How to qualify leads and forecast success in AEC
Welcome to the final instalment of our "Profitable Projects" series, a comprehensive guide to helping Architecture, Engineering, and Construction (AEC) firms improve their bottom line. This three-part series explores the essential elements of financial management in the AEC industry:
- Setting the Right Fee for Success
- Managing Cashflow in AEC
- Winning the Right Projects for Enduring Success (You are here)
Each article offers deep insights and actionable strategies to help your firm navigate the complexities of project management and financial performance. In this third and final chapter, we focus on how selecting the right projects - and the right clients - can unlock sustainable profitability. Let’s explore how your firm can refine its project pipeline, qualify leads, and use data-driven forecasting to achieve long-term success.
Securing the right projects is essential for long-term profitability in AEC firms. It’s not just about winning work; it’s about winning the right work that aligns with your firm’s expertise, capacity, and financial goals. In this article, we will discuss how to manage your project pipeline effectively, qualify leads based on key criteria, and use weighted forecasting to improve your firm’s chances of winning profitable projects.
Manage your pipeline effectively
Maintaining a robust pipeline of potential projects is the first step to securing steady, profitable work. Firms that don’t actively manage their pipeline may find themselves scrambling for projects or overcommitting resources to low-value clients.
- Segment and categorise leads: Basic pipeline management involves maintaining a list of leads and opportunities. However, to maximise profitability, it’s essential to go a step further and categorise potential projects by sector, client type, and project size. This segmentation allows you to focus on projects that best align with your firm's capabilities and have the highest likelihood of success.
- For example, a mid-sized architecture firm specialises in high-end residential projects. By categorising leads based on client type (e.g., private homeowners, developers) and project complexity, they focused their efforts on securing contracts with clients offering higher profitability. This approach enabled them to win more high-margin projects while reducing time spent on less profitable bids.
Qualify your leads
Qualifying leads is one of the most important steps in project selection. Pursuing every opportunity is not only inefficient but can also waste valuable resources. By qualifying leads based on specific criteria, your firm can ensure it’s only bidding on projects with the best chance of success and profitability.
Key criteria for qualifying leads:
Firms should qualify leads based on four critical factors:
- Capability: Can your firm handle the project? If a firm is known for residential projects, it may not be well-suited for a complex industrial facility.
- Profit Potential: Will the project be profitable? Firms should assess whether the fee and budget will cover all costs, including any potential risks of scope creep or payment delays.
- Likelihood of Success: Consider historical win rates for similar projects. If your firm has a low success rate with a particular client or project type, it might be worth reallocating resources elsewhere.
- Client History: Evaluate the client's payment history and project management approach. Avoid clients with a history of late payments or excessive scope changes.
Here is how some clients could operationalise qualification in their firms using Fresh Projects. [Image: Fresh Projects Freeforms]
For example, an engineering firm specialising in public infrastructure declines to bid on a large commercial real estate project after determining that its expertise doesn’t align with the project’s scope. By focusing on opportunities within its niche, the firm avoids wasting resources on a low-probability lead and instead secures two public works projects with a much higher success rate.
Weighted forecasting: plan for future projects and cash flow
Weighted forecasting is a powerful technique that helps firms plan for future projects by assigning probabilities to potential leads. This allows firms to manage their resources more effectively, avoid overextending, and make informed decisions about staffing and capital investments.
Steps for implementing weighted forecasting:
- Assign Probabilities to Leads: Estimate the likelihood of winning each lead. For example, a project with a 70% chance of success should be factored into your cash flow forecasts accordingly.
- Forecast Future Income and Expenses: Based on these probabilities, project your firm's future income. This will help you understand whether you have enough resources to take on new projects or if you need to adjust your staffing levels.
- Adjust Hiring and Resource Allocation: If a high-probability project is likely to materialise, plan your resources accordingly. If the probability is low, it might be better to hold off on hiring or investing in new resources.
[Image: Fresh Projects Forecast]
For example, a construction firm uses weighted forecasting to plan for future projects. They assign an 80% probability to winning a government contract for a public park and a 50% probability to securing a smaller residential project. Based on these probabilities, the firm allocates staffing and resources accordingly, avoiding over-hiring and ensuring they have the capacity to deliver on both projects.
Build Your Blueprint for Profitability
Winning the right projects is essential for maintaining long-term profitability in AEC. By managing your pipeline, qualifying leads effectively, and implementing weighted forecasting, you can secure not just work — but the right work. The principles we’ve explored in this article and throughout the Profitable Projects series offer a practical roadmap for achieving long-term financial success in the AEC industry.
Thank you for joining us on this journey towards more profitable projects. If you missed the earlier articles, be sure to revisit:
Together, these insights form a complete strategy for transforming your firm’s financial health. Now, it’s your turn to take the lead and build a future where profitability and excellence go hand in hand.