For years, I worked in the financial team of a large AEC firm. We had over twenty people running the accounting functions that kept the business ticking over. If I reflect on what actually made a difference at the end of the day, I believe there are really only three things to focus on to ensure a thriving practice:
- Win more of the right jobs
- Ensure our project fee covers our project costs
- Invoice early and collect debt quickly
This article will cover the first item. Follow the links above to read about the other focus areas.
Winning more of the right jobs
Not all jobs are created equally. And, just as importantly, neither are all practices. We all have our natural strengths and weaknesses. Attributes that, when revealed, give us great insight into what jobs are good for our practice - ones we enjoy, enable us to create work we are proud of and make us money- and those that are not.
One of the most important steps in gleaning and putting to work these insights is creating a pipeline management system. This incredibly easy and powerful system will very quickly start to bear fruit. Enabling you to focus your energy on winning jobs that are good for your practice.
Setting up a pipeline management system:
A pipeline management system very simply allows us to manage leads and opportunities easily and systematically. This could be a manually created spreadsheet or a pipeline management tool like Fresh Projects STARTER (free).
When implementing a pipeline management system, we need to ensure that:
1. A comprehensive list of all potential leads and opportunities is maintained.
2. The following basic information about each lead is captured:
a) estimated potential fee
b) estimated start date
c) estimated project duration
d) probability of winning the job
3. The stages that our deal pipeline consists of is clearly defined (this will be unique to our way of working), for example:
a) prospect
b) engaged
c) proposal sent
d) probable
e) won
and place each lead and opportunity into the corresponding stage.
4. The next action/task that is needed on each lead or opportunity in order to progress it to the next stage (for example follow-up call to the client) is tracked.
5. Each opportunity and project is classified so that as we progress we can identify the types of projects and clients that are the best at converting - then stop wasting time and energy on opportunities that we struggle to convert. Examples of classification categories might include:
a) project size
b) client type (private, government, etc)
c) project type (residential, commercial, healthcare, etc)
d) lead owner (i.e. person with the client relationship)
e) lead source (e.g. website, referral, competition, etc)
Managing our pipeline process
At the highest level, our pipeline should consist of two distinct phases:
LEADS are lightweight placeholders for potential jobs. The information tracked on leads is minimal (name, fee, probability) - they serve mainly to ensure we don’t forget about the client/competition/job. Before a lead can progress to the next phase (opportunity), it should be qualified i.e. make sure it’s a job we actually want to do.
OPPORTUNITIES are used to track potential jobs in more detail as they get closer to converting to won. We would typically do a project budget for each opportunity prior to issuing a fee proposal to the client. All costs expended on opportunities (e.g. time spent on winning the job) should also be tracked and carried through to the won job when analysing its profitability.
If this process is followed we end up with a lot of unqualified leads at the entrance of the pipeline and fewer, more realistic opportunities at the end of the pipeline. We ensure that time and money isn’t wasted on trying to win jobs that aren’t suited to us or are likely to be unprofitable. By focussing our limited resources on winning the jobs that have the best chance of conversion and will ultimately make us more money.
How to qualify leads
Before a lead is converted to an opportunity - i.e. before any meaningful time is expended on a potential job, we need to qualify the prospect. This go / no-go process should cover the following aspects:
- Validate the client - this could involve credit checks, references etc, but can be as simple as listening to our gut feeling.
- Define the project scope - list what services we will undertake, and (even more importantly) the ones we won't.
- Quantify the probability of winning - do we have the right skills and experience, are we up against strong competition?
- Prepare a budget - understand what the job will likely cost to deliver.
- Calculate our fee - ensuring that it has a healthy profit margin.
Once an opportunity has been properly qualified and a decision has been made that the job is worth pursuing, we can send the service proposal to the client.
Learn more about project budgets and fees in our second article in this series.
How the pipeline can provide valuable insights
If leads are classified as they enter the pipeline, we will soon start to gain valuable insights into the types of jobs that we are best at winning. Patterns might start to become clear, such as:
- More fees are won in mid-sized jobs than smaller jobs, due to less competition
- Healthcare projects are easier to convert than residential projects
- Sarah is better at closing deals than Paul
- We almost never convert leads that contact us via the website
This creates a positive feedback process - where potential leads can be disqualified sooner and the focus can be on winning more of the easier and more profitable opportunities.
Forecasting future income
The final benefit of a robust pipeline process is the ability to forecast your future practice income with confidence. Because each lead or opportunity has an estimated fee, probability and start date, we can quickly establish a monthly weighted probability forecast. The fee value is multiplied by the probability of winning the job - so a 100k fee with a 10% probability counts for 10k, but a 20k fee with a 75% probability will count for 15k.
Make sure our “right jobs” are profitable
Creating insight and focus on winning the right type of jobs via your Pipeline Management system is the first of many important steps to creating a healthy practice. The next area to focus on is ensuring that our project fees cover our costs. Read more about this process here.