Budget Estimations for Performance-Based Deliverables

Background

I work for a Digital Agency (BlueGlass) based in London who focuses on Content Marketing and SEO. As part of the content marketing deliverables, we provide digital PR. The budgets for our clients are calculated as a myriad of time deliverables, content piece deliverables, and performance-based deliverables. The last deliverable is what I will be discussing here.

The Performance-Based Deliverables

Our PR coverage that we secure for our content pieces are solely calculated on a performance basis. We realise that for our clients, we cannot put in just time, but instead we need to show actual results. From that argument, all of the coverage is calculated with a monetary amount which we have developed ourselves. The amount as well, which is quoted in the statement of work, is intended as a minimum performance guarantee. This allows the client to pay for the results that they need rather than time (which varies depending on the variables involved), and us as an agency are incentivised to focus on the work and the deliverable rather than hour estimations. That being said, it also forces the employee to work efficiently and maintain a strong alignment with the client’s objectives. However, as the project manager, I need to ensure that each client has their allocated amount of time relative to the amount that their budget is.

The Known Variables

I know that the digital PR specialist who works on my pod will work on a set amount of clients a month. I know what the client budgets are, I know what content pieces will be outreached, and I know how much time that person has in a month. However, as this is a performance model, I need to make sure that each client get’s their correct amount of time to achieve the desired results. I need to gauge their budget not by the promise of the amount of links, as that is a minimum, but instead by the amount of time that that person has in relation to the other budgets available.

• Client Budgets — these will not change during the month
• Outreach pieces — these should be organised prior to the beginning of the month
• Client industry — this as well, will not change
• Employee hours — this will not vary widely

Difficulties in the Variables

All of these variables need to be taken into consideration, as sometimes a content piece is more difficult to gain traction, and some industries are not as luxurious, or as well received as others. The hindrances which can arise from the content itself or the client’s industry needs to be factored in when considering how much time to allocate to each client.

The Real-Life Query

Let us say that I have 8 clients, ranging from monthly budgets of £1,200 to £3,000, I need to make sure that all of the employee’s capacity is not focused on the £1,200 client, but instead relative to the rest.

I have developed a spreadsheet, with formulae, to calculate an estimated amount of time per client. Let us say that Client “Bob” has a budget of £1,500, Client “Dan” has a budget of £3,000, and Client “Siobhan” has a budget of £6,000. The employee “Francis” has 7 days that they are able to work on clients in a month, I would need to tell Francis to work on Bob for 1 day, Dan for 2 days, and Siobhan for 4 days. However, it is not as easy as that.

The Formulae

You will need to open up either Excel or Google Sheets to work along with the steps. Go back to Bob, Dan, and Siobhan, and let us add in some more clients and more variables.

Clients & Budgets:

• Bob — £1,500
• Dan — £3,000
• Siobhan — £6,000
• Catherine — £5,500
• Lucinda — £4,500

Calculating the Percentage

You need to understand how each budget relates to the other. To do this, you must add all of the budgets together to get your total budget amount. In this instance, the amount is £20,500. I use a simple SUM formula for this:

Each budget then needs to be divided by the sum total of the budgets to get the percentage of it relative to the rest.

I have taken Bob’s budget over the total budget to get the decimal amount for the percentage. I do not want to either format the cell to be a percentage, or to multiply the number by 100, as I need this number to multiply against the actual hours available. I have put a ‘$’ sign in front of the ‘11’ so that I can copy the formula in the each of the below cells, and the cell B11 will remain constant. Continue this for all of the clients.

Calculating the Actual Hours Available

Francis is a full-time employee, and we shall calculate this for the month of February. The variables we need to consider:

• 7.5 hours a day for a work day
• 80% utilisation rate for Francis (however, if you prefer to use a different capacity rating, that is fine. It is best to look at your employee’s previous utilisation rate to get a measure for what is capable from the employee)
• 18 working days in February; Francis has 2 holiday days booked and must be taken away from the 20 working days available.

You need to multiply the hours per day with the working days available, and then take that number and multiply that by 80%, which is your utilisation rate, and you will find what your actual available hours are for Francis. Also, there are other ways to calculate this figure, if you prefer another way, as long as it is correct, that is fine.

The above formula is working under the assumption that Francis has no other work to do each month other than digital PR. In instances where Francis will to do time-based work, remove those hours from the ‘Total Hours Available’ and this will give you an accurate amount of hours available each month.

Calculating the Actual Hours Per Client

In the case of a performance-based deliverable, calculating time estimations require that you calculate your budgets relative to each other. The amount of the budgets become a percentage of the total sum of your budgets; thus pretending that the sum of hours available and multiplying that by your percentage, you find out how much actual hours you have for each client per their budget.

Your Actual Hours Available has become your absolute, thus, you now need to multiply your percentage per client by the hours available and you will find out how many hours to assign per client. As I mentioned above, you need to ensure that the Actual Hours Available are the actual hours that the employee should be working on client work, this number should not include internal work, only billable hours.

When creating your formula, do not forget the ‘$’. Copy this for all clients and you have your preliminary estimation amounts correct to each client’s budget.

It should look like this:

However, it is never that easy. As I have mentioned above, there are other variables to consider. The ease of the industry, and the appeal/niche of the content piece.

Additional Variables

Let us go back to the beginning. We have the clients, their content piece and the industry as show below:

I have repeated some of the variables each time so that it is clear how each variable relates to the other.

The industry and the content piece, I will speak to the digital PR specialist and give it a weighting between 1 and 3. 1 is given to the easiest options — “Retail / Well Known Company” and “Highly topical lifestyle HTML5” while 3 is given to the variables which will require more time — “Gaming / Lesser Known Company” and “Expert articles for niche bloggers”.

Fitting It All In

In you spreadsheet, create 2 new columns between “Outreach Budget” and “Percentage of Total”. Create 1 column for “Industry/Company” and the second for “Content Piece”. From here, insert your figures. As per above I have weighted them as below:

However, this weighting system is to be decided upon by the digital PR specialist as they will know whether or not a client or content piece will be easier or harder to outreach.

The New Percentage Totals

You need to use a new formula for your percentage totals. These weightings will be multiplied by the original budget to create a new “Outreach Budget” amount. Each client will have their new amount, which means that your total budget needs to equate to the sum of the client budgets. Once you have found the new percentage amount, you can go back to the original formula and complete the spreadsheet.

How to Generate the Formula:

• Outreach Budget = m
• Industry / Company = y
• Content Piece = z

=(Bob m* Bob y * Bob z)+(Dan m* Dan y* Dan z)+(Siobhan m* Siobhan y* Siobhan z)… and so on

There are a lot faster ways of creating this formula, however I have inputted it as such:

With your new weighting variables your spreadsheet should look like this:

The values and formulae will already be input into the document, and if you just duplicate the sheet per month, you can input your new variables each month and have your hours calculated per client.

If the time allocations above do not seem “fair” for Bob, then the company resourcing should decide whether or not Francis should be working on Bob, or potentially moving Catherine onto another employee. However, as the budgets and the other constraints are added in, this is the amount of time Francis should be spending on each client to have a fair weight of their attention.

The Concept

This example is purely taken from our own digital PR experience, however, the basic concept can be implemented for other performance-based deliverables. If you have only one variable, then it is a lot more straight-forward, and you just need to take the ratios of the amounts against each other.

If you have more than 2 additional variables for the client, do not forget to continue to multiply it to the sum of the total budgets. This will allow for the budgets to become relative to each other and not mess with the sums.