You may remember my last post about the firm that had been undercutting themselves continually on repeat business.
That post addressed the steps you can take to ensure you’re quoting accurately as consistently as possible.
But in the real world, mistakes do occasionally happen. No matter the size or structure of the business you’re in – we’re human, after all.
So I’ve put this post together to address - what I believe to be - the most effective approach to take in those difficult situations where you're faced with having to push-back on a client, or risk your profits altogether.
I've experienced the headaches that these situations cause.
You're left wondering whether you should just suck it up and let the problem slide, or be up front & push back on the client, even if it risks wobbling your relationship with them.
In reality, there’s only really one approach you need to take in situations like this and it involves cold, hard facts.
Facts, stats & data take the emotion out of difficult conversations.
When I need to communicate a crucial point about budget & overspending to a client, I fire up the Budget vs. Actual area of CMAP. Here's what it looks like:
There’s an associated Budget vs Actual report for every live project logged in CMAP.
The idea behind this report is that it provides a clear, visual comparison of the assigned budget against the actual spend for each of your projects.
This is broken down by work stage so it’s easy to identify the point where projects start flying off the handle.
It factors in things like role rates, supplier costs, time spent and future resourced time, against what your fee accounted for at the job costing stage.
Plus, it uses live project data to provide instant, up-to-the-minute stats about the financial performance of your projects.
So if you're struggling to turn a profit on a specific project, this report offers a sure-fire way of demonstrating just how much the project is costing you to deliver.
Trust me, it works 99% of the time.
The client doesn’t need to go through the project with a fine-toothed comb to understand the big red bar that’s staring them in the face on the Budget vs Actuals report is not a good sign.
It’s a really quick, simple way of saying we can’t continue with this budget, here’s why.
Your client is left with a simple choice: provide more budget to complete the project, or cut it off at that point.
Either way, your profits won’t suffer like they would if you were to just brush the problem under the carpet.
To sum it all up...
Data provides honest, accurate answers to help you solve the problems you come across in your business.
Over the years I’ve learnt that people tend to be pretty fair with these things when you’re open & honest with them. After all, if the data is there, clear as day, then they can only agree with what they're seeing.
It’s amazing how having the right data at your disposal makes it so much easier to have these kinds of conversations, solve problems and - above all - make the right decisions for your business.
If you're interested in learning more about project profitability, download yourself a copy of our guide to project profitability below: