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Running a professional services (i.e. project-based) business is complicated. Winning business is only the first challenge. Successfully delivering it and making a profit is by no means guaranteed.
Most other business models have the luxury of figuring out the economics up front. For example, if you know it costs £500 to produce a TV and you sell it for £1000, selling at predetermined profit margin is fairly straightforward. It’s also the final step. Beyond that, there's nothing to "deliver".
However, in the project-based world, we do it backwards. For a start, we haven’t actually done the work before we agree a price—so we’re really guessing at the cost of delivery. In effect, we’re selling the TV for £1000 … and then hoping we can produce it for less than that afterwards.
The point we're trying to make is: just because you’ve won the business doesn’t mean you’re going to make a profit. Not least because, if we’ve got things wrong with our initial estimate, we could be onto a lossmaker before we’ve even got started.
It’s all too easy to celebrate when we land a big, new client—and you should!—but if your quote wasn't accurate or the scope too loose, the high-fives quickly turn to a palm slapped against the forehead.
There are many pitfalls in the professional services business model and it’s astonishingly easy to work incredibly hard … and end up with no dividend at the end of it.
The good news is, there are a number of principles you can implement to control the variables and give yourself the best chance of coming out on top.
If you can establish these principles, you really can celebrate all the new business you land—because you know you’re going to be delivering it more profitably and reap the benefits of your hard work.
The good news is we've written many blog articles to help you achieve just that, so we recommend you have a browse—and return, as we're always pushing out new content!
A good place to start is "How the best companies achieve great profitability".