Managing Small Projects
Sep 30, 1996
To a lot of people in the A/E/P and environmental business, small projects are still something to be avoided. In fact, many business plans we read contain some sort of strategy statement that say the firm will be seeking larger projects and do small jobs only if necessary. But the fact is, there are never enough large projects to go around. Too many firms are set up to only handle large jobs. These companies will tell you that they lose money on every small job they do— that the accounting system/project initiation/set-up costs are too high on small jobs as a percentage of project revenue. There’s some truth to what these firms are saying. Yet, if you take a look at darn near any company’s list of active projects, what you’ll find is a whole lot of small jobs and very few big ones. Usually, there’s some misconception at the top about how much of the firm’s work consists of large projects, too. Top management may think average project fees are $100,000 plus, and we often find out that the average project is closer to $12,000! The reality of the situation today in our business is that you are probably going to be doing lots of small jobs. Here are a few of my thoughts on how to handle these projects more successfully: Stop fighting the idea that you can’t make money on small jobs. If you are doing Phase I site assessments for $1,800 fees, and the raw labor to do the job costs you $500, you are making a 3.6 multiplier. That’s entirely possible if you are organized, and a 3.6 in my mind is not bad. This is the case with many small jobs. Of course, it’s a lot easier to make money on small jobs when you are working for repeat clients. One-off, small jobs for one-time clients probably don’t make sense for any but the smallest firms in our business. Small projects equal big client relationships. Although it does happen occasionally, it’s rare that a firm will be hired for the first time by a client to do a big job. What’s far more likely is that the firm will be tested on one or more small jobs first. The reason is that it’s risky for a client to hire an engineering, architecture, or environmental firm that they don’t know. They need a chance to get acquainted with their professional services providers, too. Once again, until you change your staff’s attitudes about small projects, those projects probably won’t go as well as they should. The key to success today lies in having large client relationships, not just large projects. That way, you minimize marketing costs and increase the client’s investment in your company’s success. Reduction in the number of suppliers used is a trend in industry and government. It probably won’t last forever, but many clients want to deal with fewer firms when it comes to buying A/E/P and environmental consulting services. This means that these few companies have to do whatever comes up for their client, do it well, not complain about it, and be able to make enough money on it to stay in business. Obviously, there are firms doing this successfully. Take a look at how they do things and learn from them. The more people you get involved in a small job, the greater the chance you’ll lose money on it. Another way to look at this phenomenon is that every time a glass of water is passed, a little spills on the ground. The communication and coordination requirements, along with individuals’ ramp-up time needs whenever they switch gears, tell you that the fewer people you need to involve to do the job from A to Z, the better. Give managers of small jobs the resources they need on a full-time basis. Once again, I have to be critical of the typical multi-discipline firm’s matrix structure consisting of discipline departments on one side, and a group of project managers on the other. It doesn’t work very well for small jobs. Too much time is spent on scheduling people and resource allocation that could be avoided if the PM had the people he or she needed reporting to him or her directly. That way, priorities can be shuffled and client needs addressed quickly without having to talk to anyone else about their priorities. Just because a job is small doesn’t mean that you don’t need to manage it. The average percentage of a fee allocated to project management in our industry is 10%. That means that even on a $2,000 job, there should be $200 worth of management time. At a typical PM’s billing rate of $90 per hour, that’s a little over two hours to devote to planning, scheduling, controlling, and other management activities on the job. Get yourself organized, get your tools ready to use, your systems clearly defined, and you’ll see that a great deal of project-specific managing can be accomplished in this amount of time. We’re so convinced at ZW&A of the merits of small jobs and the fact that our industry has a lot to learn about doing them well that we are planning an all-new seminar series on the subject of successful project management of small jobs. Stay tuned for more information. In the meantime, consider my quick advice! Originally published 9/30/1996
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