Chip Shots by Chip Griffin

Don’t overlook labor costs when calculating ROI

I was reading a thread in a private Slack channel this morning about ROI for a particular marketing activity. One person made the point that people costs were being overlooked in the calculation being discussed.

This is true of many things in the agency business community. Too often I see discussions with agencies and with agency clients that focus on hard costs — advertising spend, list rentals, software subscriptions, etc. — but that leave out the hours worked and the cost of those hours.

That’s especially important when looking at project/client profitability within an agency. If you focus just on on third-party expenses without calculating the cost of your own team’s time, you will end up with a very skewed analysis.

Of course, that means that you need to track time accurately and estimate labor costs properly.

If you do those things, you will have a much more clear picture of the best projects/clients for your agency — and which ones need to be re-priced or otherwise reviewed.

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