It can be all too easy for a project to creep outside of the initial scope. You may come up against unexpected barriers, or the client might ask for amends/extra services that were not previously discussed. This means that, very often, agencies are potentially giving away work for free.
There are some simple processes that can be put in place to stop this from happening and ensure your projects remain profitable.
Managing Projects for Profit: Before You Quote
Even before you come to quote for a project, there are things you can do to minimise the risk of it not being profitable to take on. Firstly, define what a great project looks like for you. Stick to what you can do well. Taking on a project that might be slightly outside your skillset could require more time to complete.
Many agencies give time and money away by pitching for free. A score card can be used to determine whether a project is viable for you. The first of those questions we’ve just hinted on. Is there a pitch fee?
The pitching and scoping process takes time, and it’s not unreasonable to ask if there’s a pitching fee. Why should you give away free time for a project that you’re possibly not going to win? If there is one, great, but if not, even just asking the question can be used to your advantage. It can be approached as such:
“It’s a shame that there isn’t a pitching fee, because I know that our Finance Director (doesn’t matter if you don’t technically have one) will struggle to sign this off. However, if you can help answer some further questions, I might be able to get them onboard.”
The further questions on this score card to ask could be:
- How many agencies are involved in the process?
- Is there an incumbent agency?
- Who is involved in the decision-making process?
- How will you make your decisions?
- What are your timescales?
- What is your budget?
The extra information that you can get from the client should allow you to make an educated decision about whether you want to go on and do the pitch.
Managing Projects for Profit: Scoping
Charging For a Scoping Exercise
An alternative to a pitch fee would be to charge for a scoping exercise. Again, just like preparing for a pitch, scoping for a project takes time. Some companies will be happy to cover the cost of this time and others will be prepared to pay a good amount, meaning that the scope becomes a mini project in itself. This makes it more amicable if they ultimately decide not to go forward with your agency. Evidence shows that agencies who charge for scoping exercises see their conversion rate increase
Using An Agile Approach
Rather than giving a fixed, upfront fee, are you able to create phases of work to minimise the change of scope creep? It’s not always the case that scope creep is the client’s fault – it just happens as ideas progress and new opportunities become available. As such, you can break it down into phases. For example, once you’ve completed the first stage, i.e., research, you can give the client an estimate for the second stage (design) and then third phase (development.)
An agile approach can be pitched as being best for both the agency and client and help form the relationship from the get-go.
Managing Projects for Profit: Delivering the Project
Now that you’ve won the project, you need to ensure that it remains profitable. One way of doing this is by including a contingency budget – an additional amount on top of a budget value in case of ‘emergencies.’ This addition could be 20% of the project value, for example.
Some agencies might be worried about being upfront about this. They will add it onto an invoice, but it won’t be detailed, and they won’t communicate it with the clients. Others will embed it and be more transparent, explaining there will be months they use it, other’s they won’t and some they will go over.
It’s possible to have the conversation about a contingency budget without going ahead and invoicing for it. A conversation alone can make you sound more expert on the type of project. You can approach it by saying a contingency budget would be beneficial to have signed off if you need to eat into it. Having an initial conversation will mean that you don’t have to jump through hoops later down the line. It’s difficult to lose by having this conversation.
Scope creep shouldn’t be something that you hate. It often can’t be avoided, and you have the opportunity to handle it better than other agencies. Shift your mindset from ‘annoying’ to ‘it’s going to happen, but how can we manage best as possible?’
One of the best ways to do this is by making the terms clear from the offset. Ask what happens if something falls out of the original scope, and how the client would like to handle it. If they’re reasonable, they shouldn’t expect you to do it for free. By having the conversation early on, it makes it easier to approach later down the line when it happens.
Sign Off at Each Stage
Having sign offs at each stage of the projects are a good opportunity for a client to bring up any amends they want to make. Build this amendment time into your budget, whether it’s one round, two rounds etc. You might be drawn into the idea that it’s only a ‘small job.’ ‘It’s only a font change. It will only take two minutes.’ There’s very rarely a job that only takes ‘two minutes,’ and all these smaller jobs add up.
A Minimum Fee for Amendments
Rather than doing odd jobs here and there, set a fee for an hour’s worth of amendments and group them together. This not only helps the team manage their capacity, but it also gives the clients a clearer understanding of how long tasks take to complete.
Including the Team
One of the best ways to ensure that a project remains profitable is by keeping track of how much time you’re spending on it. Using timesheets/time tracking tools shouldn’t be seen as way of keeping tabs on people. They should be embraced as a way of identifying where you might be overdelivering and where you’re making profit.
Encourage openness among the team during projects, asking for help with any challenges etc. You could even set up ‘no work for free’ cross-team groups, where people are holding each other accountable. It can really help to keep a team engaged and make them feel that they aren’t being managed from the top.
Tools to help with this include CRM systems, project management tools such as Asana, Monday and Trello, and time tracking tools like Synergist and Harvest.
If you’re wanting to make sure that your projects remain profitable, here are the key takeaways from this article that you can begin to put into practice today.
- Create a scorecard to ensure you’re not wasting time pitching for a project that isn’t right for you.
- Offer clients different options for scoping charges.
- Be upfront about the use of a contingency budget.
- Plan for scope creep and amends.
- Put in place minimum amendment fees.
- Start tracking the time you’re taking on a project.
In our next session, we’ll be diving into the opportunities for driving profit from your existing client portfolio in a way that drives value for all.