Best Practices with 10,000ft

Here are some best practices for getting started with 10,000ft.

Reduce Complexity

Whether you run a team of five people or 5,000, operational complexity costs money. For companies who bill based on time, reducing operational complexity is even more of a necessity.

The level of detail that’s typically put into creating plans can get in the way of doing the actual work. By planning the boundaries of a project in terms of time and budget, you can ensure that work is completed as intended without the plan becoming too prescriptive.

The goal with planning projects in 10,000ft is to put in the right level of boundaries so your team stays on the same page with respect to time and budget, but there’s enough room for people to have autonomy and fill in the details themselves.

Operational complexity can also be reduced by choosing a blended bill rate for all people, and by sticking to one single rate for all clients.

Fully Schedule Projects

We recommend fully scheduling resources on a project up front, rather than on a weekly or daily basis. This way, there’s better insight into your team’s availability over a longer time frame and your team knows what’s ahead.

Things change daily, however, which means adjusting the Schedule daily. But when projects are fully staffed ahead of time, these changes can now be precise and will only have an impact on people on the impacted projects.

From an organizational perspective, scheduling a project fully upfront will provide real-time insight into the profitability of the project. Before a project starts, a fully scheduled project should be exactly up to the budget, so you’re mapping the work plan for the project to the actual fee you’ve estimated.

For example, if there’s a $96,000 budget and you schedule two people for two months, full-time at $150/h, the future scheduled amount should match the budget.

Internal Teams

Internal teams who don’t need to track rates or fees in 10,000ft should make two changes to Account Settings:

  1. Progress: select “Show project progress in days”

  2. Incurred Hours and Amounts: select “Confirmed hours and unconfirmed past scheduled hours”

Making these two changes maintains project time data without requiring your team to track time. This will enable you to get accurate insights and analytics.

Track Real Time Project Schedule Updates

We recommend fully scheduling resources on a project up front, rather than on a weekly or daily basis. This way, there’s better insight into your team’s availability over a longer time frame and your team knows what’s ahead.

Things change daily, however, which means adjusting the Schedule daily. But when projects are fully staffed ahead of time, these changes can now be precise and will only have an impact on people on the impacted projects.

From an organizational perspective, scheduling a project fully upfront will provide real-time insight into the profitability of the project. Before a project starts, a fully scheduled project should be exactly up to the budget, so you’re mapping the work plan for the project to the actual fee you’ve estimated.

For example, if there’s a $96,000 budget and you schedule two people for two months, full-time at $150/h, the future scheduled amount should match the budget.

High level planning project budget estimate

 

Now, when your team reports their hours for the work they’ve done, you immediately see the impact on the forecasted budget.

You might not yet know who is going to work on the project, but you might know either the discipline or department that will do the work. In this case, you can create a Placeholder Team Member for that discipline (i.e. “Visual Designer”). This team member can also have a bill rate, so you know the impact on the schedule.

Once you decide on the right person for this project, you can reassign it. And if you make these scheduling decisions on a weekly or daily basis, you can split off weeks of the Placeholder’s assignment and reassign them to another person on the team.

Reassign work schedule

Use Bill Rate to Calculate Costs and Profitability

The bill rate in 10,000ft refers to the rate that’s being used to bill your customers. This bill rate takes a profitability margin and utilization into account. When a project is completed “on budget,” you know that your profit margin has been met.

When defining a bill rate for an organization, take the following aspects into account:

What’s the cost involved in doing the work?

This includes salaries and benefits of your staff, and overhead costs of non-billable people, rent, and other operational expenses.

What's the utilization goal of the organization?

Work can be divided in direct labor (project work that clients pay for) and indirect labor (work that’s considered overhead, or work in-between clients’ projects). The utilization is the percentage of work hours that are considered direct labor.

For example, one person has 2080 work hours within one year (capacity). If they work 1200 direct labor hours on client projects, the utilization for that person is around 58% (1200/2080). For an organization you can calculate what the capacity is for the group of people and define what percentage of that is the target utilization. Utilization differs per organization, but it’s typically in the range of 50% – 75%. Higher than 75% may be unhealthy for an organization over a long period of time.

What's the profitability goal?

If everything runs according to plan, what’s the profit margin that the organization is aiming for? This also differs across organizations, but is typically in the 15%-25% range.

As an example, let’s say an employee that has $80,000 salary, $20,000 in benefits and another $50,000 in overhead and operational expenses. The total cost for that person is $150,000 per year. If the utilization goal is 58%, that cost needs to get recouped with the 1200 hours that this person is likely going to work on client projects within one year. This equals a rate of $125 ($150,000/1200). If the company’s goal is to earn a 20% profit margin, you need a bill rate for this person of approximately $155 per hour to cover their costs and meet your profit goal.

This is called a “fully burdened rate”. Knowing the true cost per production hour for each team member, you can calculate exactly how much you need to charge per hour for that person to meet your gross profit goals on the projects. The budget status in 10,000ft will help you see if you’re below, meeting, or over your profit goal.

Profitability goal fully burdened rate

One quick way to calculate a bill rate is to use a pricing multiplier. Start with the base salary of an employee, $80,000 per year. Divide that by the number of work hours in a year, which is about 2080. This results in an hourly rate of around $38.50. ($80,000/2080).

A typical pricing multiplier is in the range of three to five. So, using a multiplier of four results in a Bill Rate of $154 (4 x $38.50). Multipliers vary greatly and depend on your industry. We recommend doing some additional research to see what multiplier makes the most sense for your team.

Profitability bill rate multiplier

 

As your labor expenses and overhead expenses change over time, it’s a good idea to recalculate this rate once or twice a year to make sure it’s current. Adjust the bill rates for new projects as needed in 10,000ft.

Calculate Estimated Project Costs

When presenting your clients with a price for your work, base your estimate and calculations on this external bill rate. Figure out how much time it would take to complete the work and multiply that by the hourly rate. For example, if it takes eight weeks (320 hours) for one person at $150/h to complete the work, then the cost for that work is $48,000 (320 x $150).

Depending on the industry, it may be better to communicate this to the client as a fixed bid and not to divulge the hourly rate calculations that went into it. Otherwise, it can lead to situations where you’re negotiating around every hour, rather than the value of the work performed. Even when project durations are unpredictable, as in software development work for example, costs can still be calculated in blocks of time and with an upper budget limit.

Set Up Your Project Budget in 10,000ft

Fixed Bid Projects

For a fixed bid project, you bid that you can do a defined set of work for a certain amount of money. The price that you are charging the client is the amount that gets entered as the budget in 10,000ft.

Retainers

For a retainer, the client pays a fee for a set amount of work, where the scope isn’t typically defined upfront. There may also be agreements in place about what budget not to exceed. In the case of retainers, the budget is dependent on how you want to break up the retainer. For example, it could be in increments of one month projects or phases, or a year-long project. You can read more about setting up retainer projects here.

Time and Materials

For Time and Materials projects, you get paid for the actual hours you worked. You can leave the budget blank and simply keep track of incurred fees. Or, you can enter a budget amount for what you’re aiming for, or for the maximum amount that was agreed upon. For Time and Material projects, you might need to adjust the bill rate for people to reflect the agreed upon markup for worked hours.

Planning for a New Project

Estimation is typically done based on experience or a set of quick calculations. For example, this project would take one designer and one developer two months, at $150/h, totaling $96,000 in billable labor. If at all possible, keep estimates and subsequent proposals high level and accurate, rather than calculate every minor expense upfront.

High level planning project budget estimate

 

In 10,000ft, you can create a new project then assign people (or Placeholders for roles and disciplines) for the amount of time you think it will take to accomplish it. The resulting “Future Scheduled” amount is the estimate for this project.

When the project becomes a reality, this estimate turns into the budget. When future assignments are made to the project, the resulting future scheduled amount should be up to the budget.

When you schedule too many people or too much time to a project, it will be immediately apparent that this project will go over budget if you continue with this plan.

Over budget

 

If you don’t schedule enough people to a project, consider whether you will have the right resources available when you need them.

Under budget

Tips for Tracking and Analyzing

Don’t track more than you need

Tracking time always puts a burden on the person who needs to enter it. Our recommendation is to track as little as possible to meet your organization’s goals.

For some organizations, this means they don’t track time at all. They assume that what was planned is how it was incurred. These teams will calculate incurred hours and amounts as confirmed and unconfirmed past-scheduled hours.

Other organizations need more information, so they choose to only record the hours needed for each project. Their time tracking settings should be set to Hours and minutes.

The most detailed form of tracking is to require your team to enter notes for each time entry. This way of tracking will allow for more filtering and analysis of reported hours.

Enable good decision-making

People who do the actual work are always better at determining when is the best time to do it, as long as the expectations around deadlines and how much time they should spend on something are clear.

In general, we recommend making assignments as high-level as possible. A week-long assignment of 20% of a person’s allocation rather than a day-long assignment of eight hours, for example. This way, people have the ability to plan their entire week around these higher-level expectations.

Analyze across segments

Reports in 10,000ft allow you to group incurred and future hours, budgets and utilizations across different “pivots.” You can simply analyze the hours for one project, but you can also look at all hours grouped by client, discipline, role or month (among many other pivots).

The goal of analysis is to make strategic adjustments going forward. For example, you might find that certain people always need more time for work. Or work with certain clients always goes over budget. These triggers help adjust your estimates going forward. For example, you might add three extra weeks when you start a project for certain clients.

You can create a template for project types with suggested budgets for certain activities. This way, next time you set up a project, you have something to emulate that is based on real data aggregated from the tool.