“You fool! You’re 30 cents away from having a quarter!”
~Sweet Dick Willie – Do The Right Thing (1989)
As project management professionals, we love to delight the customer - bringing a project in on time and at (or preferably under) the customer’s budget.
But what about our own budget? If we’re to continue to be able to provide services to our customers, we also need to be equally mindful of our bottom line as well. The last thing anyone wants is to get to the end of a project only to learn it cost more to provide the service than was actually realized from the customer. It’s frustrating, potentially fatal (from a business sense that is) and could put the project manager at the back of the line at the local soup kitchen, if you catch my drift...
Before we get too far into this post, it’s important to remember this is not an “us versus them” situation when looking out for your own profitability. The key is to be smart; have full agreement on a project’s scope; communicate costs for that scope and what will need to occur should any changes impact the scope (or more specifically, who’s responsible for what?), and knowing where to invest your profits to generate more business opportunities.
To address what I call the “Profitability Factor”, there are a few things to keep in mind. For the purposes of this blog post, I’ll highlight the following which should be at the top of anyone’s list:
Stick to the plan. We’re project managers, yet many times we find it difficult to simply stick with the plan. Understandably things change and a strong project manager knows how and when to adjust the plan; knowing full well the consequences which may result. That said, we build a plan for a purpose – to ensure the customer gets what they need and that we are able to deliver on this need in a manner which allows us to succeed as a business. To accomplish this, a project manager must be able to:
- Say no to the customer when faced with unreasonable requests or changes;
- Be understanding but resolute in what it will take to deliver the project as stated;
- Don’t undersell yourself - stand behind your estimate and the work involved.
Many (but not all) people simply want something for less. Stick to the plan, be conscious of changing conditions and what they mean for a project and don’t de-value your work. In the end, you’ll deliver a quality project, keep a happy customer and grow your business as a result.
Understand “Your” Business. A project manager is also a business leader, meaning you have P&L responsibility for your group, division or project deliverables. This requires an in-depth knowledge of your own cost of doing business. Overhead, staffing costs, travel and support, plus the inevitable “unbudgeted expenses” are all costs associated with being able to provide project management services to your client whether internal or external. Understanding these costs, and the many hidden items which can arise in the course of providing services to others, allows you to better estimate your rates or project costs to the customer in a manner enabling you to earn a profit at the end of the project. Flying blind, “winging-it” or “guestimating” are sure ways to end up on the wrong side of the ledger with potentially catastrophic consequences for you, the client, and/or the project.
Know “Your” Industry. I get it. You’ve got sweet looking office space, you’re using top of the line laptops and project management solutions (Viewpath of course!), your shirts from Mizzen and Main suggest a hint of hipness and an attention to detail and you have cold-brewed coffee on tap in your team break room. Unfortunately, that does not mean people are going to pay more than market rates for your services. Sure you may be able to juice a little bit given a solid track record and some nice lighthouse customers, but that’s about as far as you’ll get over the long haul. Customers are notoriously price conscious and while they may award you an RFP once, if they discover later you over-charged them, or your rates were way above market, you can be assured to be removed from any future consideration. Understanding the market, recognizing where you can command higher fees, and where you need to be more elastic will help you better manage your business and and keep the customers returning.
Advertise Strategically. Advertising is an investment where you invest to promote your business and/or services to generate a return in the form of profitable customer relationships. So why do many approach it from an egocentric point of view? Sure, seeing your company’s logo out in the wild is cool, but if the cost of that ad placement is not being covered by the sales it generates, then the money is better spent elsewhere. The same with by-line articles, analyst reports, SEM, social media outreach, press releases, etc. Any and all advertising or marketing expense must be tied to thoughtful analytics which match with your business KPI’s. Where one campaign fails to move the needle, those dollars can be re-allocated to those which do. The goal is to boost your bottom line. Applied correctly and advertising/marketing spend can be a boon for your business. Isn’t that what we want??
Project managers and independent consultants must have a thorough understanding of their customers, their industry and their own business to fully realize their fullest potential in a profitable manner. When profit margins are tight, every effort counts and that means detailed scope management, careful cost control, and planning... planning... planning.