There are 3 simple steps you can take to stop under quoting on projects, and increase your profitability.
Recently, we described the Evil Twins that eat into your project profits. The two terrors in question being Under Quoting and Over Delivering.
In this post, we’ll explain how you can best take down Evil Twin #1. We'll help you to stop underquoting on projects, and ensure they’re delivered with a healthy profit.
There are three main causes of Under Quoting:
- Failing to pinpoint every task you’ll need to do.
- Underestimating just how much time you’ll actually need.
- Not spelling out to the client exactly what's included.
Let’s tackle each of these causes in turn and explain how you can prevent them.
Step 1: Pinpoint every task
The first thing to do is visualize everything you’ll need to do to complete the project.
Then, and this is crucial, detail that within your fee estimate.
Pulling numbers out of thin air will always end in disaster. But, putting numbers down against each task will help you construct an accurate fee.
Not only that, but you can then explain to your client how you’ve arrived at the figure you have. They’re much more likely to sign off on the job if they’re aware of how much hard work you’ll be putting in.
It’s also worth bearing in mind that some tasks will have to be re-done. You might quote for 3 design concepts for example, but we all know the client is going to come back with some comments. As a result, you'll need to look at and amend that concept work.
So, make sure you budget for those rounds of amends.
It's important to specify how many times the client can come back with revisions too. Be clear that you will charge extra for any additional work you do outside of that.
Step 2: Estimate how much time you’ll actually need
This is easier to fix than you think. All you need to do is research the most recent projects you’ve done of a similar kind and find out how they performed.
How long did they actually take to deliver? Did they go over budget? If so, why? Do you need to quote more to overcome these issues, or be clearer with the client about what’s included in the scope?
We all think we know how long things take to do, but the reality is we’re often well wide of the mark. You’d be amazed how many times we see companies giving the same quote for similar projects without checking to see how long those projects took to deliver.
Doing these reviews can actually result in winning more business too. You may find you’re consistently coming in well under budget, allowing you to provide a more competitive quote in future.
Step 3: Spell out to the client EXACTLY what's included
We’ve mentioned this in passing already, but it’s the most crucial aspect of defeating Evil Twin #1.
Giving your client a price without a clear and detailed explanation about what’s included is a recipe for disaster.
For example, we used to just include a price for Project Management to cover status calls etc. The problem was, we may have expected to do one 30-minute call per week, only to discover that the client wanted to talk for an hour a day!
Why was that a problem? Well, because we hadn’t set any expectations on what was included, we ended up doing all that extra work for free and going massively over budget.
These days our quotes are very clear. If the project is going to last for 12 weeks, we budget for 12 x 30-minute status calls. If there’s more, we can bill the client for that extra work.
Of course, there’s little point in doing any of the above if you don’t regularly review what’s actually happening and go back to the client if you need to.
We can tell you from experience that while this might seem daunting at first, you quickly get used to it – especially when you’re only referring to the (well detailed) scope and budget the client agreed to in the first place.
One thing our CMAP clients tell us is that these conversations can be really helped by sharing CMAP’s Budget Vs Actual visual with the client. That red bar makes it really obvious there’s an issue to address.
Step 4: Success
So to recap, you can prevent Under Quoting by:
- Pinpoint every task you’ll need to do.
- Figure out exactly how much time you’ll need.
- Spell out exactly what your fee includes.
Those three steps are all fairly simple. Still, we guarantee that if you do them, they will result in more profitable projects.
We’ve done it ourselves throughout our careers in the project world. These days we see thousands of CMAP clients all around the world doing exactly the same. As a result, they're building stronger, more profitable companies.
Follow these steps and you can too.