I spend most of my time working with service-based business owners and I’ve yet to see a firm that hasn’t suffered at the hands of the Evil Twins.
Unfortunately, I’m not exaggerating when I say these Evil Twins will literally suck the profits right out of your business if you don’t proactively work to eradicate them.
The good news, however, is that if you manage keep them at bay, the impact on your profits will be nothing short of spectacular.
So, what exactly are these two profit-killers?
Evil Twin #1 is underquoting for projects
Evil Twin #2 is over-delivering on projects
Make no mistake, these two nasty habits will kill your profits stone dead if you let them – it’s happening every day to thousands of companies like yours and mine.
Here's what usually happens...
1. The client gives you a vague brief on a new project and asks for a quote
2. You provide the quote, making some slight assumptions about their requirements
3. The client hires you. Great…
4. Your team starts delivering the project. But without a clearly defined set of rules, they spend far longer delivering the project than they should
5. The client comes back with some additional requirements that they thought were covered in the price. Unfortunately, you didn’t specify the scope that was actually covered by your quote, so you end up doing additional work for free.
6. You complete the project. But because you didn’t quote enough in the first place, your team has over-delivered on the project and you end up making a loss.
The worst thing about this nasty habit is that it tends to occur time & time again.
We’re all guilty of doing it, too.
I remember quoting £20,000 on a project years ago, only to end up spending £65,000 worth of time delivering it!
And with no scope and no breakdown of the budget, I had no way of getting more money out of the client. Not a good day at the office!
If this sounds all too familiar, here’s a process you can implement right now to eradicate the Evil Twins for good:
Start building accurate project costings
Identify all of the stages and tasks required to deliver the project. Identify the resources you require and estimate the amount of time they'll need per task.
I’m not going to tell you how to calculate your fee, but the key thing to remember here is to make sure you’ve taken the time to plan out the project properly.
Be clear about what's included in the price
Include a breakdown of your costing so that your client can see the tasks involved (this also really helps to justify your cost if the client thinks it's a bit high!).
Lay your cards out on the table about what's included in the price. Have you accounted for additional work, rounds of amendments or will there be an additional fee?
Also, if you've made any assumptions about the project, state them clearly along with your quote. You can learn more about this here.
Don't over-deliver. Make sure your resources know exactly how long they've got
Make sure that each person working on the project:
(a) knows exactly what they need to do and
(b) understands exactly how long they've got.
Tracking time is vital in a service-based business because; when it comes down to it, that's what you're selling.
So your staff need to be recording their time against the project so that you can quickly see if your project is heading over budget.
Don't allow the scope to grow unless the budget does, too.
If your client asks for extra work, don't be afraid to push back. Make it clear that it's outside of the agreed scope and provide a quote for the extra work (find out how here).
Adopt this approach as your standard process and I can guarantee that repeating this project after project will add up to a serious increase in your profits.
For even more useful tips on project profitability, download our free 5 step plan: