Trying to make a profit on a job you underestimated.

From time to time, most service companies get into a situation where they are putting far more effort and time into a client’s project then the original agreement provided time and money to cover. Oftentimes it is for all the best reasons, like trying to improve the product or service you are delivering or reacting to changes made by your client. But bottom line, your best people are spending an inordinate amount of time on the project and the cost to service the business is far above what you can ever hope to make on it.

“You can make it up in volume,” as the old joke goes. Or, you can do what most do and bury their heads and hope the problem miraculously goes away. Of course it never does and most often continues to get worse. As the leader it is time for you to step up and lead.

The biggest mistake people make is minimizing how far you are going to continue to go over budget to get the work done.  We are hopeful that their won’t be any more “changes or improvements” that make the costs continue to go higher, when in reality if there have already been an inordinate amount of changes, conditions are near perfect that you will continue on that path until you step up and address the problem.  

The solution is relatively simple. Meet with the team servicing the business, which almost always feels bad and most often believes they must be doing something wrong not to be able to hit the budget they may or may not have helped establish. As no two projects are ever alike, I’m not sure where this confidence to hit the original budget comes from.  Estimating time on large service projects is exceptionally complex and difficult.

Your biggest challenge as a leader is to gather this group in a positive problem-solving manner. Identify why you are going over budget, make certain you have streamlined all of the processes, and provide positive alternatives to fix the problem and then meet with the client and present multiple solutions to the problem. It is far to late to make a profit, but hopefully you are able to save a valuable relationship and set a smarter direction for future work.  The lessons you learned while failing can help assure future success.