Guide to Profitable Projects: 5 Steps for Accuracy, Skill Matching, and Resource Balance, Study Guides, Projects, Research of Project Management

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 Steps to

More Profitable

Projects

FOR PROFESSONAL

SERVCES

3

Introduction

4 STEP 1:^ Increase the Accuracy of Your Estimates

9 STEP 2:^ Match the Right Skills for the Right Task

14

STEP 3: Create Healthy Tension Between

Resource and Project Management

18

STEP 4: Measure Profit & Loss at the Project Level

23 STEP 5:^ Make the Most of the Post-Mortem Process

26 Recap

What’s Inside

Increase the

Accuracy of

Your Estimates

The estimation process should not simply result in one high-level cost estimate and overview of delivera- bles. It should provide details on the types of work involved in the project lifecycle and the specific skills needed to complete each of them. An estima- tion model that does this can help resource managers understand who will need to be assigned to various tasks and what compensation rates will inform the project budget.

The estimation model should break the project down into multiple phases, which will act as containers that you track time against throughout the

project lifecycle. Having differentiated phases will help clients understand the many aspects that lead to the overall estimated cost. These phases can quickly reveal what is costing your business more or less when compar- ing actuals to estimates.

The estimation model you have cre- ated can be replicated to track actuals on projects. However, keep in mind that each project will be executed slightly differently depending on client size, location, client history, and more, which will impact your project lifecycle.

Today, clients expect greater

transparency in the services

process, wanting to know

who is working on their

project, how long it will take,

and why it costs as much as

it does. At the same time,

it’s becoming more difficult

for services businesses to

maintain a healthy project

margin. Creating an accurate

estimate up front will help

balance both sides by setting

client expectations and

preventing surprise costs

from compromising profit

margins.

Having an accurate, reus-

able estimation model

plays a pivotal role.

What Makes

an Accurate

Estimation

Model?

STEP 1: INCREASE THE ACCURACY OF YOUR ESTIMATES

Monitoring Scope Creep

Scope creep is one of the easiest ways for project margins to be eroded. Effective

scope management is possible through the use of a project management tool that

can identify scope changes and facilitate corrective measures. Along with a strong

project management solution, the following four steps can help manage scope

creep before it begins and respond accordingly if it occurs.

Your business should have a process for change management in place and stick to it on each project. When a client requests additional tasks and deliver- ables be added to an ongoing project, the established change management process can begin.

3

Create a Change

Management

Process

Excessive revisions can eat away at mar- gins due to the unexpected amount of time and resources required to meet shifting client expectations. Prevent these cas- cading costs by setting parameters and a cap for the number of revisions upfront. These should be defined in the contract.

4

Set Parameters

for Revisions

Have a clearly defined statement of work (SOW) created before any tasks begin, which will help set client expec- tations. The SOW should have an agreed-upon plan of action that includes timelines, deliverables, responsibilities, and milestones.

1

Communicate and

Set Expectations

Up Front

Projects and related tasks should have well-documented timelines, assigned resources, budgets, and deliverables. A project requirements document should also include a section where your team reviews task statuses and compares them against the SOW.

2

Maintain

Requirements and

Status Reports

STEP 1: INCREASE THE ACCURACY OF YOUR ESTIMATES

The Estimation

Process Review

After a project comes to a close, your company should compare your project estimates vs. actuals. Remember that while estimates should be accurate, having agility and flexibility in estimation models and tools is critical. Upfront budget estimates are always needed, no matter how you calculate margins for your company.

Transparency on estimates (even for fixed fee projects) is crucial for maintaining relationships with cus- tomers. Letting a customer know why you’re charging them as you are and then completing a project accordingly creates a sense of hon- esty and reliability. This can make a significant difference in negotiation dynamics, efficiency, and trust.

Transparency on

estimates (even for

fixed fee projects)

is crucial for

maintaining

relationships with

customers.

STEP 2: MATCH THE RIGHT SKILLS FOR THE RIGHT TASK

STEP 1: INCREASE THE ACCURACY OF YOUR ESTIMATES

Services can be a feast-or-famine business,

but with the right method, companies don’t

have to be caught off guard when either time

comes. According to our research, 65% of

executives stated that they had to turn down

work in the past 12 months, with the most

common reason being that their firms did not

have enough resources.

Capacity planning will help you be prepared

and react quickly when an influx of new proj-

ects arrives, as well as when the amount of

new work shrinks. Being able to effectively

react to both means higher margins and more

projects. It all starts with being able to match

the right skills for their respective tasks.

Can you confidently say that you have the optimal capacity of resources to meet your current project demand? How about the right capacity to meet project demand in the next three, six, or nine months? Understanding your workforce skill sets at a detailed level and being able to accurately match them to upcoming projects is vital for effectively running a services business.

It all starts with

being able to

match the right

skills for their

respective tasks.

STEP 2: MATCH THE RIGHT SKILLS FOR THE RIGHT TASK

Successful project and resource managers should be familiar with their team members’ skill sets and skill levels, along with what it takes to complete tasks in ways that satisfy clients. However, this becomes more dif- ficult as teams and client bases grow over time. The result is that managers will need a resource management solution that details available team members’ skills and the skills needed to complete upcoming tasks.

First and foremost, your business should create an inventory of team member skills. This means not only knowing how they can

Your business should

create an inventory of

team member skills.

The Benefits

of Accurate

Skill Matching

be used most effectively, but when they have time in their schedule to be placed on a project.

Having these insights available in an orga- nized, easy-to-use resource management solution prevents confusion, delays, and inaccuracies in project assignments. Skill matching can also help create accurate and timely resource forecasting. Anticipating upcoming projects and employee schedules can prevent conflicts in resource assign- ments that can delay project completion and lower client satisfaction.

SKILL 1

SKILL 2

SKILL 4

SKILL 3

STEP 2: MATCH THE RIGHT SKILLS FOR THE RIGHT TASK

The

Contractor

Network

Having a network of experienced contract workers who can reliably provide peripheral skills means that your business will only pay for these intermittent tasks when they are needed. However, you will need to keep your networks with contractors and part- ners warm by staying in contact with them. Weeks, months, or even years may pass without needing a contract worker’s skills. By the time you contact them again, they may have lost interest in working for you, which will send you on the hunt for new contractors who have not proven themselves.

Stay in contact with contractors and show them that you value them, even if you are not constantly using them. Check up on them with a friendly email, keep them up to date on company news, and possibly send small tasks between larger projects. Fast contractor responses will prevent you from losing client deals while waiting for workers to agree to a gig.

This balance between an effective full-time team and a consistently utilized network of contractors is the key to staying profitable while not losing your ability to take on bigger projects.

STEP 3: CREATE HEALTHY TENSION BETWEEN RESOURCE AND PROJECT MANAGEMENT

This balance between an

effective full-time team

and a consistently utilized

network of contractors is

the key to staying profitable

while not losing your ability

to take on bigger projects.

DEVELOPER

ARTIST

STEP 2: MATCH THE RIGHT SKILLS FOR THE RIGHT TASK

Create Healthy

Tension Between

Resource and

Project Management

What Resource

Managers Want

What Project

Managers Want

Project managers are focused on executing tasks to the best of their company’s ability. Typically, this will mean that client satisfaction and high-quality results will take precedence over staying within budget. As a result, proj- ect managers (PMs) may be more likely to request more resources than they actually need during the project planning phase.

Creating a healthy tension

between your resource and

project managers can help

balance their needs.

Resource Managers are focused on the bottom line, with budgets and expenses informing their choices. However, successful resource managers (RMs) also want to make sure that people and projects succeed. This will often cause a resource manager to stretch limited resources as far as they can to save money and keep their workforce fully utilized.

STEP 3: CREATE HEALTHY TENSION BETWEEN RESOURCE AND PROJECT MANAGEMENT

Finding the

Perfect

Balance

Both resource managers and project managers are trying to accomplish their own goals first and foremost, but might be unknowingly creating hurdles for one another. They aren’t necessarily trying to complicate one another’s lives, it just nat- urally comes from the way their priorities interact.

Creating a process for regular interaction/ evaluation between RMs and PMs in order to maintain a healthy tension is critical. Consider a regularly scheduled meeting where managers review past, current, and upcoming projects to discuss their needs. As they review worker skill sets and budgets, managers will be able to see each others’ points of view for better communication.

Keep the lines of communication between them open and make sure they understand each other’s true needs before a project begins, as well as during and even after its completion. Data-driven decisions will also help alleviate the unnecessary tension between them by basing budgeting decisions on what past project data proves, rather than one manager overriding the other. Data will also aid PMs in understanding project costs at a more detailed level, leading to more accurate project planning in the future.

Both resource

managers and

project managers are

trying to accomplish

their own goals first and

foremost, but might be

unknowingly creating

hurdles for one another.

STEP 4: MEASURE PROFIT & LOSS AT THE PROJECT LEVEL

STEP 3: CREATE HEALTHY TENSION BETWEEN RESOURCE AND PROJECT MANAGEMENT

Do you know the total

revenue and expenses

of your last completed

project, not just what

was billed to the client?

Don’t just measure how

much you charged a client

at the end of a project.

Your business should be

treating each project as a

Profit and Loss, measuring

what actions cost you

money, as well as what

made you money. This will

help you better understand

what is holding your margins

back and where you can

make effective changes.

How to Track

Profit and Loss

for Individual

Projects

Being able to see the true costs and profits associated with individual projects means that your business can make informed deci- sions about which projects to replicate, which processes to streamline, and what types of clients you should focus on in your long-term business strategy.

Being able to see the

true costs and profits

associated with individual

projects means that

your business can make

informed decisions.

STEP 4: MEASURE PROFIT & LOSS AT THE PROJECT LEVEL

A project-level profit and loss

template should track and

calculate the following elements:

( pr - dc ) = (gm)- oe = NP

PROJECT REVENUE pr

All money brought in from project sales, including billable expenses.

GROSS MARGIN gm

The true profit of an individual project.

NET PROFIT NP

Final earnings made before taxes, interest, authorization, and depreciation

DIRECT COSTS dc

Non-billable expenses during services delivery.

OPERATING EXPENSES oe

The cost of keeping the business running, such as rent, administrative expenses, salaries, and utilities.

Don’t just

measure how

much you charged

a client at the

end of a project.

STEP 4: MEASURE PROFIT & LOSS AT THE PROJECT LEVEL