases repeat business and in doing so reduces sales costs for a start. Furthermore, increased repeat means you get to know your clients' businesses better, you therefore deliver more valuable and relevant insights, and this helps maintain or even raise price levels. You do need the spreadsheets, though, to check the components of these price levels. It only takes one mispriced 'massive' contract, with understated external costs, to wipe out the profits of several quality offerings. That is the big downside of everyone enjoying themselves too much, all play and no (home)work makes Jack a poorer boy. And the one point where I disagree…any high quality mid-size agency or even niche boutique, with a savvy MD, should be making a better not a lower margin than the majors - after all there are no accountants to recover for!

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9 years ago

Well said Trish - I thoroughly agree. Happy competent staff providing a great service to loyal customers who deliver the desired profit as a consequence. Yes, you've still got to be sure you've got your pricing right, but once that's in place this is a great way to go. This will, no doubt, end up as a chicken vs egg debate.

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