5 Secrets to 5% Increased Profit on Your Next Project
All resources matter on the project.
Without all resources working cohesively and effectively together, it can become nearly impossible to effectively and successfully deliver on the project. But beyond that – looking to the revenue level and the profitability on the project… everything affects it, but close management and oversight of it comes down to the project manager. No one entity on the project has the insight, access to info, and overall project knowledge from that standpoint to effectively manage how healthy the project financials are.
Also, not only can the project manager help keep the project stay on track financially, they can also help increase project revenue and profitability through effective financial management, scope management, and customer and team management. Many things do affect all of this – well beyond my list below, I know – but for me it starts with regularly performing these five tasks… my secrets to keeping project revenues high and project profits hopefully higher than expected. Let’s discuss…
Discuss financials weekly with the project team.
One of the best ways to get the team aligned on managing their own time charging well and accurately on the project is to just let them know it’s very important to you and to the bottom line of the project. Many don’t realize that and they’re just trying to account – usually at the end of the week – for all their time. They know they put in 65 hours on various projects and they are tired and throwing hours down on a time sheet that means very little to them other than a task that is due Friday afternoon or Monday morning. It’s not daily tracking as it should be – in reality it’s Friday afternoon guess work when they would rather be doing anything else.
So, discuss the project financials at each weekly team meeting. Make sure they know how much time charging is expected of them for that week and the following week from your resource forecast and ensure that the two match up. I realize this one action may not add to the profitability of the project very much – but it can keep it from being the rollercoaster ride it often is and can definitely keep the project from unexpectedly going 50% over budget leaving the project manager wondering what went so horribly wrong.
Limit PM travel.
Believe it or not, not all project customers see PM’s as a vital expense on the project. I had one project client in Texas who just didn’t see the need or value from Day One. Even my lead tech – who was mostly working onsite with the client – said “how can you not like Brad, you don’t even know him?” I got to the bottom of this PM disdain on their part and they were mostly concerned about budget and questioned the need for my $150 per hour project hit. So I immediately looked for ways to manage from afar. I eliminated my travel and reduced meetings to conference and video calls and they loved it. Best of all it added to the profitability of the project without affecting my management of the project or our performance level on the project.
Limit team travel.
Beyond the PM travel, look for ways to limit team travel as well. If the plan calls for onsite quarterly meetings with the customer re-think that. Does the customer care if you do it with a video call, thus saving thousands and adding to the profitability of the project? I realize that some travel can’t be avoided and the customer will need it to maintain a level of confidence and overall happiness in most cases. But it can be kept in check – I’ve worked too many projects where it seemed we were traveling way too often and making the rest of our “productive time” and effort on the project suffer when we could be effectively delivering on the next phase instead of wasting important dollars on what has already been accomplished by traveling just to review it.
Manage the project scope.
Scope management may be the best overall way to help ensure project profitability. Too many projects go by with extra work added without the necessary change orders in place to cover the work, add the necessary revenue for that work and keep the profitability of the project in place. Those change orders can add nicely to the project profits – I once added $100k in revenue with a high profit margin by selling the need for an onsite business analyst to the project client. The customer loved it, project revenue skyrocketed and profitability took a nice jump as well. Look for ways to do things like this when managing scope.
Tighten resource management and forecasting.
Making your team aware, watching scope, limiting travel, etc. are all great ideas. But the real profitability boost comes from you – the project manager – effectively, efficiently and relentlessly forecasting resources accurately throughout the project engagement. Don’t just come up with a resource forecast and let it sit. Revisit it weekly. Maybe you no longer need an expensive business analyst during weeks 32 and 33 on the the project. Discuss removing the resource from the project for those 80 hours – thus possibly saving the project as much as $12,000 during that downtime for the resource. If you are working on a time and materials basis with the client it may not help revenue and profitability much. But if you are charging more on a fixed price or deliverable basis, your profits could increase dramatically
Summary/call for input
You’re the project manager. No one else can keep costs on track and profitability high like you can. Never just phone it in when managing anything that affects the project $$ bottom line. Even one hour a week spent analyzing project financials and re-forecasting the project financials and resource usage can reap huge dividends in the long run in terms of profitability on the project.
Readers – what are your thoughts? Do you agree with this list? What are your secrets and tricks for keeping project revenue and profitability in check and adding to it throughout the project? What frustrates you the most with revenue planning and profitability on the projects you manage?