Business Details

BY FRANK A. STASIOWSKI, FAIA

12 Ways to Get Higher Profits Without Taking on More Work

We've all heard that working smarter, not harder, is the key to making more money. It makes us feel good to think this way because we believe that, for the most part, we are working as hard as we can. So the question is, can we change the things on which we work hard? Running a thriving design firm entails far more than providing excellent service and creating outstanding projects—hundreds of A+ designers have gone out of business doing superior work. The firms that make it in the long term work hard at their business as well as their design.

Here are the 12 essential steps to making more money on the projects you do—not by providing more design and more service, but by improving the business aspects of what you do and how you do it.

1. Learn to recognize scope creep early. If you make scope control a priority for you and your employees, you all will learn to recognize additional items that clients are likely to assume are "included," and either refrain from doing them or seek an additional fee.

2. Develop a much more rigorous "go/no go" decision-making process. Don't shoot at anything that moves. Become more selective about the projects you pursue and take a structured, "game plan" approach to selling the project. You can increase your hit rate by 100 percent simply by declining to respond to the 50 percent of RFPs you receive that you can easily predict losing anyway.

3. Learn one of the most basic principles of win-win negotiating. Not everyone wants the same thing. Most negotiations begin and end with a discussion about fee. The best approach is to discuss fee last.

4. Don't succumb to "surprise negotiation" tactics. Often clients casually bring up the subject of fee in an informal setting. Never participate in these "casual" discussions—they will come back to haunt you, especially with people you know. Always politely decline the opportunity to suggest a fee until you have had sufficient opportunity to examine the project's scope, schedule, etc.

5. Know your standard contract by heart. You and your project managers need to know what each clause means in plain English, the purpose of the clause (what does it provide, or protect from), and who has authority to alter or even remove the clause from your contract. A huge volume of fee is given away during the project by project teams and managers who ignore the terms of their own contract.

6. Make mountains out of molehills. Whenever you make a concession or provide an additional service at no charge, make a big deal about it. Modesty only brings complacency on the part of your client.

7. Understand the perception of value. Do your clients feel they are treated better at your firm than at another? Do they get more for their dollar? If you want more fee, you have to deliver more value.

8. Develop the discipline to control your projects. Poor project management accounts for a loss of approximately 35 percent of fees on the average project. Find this lost money through rigorous, no-excuses project management, and share half with your client and add the other half to your bottom line.

9. Become a visible authority on your clients' business. When you do "public relations" work you can point to, you differentiate yourself as a leading expert. The best clients will seek you out and wire work to you.

10. Repackage your services in new, unfamiliar bundles. Standard architectural and engineering services are available everywhere. But it's much rarer to find a design proposal that comes complete with a financing package from a bank.

11. Take the lead in design-build projects. Structure the deal yourself. When the construction contractor takes the lead, you are seen as a commodity. When you take the lead with a client, you can lower your own price and still share in some of the margin from the contracting end of the project.

12. Prepare a marketing plan. In the absence of a clear direction for the type of work you intend to pursue, you and your project managers are forced to simply react to opportunity as it arises. In today's highly competitive and constantly changing business environment, you must have a clear idea of your position in the marketplace. A marketing plan will give you a clear direction for every-day decision-making. Yet, according to PSMJ's surveys, two-thirds of all firms never prepare one, and probably half of those that do never commit the plan to writing. Set yourself apart now by having the discipline to develop and implement a marketing plan.

Frank A. Stasiowski, FAIA, is president of PSMJ Resources, Inc. in Newton, MA. PSMJ offers several books covering the essential elements of this 12-step plan, most notably Getting Paid What You're Worth, PSMJ's Guide to Negotiations and The Ultimate Project Management Manual. For more information about these titles, go to www.psmj.com.