7 Best Practices to Ensure Your Service Projects are Profitable
Are your service projects not as profitable as you'd like? Here's how to change that.
Staying profitable can be a challenge for any service business. Professional services companies are continuously tasked with improving their margins, increasing revenue, and improving client satisfaction. With these constant pressures, how should service businesses maintain and improve their project profitability? Here are seven best practices that will help make each project more profitable, which we've rounded up for you below.
Increase the accuracy of your estimates
Your clients want to know how long their project will take, who is working on it, and why it costs as much as it is. Creating an accurate estimate upfront will set client expectations and prevent any surprises from comprising your profit margins. Breaking your project into multiple phases will let you track time easily through the entire project lifecycle. It will also provide insight into what is costing more or less when you compare actuals to estimates.
Monitor and prevent scope creep
Scope creep happens when changes are made to the project scope without procedure. These changes tend to affect the schedule, budget, costs, resource allocation and may push back milestone and goal completion. Not to mention, it quickly erodes a project margin. Along with a robust project management solution, you can avoid scope creep by setting up expectations upfront with a clear statement of work and set up parameters or a cap for the number of revisions upfront, which is also defined in the contract.
Improve communication and collaboration
Inaccurate or poor communication can lead to project delays or budget overruns which deceases profitability. Are your resource managers and project managers in regular communication? Creating a regularly scheduled meeting where project and resource managers review past, current, and upcoming projects will open the lines of communication between them and help understand the needs for a project. Project managers may also deal with poor communication between team members. For instance, if chats or emails are used to track updates or project statuses and approvals are given verbally instead of being tracked in a system, this can mean inaccurate information between reports and impact the profit near the end of a project.
Allocate the right tasks to the right people
Is your company matching the right skills with the right tasks? If your company cannot identify the right employees to work on specific projects, your resources aren't being properly utilized. Skill matching helps create accurate and timely resource forecasting. Your company should have an inventory of team member skills that enables you to understand which project or tasks they would be most suited to and when they have time in their schedules. This helps prevent conflicts in resource assignments that can often delay project completion and lower your client's satisfaction. Finally, do you have a network of trusted and reliable contractors? Balancing your full-time team along with contractors can help you take on bigger projects while staying profitable.
Eliminate any revenue leakage with better tracking
Often in the past faced services world, it can be easy for employees to forget to log an impromptu client call or after-hours support. And if you're relying on Excel spreadsheets or using disconnected financial management systems to track time and bill hours, this is likely causing revenue leakage. A unified project management solution can help you ensure every hour gets tracked and makes it onto an invoice. It also makes it easier to automate the process, saving your team valuable time and effort.
Track profits and losses for your projects
You should be able to see the true costs and profits associated with every individual project. By measuring what actions cost or made money will help you make informed decisions and help you better understand which processes you should streamline, which projects should replicate, and what type of clients you should be focusing on in the long term. You'll know what is holding your margins back and what improvements you can make to change that.
Invest in the right solution to improve profitability
Manual processes or disjointed systems will only take your business so far. For project profitability and long-term success, investing in the right technology is key. You should look for a solution that can unify your business under one platform and connect your CRM to your financial and HR system so you have better control over the project lifecycle.
A business management solution like Microsoft's Dynamics 365 Business Central is a top choice for professional services and project-based companies. It offers key features to help you manage your projects efficiently.
⬜ Read a success story of how a client used Business Central for his services business
⬜ To see Business Central in action, contact the Kwixand Solutions team.