Winning Project But Not Profits
Transcript
Thank you so much for joining me.
I think I've got a really great video for you today.
W e're going to be talking about a situation that
I'm sure many of you are finding yourself in and
some of you wish you were finding yourself in, which
is when you are winning projects, but not profits.
What I mean by that is that you're
getting the award on your projects and you're
completing the projects pretty well, but you're aware
something isn't exactly right because you're not making
as much money as you should be.
Today we're going to go through
why it's important, what causes it.
I'll explain the overall cause, and then
I'll give you some concrete steps to
get you that profitability you're after. Sound good?
Let's get into it.
First off, why is it important that
you're not making the profits you're after?
Well, it sounds like a dumb question.
We want profits because more money
is better than less money.
That is true, but that's not the only reason.
Profits allow you to build your
business, access better resources, lower inefficiencies.
Profits allow you to survive during slow periods.
They help you to invest in R and D
so that you can become a better company.
And all of that allows you to
provide a better service for your customer.
That's right.
Your relationship with your clients will improve
if you're making more profits and using
those profits to make your business better.
Except in cases where you might
not want the client anyway.
Clients want you to make a profit.
That's why it's important.
So what could be causing it?
There are four things that could be causing it.
Either you're not planning correctly, you're not
doing what was planned, you're not accurately
estimating costs, or you're not pricing correctly.
That's it.
Planning, scope, cost, price. Great.
You're saying that's my entire business.
But let's break that down and we see how we can fix it.
How do we fix it?
Your bidding process.
By now, a lot of people know that your bidding
process really has an effect on your win percentage.
Across all industries.
Win Percentage is around 42%.
Big companies get around 46%.
Companies that have strong bid processes get a
bump of 8 to 11% on that.
So it's no secret that having a
strong bid process gets you more wins.
And once you get those wins, you're in an even
higher win rate because you're an incumbent with that client.
But strong bid processes have a compounding
effect, because when you have a strong
bid process, you make more profit.
And that in turn, allows you to
build a better business, have better service,
and that just wins you more jobs.
So let's talk about the bid process.
There are six steps defining scope, planning
the project, estimating the cost, assigning prices,
incorporating feedback, and getting approvals.
That's it.
But how you do those steps
is really vital for your business.
Defining scope.
This is where you work with the client to write
down and agree upon what you're going to do.
It's where you say, we're doing
this and we're not doing this.
In your bid, you should be writing
out exactly the nature of your work.
So if you're a motion graphics company and you
don't have a storyboard or some frames to show
exactly what you're doing, you say three 2D illustrated
characters for a total of seven seconds.
And you get as specific as you can be.
If client is handling edit, you say edit will be
provided by client and anything they need to know.
If you're handling voiceover, how is that procured?
Who is handling licensing?
What is the license?
You got to think through all of this.
Books could be written about all these things.
A deliverables list.
You should be providing a full
deliverables list with each deliverable.
It should have the name, duration,
format, frame rate, resolution, aspect ratio.
If you're doing an HD spot and then cropping
for nine by 16, that needs to be noted.
You want to make sure that there
are no misunderstandings about what client is
expecting and what you're doing.
You need to provide a schedule.
I'll say it again because it's really important.
You need to provide a schedule.
The cost estimate of a job is
directly related to the schedule.
Even if you were to do all the same work
and then just deliver two months later, you should be
charging more for the time cost of money.
Include when client feedback is needed.
You need to put in how many rounds of
feedback and changes are included in the bid and
what the types of those changes allowed are.
It's good to make sure they understand that when
a design is locked, that means no changes happen to that.
You need to put into
the scope how changes will be handled.
If client misses deadlines, overages
might need to be incurred. Side note here.
Always make sure the clients understand that no
overages will be incurred without an approval.
If any of this is helpful at all, I'd
love it if you could like this video.
Write something positive in the comments.
Making these videos is a lot of work, and
anything to just let us know that we're providing
some value to us keeps us going.
The second step in a strong
bidding process is planning the project.
This is where you go through the entire process
of the project with a schedule and create a
task list that includes everything in there.
Do you need to procure
a piece of specialized equipment? Put that in there.
You need to book a freelancer to
do some work you can't do internally.
Put in how many days of that you'll need and when.
This planning process that you should be doing with the
project manager, producer, and team leads is what will make
sure that you're accounting for everything that will need to
be done, and also making sure that internally, you're all
viewing the project the same way.
Defining the scope gets you on
the same page with the client.
Planning the project gets you on the same page with
your team, and it gets you set up for the
next step where you're estimating the costs to all the tasks.
To estimate costs
you should be putting in how much each item
in your task list is going to cost.
If you've got five days of a designer at
$700 a day, put that $700 in there,
and also put in how they're going to be paid.
Are they staff? That's one cost.
If they're temp W2, that carries with it another cost.
1099.
All different costs and pay structures.
Put them all in there.
That specialized equipment you're buying or renting, get
an estimate on its rental or find out
its exact cost by getting a bid.
Potentially put in a little buffer in there to
make sure you're not losing money on it.
Basically, this section is where you estimate
the cost of the entire plan.
Schedule this because cash flow is
arguably more important than profit,
The next step is assigning prices.
Notice that I've separated those two
the cost versus the price.
This is a mistake that I've seen too
many early companies make, and it's made worse
by all the software platforms out there that
have businesses sending invoices as if they're bids.
Cost should be estimated and tracked separately from
the price that a client will be paying.
The price a client pays should be based
on the value that you're providing them.
Add in things like strategy.
Tim Thompson over at RevThink has a lot
of smart things to say on the subject, so
I would listen to some of his videos.
I'll put a link down below.
The way your competition is presenting.
Their bids will definitely affect how
you can present your own.
And very frequently, they're providing a
price based on the task item.
So you'll probably want to have a rate
card that handles all that for you and
changes with the customer to reflect the value
you're providing to that specific customer.
Let's say you've done all that.
If you're working on a team, you're probably
going to need some feedback and approvals.
You need to lock down the current version of the
bid for that feedback and not allow any changes.
I have heard horror stories about this.
When someone changed an Excel spreadsheet or Google sheet
either before or after the client approved it and
they did the project with the wrong information.
You need to have a good way to get feedback
from the team on the schedule and the bid, resolve
the feedback and then get the bid to client.
Then you need to get their feedback, resolve
it and get it back to them.
This can be a painful part of the project,
so you need to have lots of fortitude.
I don't know how many times I've had a three
month project and client has said can we change the
start date by two weeks and two days?
You need to be able to adjust the calendar very quickly
and make sure that those two items stay in sync.
You also need to make sure that when your
client provides external feedback that you're tracking and resolve
all that feedback so that they feel heard and
you make changes to the bid reflect those changes.
Then finally, the last step of the bidding
process is to make sure your company is
protected, that you get the proper signatures.
Nothing is worse than getting clients started on
a project before client has really approved it.
And it happens all the time. And.
And then you need to get the bid to
accounts receivable and accounts payable to set it up.
That's the bidding process.
It's not glamorous, but doing it right will
set the entire project up for success.
Remember the four areas that could be
causing the issue with profitability, assuming you're
winning projects - scope, planning, cost, and price?
Let's go through the concrete steps you should take to
get your bidding process up to speed for scope.
Require all bids to describe the nature of the
work and get into the weeds on them.
Require all bids to have a full deliverables list.
Require all bids to include a schedule.
Schedule includes everything - feedback, assets
being provided by client, approvals...
Make sure the schedule is connected to the bid.
Include a section of notes
with common misconceptions of inclusions.
If you find that clients think they're getting a
hard drive with their files and you provide the
files via FTP, put that in there.
This is also where you put the info
about what happens when a deadline is missed
or any change management needs to happen.
Explain your types and rounds and feedback.
Create that full work breakdown.
Include all resources schedule tasks into the calendar.
Your bid and schedule should be flexible enough to
handle different types of projects, so if you have
one that's asset-based, and one that's shot-based,
it should be able to handle both.
Your plan needs to be able to be
made accurately and efficiently without taxing the team.
For cost, use rate cards for frequent costs.
Use estimates for infrequent costs.
Make it easy for your bidders to build
a bid and schedule at the same time.
Stuff like task templates for common sets of tasks.
The ability to say put in 20% utilization of
a person over a three month period in the
same bid as a start date and quantity.
This is actually really important
to cutting down on mistakes.
Also, make sure you're tracking
costs and price separately.
Bid and schedule need to go through at
least one round of review and approval and
then streamline, streamline, streamline the whole bidding process.
Finally, the concrete steps to solve the pricing issue.
Price for value, not for costs.
Where you can't price for value, you need to be
getting at minimum 40% gross profit margin.
Make sure you have different rate cards for different
clients who place different value on different work.
Google should not be charged the same as the regional
restaurant chain because the value to them is different.
Always discount off the final total.
Do not lower your prices off line items.
This makes it a favor you can track and
makes it seem like those prices are locked.
Then with your analytics you can see on average
this company wants a discount of 15% and you
raise your prices by 15% for them.
If client wants you to lose 10% of the final
price, don't reduce costs externally unless the scope is reduced
or if it's obvious that you're doing less work.
Does that make sense?
Client wants you to make a 15 second video.
You say it's going to take seven
designer days and 10 animator days.
You come in at 60K, they want it down to 45K.
You don't lower the number of workdays on
the client bid unless it will be obvious
you're not doing that much work.
You spread the work over that time and change
the amount of work on the internal side while
lowering client price to 45k off the total number.
That way they've been given a gift of
15k and you can track that gift.
Make sense. That's it.
I hope you've come away with some good
ideas that might make your company more successful.
If you're interested in taking your bidding process to that
next level, I'd recommend taking a look at Kiterope.
It offers super fast and easy bid creation.
It'll schedule your project at the same time
as calculating costs and preparing a bid.
You can drag and drop company-wide or project-specific
bids together for both internal and client-facing bids.
There are task templates, bid tracking follows best
practices for internal and client feedback and approvals
and it's got a white labeled client portal
for presenting your bid schedules and getting feedback.
It also offers integrated document signatures
and advanced sales and financial analytics.
It's a really great product and
it's getting better every day.
I'll put a link below to get you to it.
Go on and try it out or hit
us up and we'll give you a demo.
Get you off the business tightrope
and on the Kiterope. Have a great day.