There are a number of reasons that we lose money on projects or jobs. When you lose money on a project or don’t make as much profit as you should have, these impacts on your bottom line and on the overall profit and success of your business. As a business coach, I always ask prospective clients why they went into business and I can assure you that no one has yet said it was to lose money!
Learn more Negotiation Tips here.
So why do you lose money on jobs?
We didn’t cost the job properly in the first place.
Do you have a checklist or take off sheet to ensure nothing is missed? If you need to get in parts or equipment are you using current pricelists or old ones which are not reflecting what you will actually be charged?
Were you clear in what was included or not included?
Having clauses or conditions around this are important. Anyone in excavation has a ‘rock’ clause because once they start digging they may hit rock and dealing with that is far more expensive. What are your ‘rock clauses’?
Never ever assume!
Do not presume you know what the other person is thinking or wanting and certainly assuming they are on the same page as you. Be sure to clarify everything (in writing) so there is no room for (often incorrect) assumptions.
Did you take the time to inspect the site, job or project personally?
I occasionally work with clients who want to just Google the location or guess it (because going to site can be quite timely) but the fact remains that until you ‘eyeball’ a job, you really don’t know all the particulars. You might save an hour of your time, but potentially it could cost you thousands (or hundreds of thousands).
The eye is in the detail.
This is an expression a good friend of mine, Lynne, uses. Be specific in what you are including; where appropriate include maps, diagrams, drawings, specifications, measurements etc. If you are unsure, ask and get clarification in writing. If it’s a larger deal, consult a solicitor.
Do as much as possible via writing or email.
When it becomes a discussion on the phone (or on site) then the other person can say “I didn’t say that”. If it goes to court, the Judge will rule on documentation and what can be proved, not hearsay and denied conversations. If there are variations to your original quote, re-issue the quote properly and outline all the details or issue a very clear and specific variation document that the client must sign prior to works being done. You may well have to adjust specifications and diagrams; don’t cut corners here or skip procedural steps, as this is often when things go wrong.
When you start the job, if you have a team, ensure they have all the facts.
There is no value in having all the maps, plans and specifications in the office and the people on site have just vague verbal instructions from you. Build into your processes ways to ensure mistakes are not made between the person quoting/liaising with the customer and the person doing the job. This is another common place where things go wrong. The employee is just doing what they are told, but frequently get the ‘blame’ from the customer when things are wrong.
After a job, invoice promptly and be diligent on debt collection processes.
The longer you leave it to chase payment and the more time which has lapsed, the less likely you will get paid. As time passes, all sorts of things can happen – the customer closes their doors, does a runner, goes into liquidation, declares bankruptcy and much more. Make sure you get a deposit and where relevant, progress payments and of course at the end of the job invoice and collect promptly.
Staff mistakes are another problem.
I know of one business (not a client of mine!) who has a worker who almost always gets it wrong. Management know this person gets it wrong, the installers know it’s going to be wrong often, and yet the problem persists. Are systems in place to ensure mistakes are not duplicated? Is the staff member being correctly trained? If the staff member refuses to follow process, have they been formally reprimanded and given notice? This issue costs this business a fortune every week; I wonder if they are even making a profit?
Finally, do a budget versus actual analysis.
Did you make money on that job or project or lose money? If you lost, where did you lose it? It won’t help you in this case, but that knowledge can definitely help you in the future as you certainly want to ensure any problems are rectified promptly.
From a user perspective a few of these tips are relevant too. If you are getting a job or prospect done, especially items #2, # 5 and # 6 above are very relevant. Absolutely ensure everything you want is in writing and clearly documented. Don’t rely on a ‘hand shake’ deal or verbal promises. If it’s not in writing it never was said or promised. Be detailed and ensure your instructions/requests are in writing and specific, clear and detailed. Assume nothing and spell out everything. Again, if it goes to court, your correspondence, emails, agreements and quotes will save you. However, if both parties do the right thing and are super clear – then problems don’t arise and you won’t need to seek mediation or judgements and all parties are happy.