How to Make Winning Estimates and Proposals
How do you get your consulting firm to return a 40% net-profit?
Your firm’s ability to grow and profit depends on its ability to finish projects on time and either on or under-budget. But how often do projects actually go seamlessly?
The short answer is: Not very often.
According to the most recent industry research*, over 35% of the projects in the environmental consulting industry go over-budget. Furthermore, and probably even more telling, the average profit margin in the industry is a meager 10%. On the other hand, our best-performing clients have reached a net profit of near 40% consistently. What is it that makes them unique?
While there are seven key things that you need to do to maximize the profits of your environmental consulting firm, (the subject of our newest eBook - pre-sign up here to be one of the 100 people to get a free electronic copy), this blog post addresses the most important single thing you need to do.
Before you start delivering your service, before the kick-off meeting and all of the planning, and regardless of whether you are charging time and materials or a fixed fee; the success of your venture lies in a winning proposal, backed by a detailed, accurate, and profitable estimate.
In this blog post we’re going to be covering some of the best practices you can apply to get your project from estimate to proposal to outline, all while setting up your team to execute on time and under budget. For a totally comprehensive guide on this topic, check out our free eBook: The Definitive Guide to Maximizing the Profits of Your Environmental Consulting Firm.
Project management: from proposal to project
When it comes to creating a proposal, it’s important to strike a balance between setting your clients and yourself up for success. You want to provide excellent services, but you also want to have profitable projects.
Here are the four things that your team, lead by your project manager, should focus on at this stage to provide more efficient and profitable services:
- Accurate estimates and budgets
- Realistic timelines and resources plan
- Financially-solid quotes
- A winning proposal
In short, your Project Manager (Aka PM, or Principal) should be the one who focuses on creating a detailed and accurate estimate. But your operations/scheduler team should sign off on it, the proposal financials should be solid, and a ‘marketing head’ should give the proposal a look before the proposal gets sent out. This doesn’t mean that everybody should look at every proposal every time, though. A lot of this knowledge can be incorporated into an efficient process with a lot of knowledge and automation built into it.
And because internal communication and collaboration between areas (PM, Operations, Marketing, and Finance) is so key, it’s important that you have an easy-to-use software platform and processes you can use to share documentation like quotes and proposals; and to track changes affecting project scope, cost and schedule. A platform that allows integrated management of documents, work plan, cost and communication will give you the tools you need to create, collaborate, edit, and finalize your proposal all in one place without important notes or changes getting lost in mile-long email chains.
Let’s discuss the details of the very first step: making accurate, profitable estimates.
Making accurate, profitable estimates
Your Principal or Project Manager (PM) should be the one who focuses on creating a detailed and accurate estimate. Of all of your team members, it’s your PM who will have a greater understanding of your strengths and weaknesses, the right timelines, and the right team members for the job.
While it’s very hard to find two projects that will look exactly the same, an experienced PM will easily break down a project into very familiar tasks and milestones, each of which should be much easier to estimate.
But how do we know if the labor and cost estimates are in line with our historical performance in these types of projects? Which areas of the project present the most risk? Can that be quantified?
A mature, modern organization should be capturing this information in templates.
Up until now these templates have had the form of spreadsheets, but they still rely on the PMs experience to tweak each time, make informed assumptions and, based on their experience and the particular measures of the project (area, volume, depth, location, timeline, weather, etc.) they should be able to provide a ‘pretty accurate’ estimate.
While these types of templates have served the industry well, the most mature and modern organizations know there is a more efficient, more accurate way of estimating projects. A system like EVX Software can provide this - more modern - version of templates that use the lessons learned from the similar parts of previous projects in the same discipline or field.
Validating with Operations, Finance and Marketing
The next steps call for validating the proposal with:
- Operations, to make sure the allocation of resources makes sense.
- Finance, to make sure that the proposal is financially sound and profitable.
- Marketing, to make sure that all the elements of the proposal will ‘sell’ well.
Learn more about each of these steps and how you can take your firm’s profit from 10% to 40% with our book: The Definitive Guide to Maximizing the Profits of Your Environmental Consulting Firm.
Further increase your profitability with the right tools
If profitability starts with a solid estimate, then you need tools that support your process for estimates and proposals. Many project management tools claim they can deliver on this, but almost none are utilized in practice. It's rare that we speak with a prospective client and hear them say that they are pleased with the tools they use for creating estimates. Most simply just use spreadsheets, which is almost completely disconnected from the other critical element of profitable projects - execution.
From proposal to invoicing, it’s important that you have all processes defined and an easy way to execute them. More and more firms are investing in integrated project management tools that can house all aspects of the project: project planning and budgeting, time tracking, task workflows, documentation, invoicing, and communications.
While it’s not impossible to create a solid proposal without an all-in-one platform, it’s just not as efficient (and profitable) or accessible for you, your team, and your clients. Estimating and planning once, and having everything ready for project kick-off with a simple click, knowing where everything is and that all of the people who need information can access it from wherever they may be, means less wasted time, increased productivity, and more opportunities to profit and do good work.
Want to ensure your consulting firm is as profitable as it can be? Download our eBook, written after over a decade of providing software and services built to maximize the profitability of environmental consulting, research, and engineering firms: