Lunch with Don Magri, CFO @ Brigade
Insights into Project Proposals
This week we sat down with Don Magri to talk about strategic project planning over Thai food in Northampton. Don’s work as CFO at Brigade (and previously Fuzz Productions) places him at the heart of his organization and makes him a key stakeholder in project sales, resource planning and successful project execution. As we learned during lunch, the impact of each ends on his desk requiring him to engage the entire organization and he does this through strategic project planning. In Don’s world Strategic project planning encompasses everything that happens before a project is broken down into Gantt charts and/or sprints for execution. Strategic project planning presents an enormous opportunity to improve an organization’s customer relationships, profitability and employee morale.
Highlights from lunch:
On Project Pricing:
Don made it clear the most important aspect of pricing a project was ensuring the customer will achieve their project goals. A close second was Brigade’s margins and ability to pay competitive wages to retain their current caliber of talent. Over lunch, we dove into these concepts and Don graciously gave us a window into how he approaches financial management and strategic planning at a leading marketing agency.
“It’s my job to connect the client’s budget to the set of services/features that will have the biggest impact on their project’s goals”, Don explained, “ and typically, a prospective customer’s list of needs is longer than their budget can accommodate”. In cases like these Don partners with Brigade’s Account Managers to help identify which of a customer’s needs could be completed by the customer’s internal team or by a lower cost provider. Don mentioned that separating the design from the printing services is often a great way for clients to maximize their budget by channelling the appropriate services to the appropriate places.
In regard to project margins, Don had one primary goal; to create a buffer for unforeseen issues. This ensures that Brigade will still deliver a high-quality project on time even if the project gets derailed. As many reading this know, two the big reasons clients seek the help of agencies is predictability and fixed project pricing. As Don said, “It’s of the utmost importance to deliver quality projects on time and for the price we originally quoted.” This means pricing a project is extremely important and providing an accurate proposal has a huge impact on an Agency’s profitability and reputation.
We also touched on how to communicate the connection between project pricing, the deliverable and the resources required to deliver it. Don has found it useful to connect employee efforts to a project’s price to help explain why additional deliverables cannot be included in a set budget without canceling another initiative. In response to this, Carv is working on a feature that will allow companies to show the velocity at which their team is contributing to a project to elegantly express capacity limitations during the contracting process.
On Payment Terms:
Getting paid sooner is always better than later. However, as Don explained there are a few factors that make this more or less import. One of these factors was the velocity that work-hours are expected to be deployed to a project, e.g lots of work upfront, consistent across the project, or heavy at the end. As Don explained, “deployment of work hours is, with some adjustment, reflective of when Brigade is investing cash into the projects.” In other words, the more cash [work hours] invested in the project without payment from the client, the more capital Brigade has at risk. For smaller agencies, this could also pose a cash flow risk.
As with many, Don solves this problem by trying to increase the frequency at which invoices are sent. However, it’s difficult to justify shorter payment terms when you can’t clearly show what percent of the work has been completed. For comparison’s sake, connecting payments to work completion is much easier when building home. To evaluate the work completed by the general contractor, the homeowner or bank’s representative simple goes to the construction site. As a result, payment to the contractor is made as work is completed. Unfortunately, with coding, marketing, and other creative deliverables a partially finished product does not communicate it’s doneness very well.
We spent time spitballing on how to tie payments to the velocity of work hours without actually billing based on hourly rates [project pricing has virtues]. We did not have a home run epiphany before lunch ended, but did agree that a few things would be needed to make it work. The customer would need to see a graphical representation of how quickly work would be contributed to a project relative to the agreed upon milestones and actual work logs would be needed to validate the proposal's projection.
On Workload Consistency
While not typically part of a CFO’s mandate, we did have an interesting discussion about how workload consistency directly impacts culture and employee retention. People are happiest when they have just enough to do. Too much work for too long results in exhaustion/frustration and too little work results in boredom/despair. This general concept applies to the workplace as well.
There is an optimal workload for employee happiness and this should be maintained as consistently as possible. Don has validated this throughout his career by watching turnover increase during either workload extreme. During dry spells the team starts worrying about the firm’s health, dwelling on negatives, and allocate free time to job hunting. During times of excess work, employees are also in duress, but the firm has more resources to satiate their team’s discontent in the form of overtime pay and bonuses.
Agencies including Brigade attempt to smooth these cycles with filler projects and discount rates, but imperfect forecasting and communication with prospective clients makes this very difficult. As Don alluded to, a filler project could easily crowd out more profitable, long-term work if a project pipeline and resource plan are not in place. And agencies never want to hire because of volume created by filler projects. Don noted that their current tools (Forecast and 10,000 Feet) do a great job with near-term planning, but don’t solve their medium and long-term planning problem.
By the way, lunch was great too. We ate at Thai Garden; I [Chris Lee] had the Mango Fried Rice with Shrimp, Don had the Crispy Chicken Pad Thai, and Chris A had the Goi See Mee. It was fast, casual and delicious.
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