The key is to safeguard your efforts – safeguard the profitability of the engagement. To do that, there are many things to keep in mind when you’re discussing the project with the customer, scoping and pricing the project, and then executing on the project through to completion. I've selected five to consider...
Stay on plan. This may be the most important concept of the five and it probably overlaps, to some degree, with most of the other four. What is meant by “stick to the plan” is this...having the ability to do most or all of the following:
- Say no to the customer when necessary
- Stand firm for what you believe to be the necessary tasks
- Be confident and unwavering when directing the activities of others
- Stand firm to prices quoted and stand behind your estimate and the work involved
Customers in all lines of work and in every industry want something for less. Stand firm. Stay true to your expertise. Be confident. In the end, you’ll be more profitable for it and you’ll have customers who truly need your expertise and are willing to trust you and pay you for it.
Know what the work really costs you to perform. In order to be a profitable on the project, you must – and this is critical but many stumble here – know your cost of doing business. Be real – figure in your overhead expenses in the equation and look forward to things like driving, potential air travel, phone time, supplies, some wiggle room in the scope that you know you may need to give away without putting up a fight, etc. After looking at all those things and probably more, you’ll know your cost of doing business. You’ll know what you need to bring in per hour to make a particular engagement possible. Unless you’re practice is new, you should be able to come up with this fairly quickly and even ballpark an estimate on the spot for a potential client in order to get the quick ‘in’ on the possible work that is laying before you.
Know the the value of your work and price it right. Understand what the project services should bring in and go with that. No one is going to pay $200,000 for what you are offering if similar services can be had from other organizations for $150,000. That applies to IT projects in the same way. We have to understand what the ceiling we’re going to get in terms of rate, or price, or contract. We have to understand our earnings limitations within our main client base and work with those limitations. If we fail to understand all of that, then we risk alienating current and new clients and decreasing our earning potential and profitability.
Remember that scope management is critical to profitability. Scope management is always an issue when managing a customer or a consulting engagement. You document the work as ‘x’ in the estimate and then likely in a signed contract. However, throughout the project the customer may insert some other ‘needs’ that he just has to have and he may try to convince you that they are really part of other requirements – assumptions that are being turned into real work requests. Be careful. Don’t let that line in the sand move too much. This goes back to also sticking to the plan and being stubborn. Be ready to discuss these changes that you are perceiving that are coming from the customer. Analyze them carefully and if they are truly outside of the original scope of the agreement, let the customer decide if it’s something they need and are willing to pay for or if it’s something they can do without.
Strategically advertise. Practice strategic advertising. Word of mouth works great. Testimonials from satisfied customers posted prominently on your website are great ways to show potential customers that you’ve been busy and you’ve been successful. Write press releases about your offerings and post them to free press release sites on a regular basis. Write white papers and articles on the subject matter that you are an expert in post them on your own blog or guest post them somewhere. All of these can be huge boosts to your project management and professional services businesses.
Summary / call for input
Project managers and independent consultants must understand their customer base, their area, and their customers habits and needs in order to fully realize the best profitability on the projects and consulting engagements they are leading. When profit margins are tight, every effort counts and that means detailed scope management, creative advertising, careful cost control, and planning...planning...planning.
Readers – whether you are a project manager, project team member or consultant, what measures do you take to help ensure lower costs and overall project profitability. What would you add to this list. Please share and discuss.