When you own your own business, profitability is key in anything and everything. Of course, it’s much easier said than done to make every project turn a profit, but there are some things you can do to keep your projects making money.
As the old adage goes, “time is money”. While it can seem counterintuitive to have two or more people working on a project one person can do, it is important to make sure your team has the opportunity for knowledge-sharing. Having a team that collaborates regularly can mean greater cohesion, shared goals and cross-skilling. There is no better way to share innovative working methods and efficiencies than peer-to-peer sharing, after all, everyone in a hard-working team wants to know a faster, better way to get their job done. Encourage your employees to collaborate with one another on projects while maintaining their own efficacy at their own roles to improve profitability.
Forbes: Study Finds That Collaboration Drives Workplace Performance
This is really important in not only maintaining a profitable project but also maintaining good customer relations. For example, a client comes to you and says, “How much for job X?”. You give them a quote for it on the spot and then a week later you realise that you have forgotten to account for Y or Z cost and have to draw up a new quote for them. You’ve created a very delicate and highly avoidable situation, where the client at best may be annoyed or dissatisfied, and at worst may feel ripped off and cancel the work altogether.
It’s okay, sometimes, not to know your costs on the spot. Obviously, it’s beneficial to have to hand the pricing for common and straightforward projects, but it’s perfectly okay to tell a client that you’ll get back to them within 24 hours and then spend those 24 hours accurately costing out each aspect of the project. Coming back to them with a well thought out and accurate estimate gives both you and them peace of mind because it’s clear you’ve put consideration into the project already.
Reflecting on the likely costs beforehand, even taking note of often-overlooked expenses, can help you to make money on every project. You may even notice things that you can charge more for or costs that have been ignored, like freight of supplies, or complimentary spare parts.
Change is inescapable and inevitable. This is as true in project management as in any other aspect of life. Maybe the supplier that you use suddenly closes their doors, and the nearest competitor only stocks the product you need at a higher price. It’s essential that you roll with the punches and not be afraid of things that change, you simply adapt your cost of production to suit the change.
Inform the client of changes as early as possible. Ask how they would like you to proceed – perhaps they would like less for the same price or are willing to order more for a bulk discount to keep the per-unit price the same. Try to coach them through the change as maintaining a trusting relationship is critical. It’s all about liaising with your clients in a timely and professional manner.
You want to make sure that your business is “best-in-show”, but it isn’t always easy. Sometimes tough decisions need to be made around things like staffing, workflow and when to say ‘no’ to a client.
Yes, it’s okay to say ‘no’ to a client. That can be a hard decision, particularly when the ‘customer is always right’ mantra is so prevalent in business. But it’s simply a fact that sometimes customers don’t understand that what they’re asking for is out of scope. What can seem like a simple extra or a small favour to them may actually put your profitability in the red. Be open with the customer and explain why it can’t be done, and if possible suggest alternatives. After all, a good customer understands that you can’t keep providing them a product if you go out of business – it’s in everyone’s interest to keep the business going.
It’s also true that sometimes your staff can become demotivated or neglectful towards their responsibilities and you may need to reassign staff to a different project or reassess their employment altogether. While it is always a hard decision to make, if members of your team are consistently causing profitability issues then it’s not just you but all other team members that are affected.
Another integral part of keeping a project profitable is to outline a detailed budget for each project. Forecast that budget at the end of every week to make sure you’re still falling within acceptable parameters. 10% over budget is fairly normal for most major projects. 50% over budget, is an insurmountable recovery – You almost certainly won’t be able to bring it back.
If you keep on top of the project’s budget by re-forecasting (if necessary) every week, as each week presents new challenges, then you can adapt to those challenges and ride out the waves as they come, even if there is the odd rogue wave.
Read more: 7 Estimating Mistakes That Hurt Profitability & How To Avoid Them