Hey, you get a request for proposal. That’s great! But before the client signs the contract, they want, beside your creative ideas, answers to some tough questions: How much is this project going to cost? When will it be done? Do you have the necessary resources available?
Questions like this aren’t just important for your client, they are also crucial for your business. The answers are the foundation of every project. They determine who’s going to be working on it and for how long. They also determine whether you make money, or lose it.
Even with the stakes this high, many businesses still don’t have an organized method for coming up with estimates. Too often they’re just picking a number out of a hat or spinning a wheel and hoping it lands on something that will make a profit. We also see a lot of agencies using Excel to make calculations. Excel can be pretty error prone.
That’s why we wrote this blog: to help you make your business more profitable.
There’s no switch you can flip to automatically start making better estimates. But, with the help of time tracking it is possible to take a more data-driven approach that reduces the risk of losing money on a project. Here’s how to get started:
Laying the groundwork
As a client services business, the most valuable data you can have is information about where your time is going, because, at the end of the day, time is what you’re selling.
Furthermore, you do not want to make a loss on your purchases. So you provide assignments with price agreements to your suppliers (POs) and you have a markup on project related expenses to cover handing costs
In order to estimate future projects, you need to know how long similar projects took to complete in the past and how much they cost you.
The only way to get this information is to track time.
Time tracking sounds horrible, but if you set it up properly, it can be surprisingly easy. Here are some tips to make sure you get data that’s actually useful:
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