Chapter 2: The Power of B2PP: Boosting Profitability

In chapter 1 we defined the most common productivity metrics. It is also important to revisit the precise definition and calculation of the Billed to Production Paid (B2PP) metric. B2PP serves as a representation of the agent hours that are invoiced to clients in comparison to the agent hours compensated for in the production phase. Its primary function lies in ensuring the accuracy of billing procedures and upholding client satisfaction levels. B2PP plays a pivotal role in monitoring the alignment of invoiced time with the actual hours worked by agents, thereby fostering transparency and accountability in the billing process.

The formula for B2PP stands as follows:

Billed to Production Paid (B2PP) = Total billable time (as per the chosen pricing model) / Total advisor paid time in production (excluding paid vacations or leaves).

It is evidenced that variations in B2PP—whether higher or lower—bear a direct impact on the revenue part of profitability. However, this fact is not universal but contingent on the specific billing methodology in use. When the pricing model hinges on productivity-based metrics (e.g., price per productive minute or price per task), the level of B2PP significantly influences the Gross Margin. In such instances, a positive correlation between B2PP and Gross Margin will exist. This correlation comes from the fact that, with constant costs—utilized as the denominator in the B2PP calculation—higher billed hours lead to increased revenue.

Conversely, under alternative billing structures (e.g., Price per Full-Time Equivalent or price per login hour), B2PP should remain relatively stable, with any fluctuations in profitability stemming from other contributing factors. In these scenarios, a notable correlation between B2PP and profitability may not exist.

Question 1: Why is it important to define and analyze the connection between profitability and B2PP? Two key reasons underscore its significance:

1)     Setting B2PP Targets for Profitability : When a strong correlation is identified, it becomes possible to set B2PP targets for teams with the aim of aligning them with broader profitability goals. If there is a clear link between how efficiently an organization invoices clients (B2PP) and its overall profitability, then managing B2PP becomes a strategic lever to enhance financial performance.

2)     Defining Optimal B2PP for GM expectations. It is quite important to determine the optimum B2PP that the production process can deliver. This sets expectations for profitability. Knowing what level of B2PP is achievable within the existing operational framework, provides a baseline for assessing and planning for profitability.

The above statement outlines the importance of understanding the correlation between Billed to Production Paid (B2PP) and profitability and suggests two key reasons for its significance.

However, it's important to note that the actual impact of B2PP on profitability can vary depending on the industry, business model, and other factors. Therefore, conducting a thorough analysis to establish the correlation specific to your organization's situation is more than needed.

Question 2: How can I convert non -time billable units to billable units in case of outbound and/or back-office activities where the pricing model is Price per Unit or Sale?

There are 2 ways to do it:

a)      Billable unit: Calls or tasks

Billed hours: (Total handled minutes/60) or Total calls X AHT

b)     Billable unit: Sales

Billable hours: Total sales x (AHT Avg. Aux time) or Total sales/Sales per hour

In Chapter 3, we will go deeper on WFM role on profitability forecast (short and long term)

thank you...