Why is overhead allocation important?
According to the AAAA, overhead represents almost 50% of a typical agency’s total operating expenses. It is the rent, utilities, office supplies, and other expenses used to run the shop and service the agency’s client accounts. By allocating these overhead expenses to each client, the shop has the ability to see what the true service cost of the account is — and if the account actually makes money for the agency. Once you know each client’s true profitability, you can more profitability allocated people, facilities, and other resources to your most valuable clients. You’ll also know as well which clients may not be worth keeping.
