Don’t Hire on Instinct – Hire on Data

In the creative industry, agencies often measure success by headcount. There’s a certain prestige in saying, “We’re a 25-person agency.” But while growth is exciting, simply adding more people isn’t a measure of success.

One of the biggest mistakes I see is agencies hiring too quickly. A new client signs on, and suddenly, there’s a rush to recruit. While it might feel like the natural next step, reactive hiring can lead to inefficiencies, overstaffing, and financial strain.

Before hiring, agencies should take a step back and assess their existing team’s capacity.

Maximising Utilisation Before Hiring

A well-run agency ensures every chargeable team member is working at an optimal level before considering recruitment. This means regularly tracking and analysing utilisation rates. Before making a new hire, agencies need to calculate their current resource against incoming work.

That’s where the Capacity Model comes in.

The Capacity Model: A Data-Driven Approach to Staffing

Rather than making hiring decisions on instinct, the Capacity Model provides a structured way to determine if additional resources are truly needed or if existing capacity can be better optimised.

Using this model, I assess an agency's total available resource and compare it to projected income. Many agency owners are surprised to find they already have enough capacity to meet their income targets - on paper. However, the creative industry's tendency to over-deliver can lead to inefficiencies, stretching staff on additional unpaid work.

By identifying available resources, agencies can restructure or reallocate work to improve efficiency before increasing overhead.

Breaking Down the Capacity Model

To assess an agency’s capacity and revenue potential, key factors must be considered. These variables help determine how much billable work can realistically be delivered by each team member. For example, let’s take a designer with a charge-out rate of £90 per hour:

• Charge-out rate: £90/hour (the amount the agency charges clients per hour of the designer’s time)
• ‍Hours worked per day: 8 hours (standard working day)
• ‍Average working days per year: 223 (factoring in weekends, bank holidays, annual leave, and sick leave)‍
• Utilisation rate: 85% (factoring in non-billable work such as internal meetings and training)‍

Step-by-Step Calculation

A. Full Annual Income (100% Utilisation):

• Daily chargeable income: £90/hour x 8 hours = £720/day‍
• Annual income at full capacity: £720/day x 223 days = £160,560/year

‍B. Adjusted for Utilisation (85%):

• Actual annual billable income: £160,560 x 0.85 = £136,476/year

By applying this model to each role in the agency, agencies can calculate Total Available Capacity (TAC) - the maximum potential revenue the agency can generate from billable work in a year.

Even with sufficient capacity on paper, inefficiencies can limit output. Common bottlenecks include:

• Poor project management: Ineffective workflows or misalignment between teams can reduce chargeable hours.‍
• Scope creep: Unbilled additional work drains capacity and affects profit margins.‍
• Lack of resource visibility: Without proper tracking, some team members may be overloaded while others remain underutilised.‍
• Communication gaps: Misalignment between departments or unclear briefing processes can slow down work and cause costly reworks.‍
• Outdated processes and tools: Relying on inefficient systems or manual processes can waste valuable time and reduce overall productivity.

By auditing team workload and addressing these inefficiencies, agencies can increase billable output without needing additional hires.

Balancing Loyalty with Business Needs

Loyalty to long-serving employees is commendable, and many agencies take pride in building strong teams. However, running a profitable agency requires staffing decisions based on business needs rather than sentiment.

Service demands shift over time. Some roles may become less relevant, while others become more critical. By consistently reviewing utilisation rates and aligning staffing with projected workloads, agencies can maintain an efficient, profitable team without unnecessary financial strain.

These decisions can be tough, but they ultimately support agency profitability and create opportunities for performance-based incentives, such as bonuses, for retained team members.

The Role of Fixed-Term Contracts (FTCs)

Even after reviewing utilisation rates and confirming the need for extra support, agencies should ensure they have at least six months of projected work before committing to a permanent hire. Assuming work will keep coming in is a risky approach.

A safer alternative is hiring on a fixed-term contract (FTC). FTCs allow agencies to:

• Bring in experienced talent without an indefinite commitment.
• Maintain flexibility if workloads slow down.
• Reduce redundancy costs if the role is no longer needed.

For creative agencies managing fluctuating workloads, FTCs provide a practical solution to scale up or down as needed, reducing long-term financial risks.

Smart Hiring

To make smarter staffing decisions, agencies should:

1. Regularly review utilisation rates: Use time-tracking tools to assess chargeable vs. non-chargeable hours.
2. Optimise current resources: Identify and address inefficiencies before hiring additional staff.
3. Use data-driven forecasting: Predict future workload based on client commitments and historical trends.
4. Consider FTCs before permanent hires: Maintain workforce flexibility while securing necessary talent.
5. Develop a hiring framework: Establish clear criteria for when and why to hire, ensuring decisions are based on business needs rather than reactive urgency.

By implementing a structured workforce strategy, agencies can balance growth with financial stability, ensuring they have the right team in place to deliver great work while maintaining profitability.

Making Smarter Staffing Decisions

Sustainable agency growth isn’t about hiring reactively; it’s about making data-driven decisions. By assessing utilisation rates, applying a capacity model, and considering fixed-term contracts, agencies can scale efficiently while maintaining profitability.

Before posting that job ad, ask yourself: Is this hire truly necessary, or can we optimise our existing resources?

Take the time to run the numbers. Get the spreadsheet out, assess your team’s capacity, and make an informed decision based on data - not instinct.