10 Ways for Project-Based Firms to Make 2019 a More Profitable Year
By June Jewell, CPA, President AEC Business Solutions
This year has flown by and we are at that time of year when we assess what we accomplished this year, lament the things we didn’t achieve, and decide what we want to do in the next year.
As we go into 2019, I like to think about the trends I am seeing in the professional services industry, and try to help our clients and fellow business owners narrow down their goals to the one or two things that will give them the biggest financial impact. And often there are many things we should be doing! Since not every firm is the same, I have compiled 10 potential initiatives that you might want to consider that will help you achieve your most important strategic objectives.
The new year is an opportunity to start over, apply lessons learned, and achieve some of the goals that eluded you in the previous year. For many professional services firms, 2018 was a good year for business. In fact, this year may have been the busiest one I’ve seen in the last 10 years. But being busy comes with new and different challenges—a war for talent, increasing competition and with it, a resulting increase in salaries.
More than ever we need to be innovative, efficient and run our businesses smarter than our competitors. We face many unknowns for the future including mixed forecasts for the economy, continued shortages of experienced staff, and continued technology advances. While we are all in business to make money and serve our customers, it is amazing that we persist with business practices that do not optimize our employee productivity and project profits, or marketing success.
This is the perfect time to put a plan in place to make 2019 the most profitable year ever. Here are 10 areas you can focus on—each on their own will enable you to grow revenue, reduce expenses or increase project profits.
1. Adopt a profitability culture: You may not realize it, but your culture may be what keeps you from growing, or becoming more profitable as you do grow. An emphasis on profitability is critical to keep employees focused on the bottom line. Looking for ways to constantly improve your people, processes and technology is critical to competing in today’s market. Setting goals, regularly reviewing key metrics, and holding employees accountable are just a few of the steps you can take to foster a culture change that will guarantee profits as the firm grows.
2. Prepare better estimates: Estimates are the key to the entire project, forming the basis for the proposal, contract, scope, and budget. It is impossible to do a great estimate without first doing a detailed requirements analysis. Really understanding your clients’ needs, requirements and desires is the key to not only winning, but ensuring a successful project. Periodically review the rates you are using. If you are using old rates, or the rates implicit in your fee estimates are too low, you will set your project up for failure to begin with. Start with good estimating processes and templates and ensure that there is consistency in the way that your estimates are prepared and approved.
3. Manage the project scope: In order to make a profit you must control project costs including labor, expenses and subs, within the scope of the contract. Many project managers (PMs) don’t have effective processes for communicating the scope to the team, monitoring real time costs against budget, and recovering extra services. Special attention to the processes and systems your firm uses to manage scope creep will pay off with higher profit margins and less problems with clients on projects.
4. Improve systems: If your firm is using outdated systems for capturing time and expenses, managing projects, preparing proposals and managing resources, chances are your projects could be more profitable. There is a direct relationship between effectively using technology, and firm growth and profitability. It is critical to keep up with software updates and ensure that your employee’s daily tasks are as automated as possible. A sure sign of inefficient systems is dependence on Excel for monthly reporting. Look for ways to automate common tasks and processes to help your employees get the most value from every minute in their day. Continually improve your technology and systems to boost financial success and stay ahead of your competition.
5. Develop your PMs with training: Today’s project managers have many different responsibilities—some that are not on their job description. In fact, many firms don’t even have a formal job description for their PMs. I recommend that you take a good look at what your PMs do every day and understand if they have the skills to excel in their roles. Many principals tell me that as many as 50% of their PMs are losing money, mostly because of scope creep, and lack of business skills to manage projects profitably. Business and project financial management training can go a long way towards improving your PMs daily behavior, and providing the skillsets they need to manage budget overruns, and improve project performance.
6. Look for better ways to do things: There is always a better way to do everything. If you interview your staff and evaluate how they spend their time every day as they engage with clients and work on projects, you will discover inefficiencies that can be streamlined through process improvement. An employee assessment, especially one that is anonymous, can help you uncover where your business operations and processes are weak, and help you understand where to focus your attention. Strive to tackle one problem or issue every quarter and you should see measurable results in just one year. By looking at your business through different eyes, and focusing on a continuous effort to improve, you will be able to save the company money, and improve the quality of your services and client interactions.
7. Develop client retention plans for your best clients: We have all seen the statistics that it takes 6 times more money to win a new client than to keep an existing one, but many firms don’t strategically focus on how to retain their best clients or get more work from them. A client retention plan can help you outline specific actions that leaders and managers should be taking on a regular basis to better communicate with clients, improve relationships, and look for ways to get more work from current clients. The plan should focus on the firm’s top 20% of clients, and determine the frequency for face to face client meetings, online communication, as well as best practices for post-project follow up and debriefing. Maximizing the long-term value of each client should be a top objective for 2019 as competition increases and clients have more options.
8. Teach your people how the business runs: Most technical and creative professionals are oblivious to how your firm makes a living, and dollars are being lost every day due to inefficiencies, failure to follow processes, or a lack of focus on the bottom line. Much of this undesired behavior is rooted in the culture of the firm, and takes an intentional focus to change. I recommend a program of training combined with discussion, and implementation of a performance management process to focus on specific behavior changes that can lead to improved financial results. Your employees are your greatest asset and teaching them what your business needs to grow and thrive, and holding them accountable for the desired behaviors, is key to seeing improved overall profitability.
9. Develop a sales process: If you rely on your professional staff to close business, it is critical to measure the effectiveness of their sales activities. Many technical staff are involved in pursuing new business with no training, processes or accountability, leaving sales results mixed and unpredictable. The key to a good sales process is documenting where leads come from and prescribing how each type of lead should be managed. Using a good Client Relationship Management (CRM) system will make a big difference in providing controls, visibility and accountability. The last thing you want is precious opportunities to fall through the cracks. A documented sales process, along with sales training, can provide the guidance your technical experts need to ensure a higher win rate.
10. Sell on value, not price: If your pursuit of new projects is not strategic or intentional, you may find your teams bidding on projects that are not profitable. Increased competition and bad habits have led many firms to bid on projects with low margins, setting them up for potential budget overruns, and low or negative profit margins. The key to eliminating this trap is to ensure that you are selling your services based on the value you bring to clients rather than just the price.
To move your firm in this direction requires a concerted effort to find better clients, to educate your management team developing your proposals, and to clearly define where your firm adds value. Interview your staff and try to dissect some of your most successful projects to understand where you may have saved clients’ money or added strategic value. You can also interview some of your best clients to understand why they would be willing to pay more to work with your firm rather than lower priced consultants. By looking for ways to focus on your firm’s unique expertise and value, you can move away from unprofitable clients and projects, and help boost your firm’s profitability.
The future is never certain. However, opportunities always exist to improve and become more efficient and profitable. To be able to take advantage of these opportunities, it will be essential to leverage innovative and even unconventional business management and leadership practices. Strategically leveraging your greatest assets—your talent, business infrastructure, and systems—will provide a competitive advantage and help to ensure stability in the face of rapid industry change and growth.
About the Author
June R. Jewell, CPA is the author of the book “Find the Lost Dollars: 6 Steps to Increase Profits in Architecture, Engineering and Environmental Firms”. She is the President of AEC Business Solutions, offering employee development training focused on helping Architectural, Engineering and Construction firms make more money on their projects and develop their next level of leadership. Read more tips for A&E firms at her blog at www.AECBusiness.com/blog.
- Customer Experience
- Customer Spotlight
- Data and Analytics
- Deltek Cares
- Deltek Insight
- Deltek News
- Deltek Project Nation Community
- Digital Transformation
- Diversity in the Workplace
- Executive Spotlight
- Financial Management
- Industry Analysis
- MVP Awards
- Organization and Culture
- Partner Spotlight
- Project Management
- Risk Management
- Small Business
- Team Deltek
- Transformational Trends
- User Experience
- User Experience Innovations