Getting your quoting right is a key element of success for any creative/marketing/agency business. One should make absolutely certain that every single quote that is generated contains sufficient margin to maintain the correct level of profitability for the business as a whole. To make a decent profit at the end of the year, you have to make really sure that you make a profit on every job you do. This requires clear intent and a systematic approach.
- Most of the time, one is constrained by the clients budget. They generally have a poor appreciation of what it really costs to get they want and so they put pressure on your profit margins. On the other hand, commonly, in trying to win business, you may pack a little too much value into the proposal, potentially marginalising the project’s profitability.
- Working out an accurate estimate can be a challenge in itself. Depending on your estimating methodology, your understanding of the clients needs and your experience with the type of work being proposed, your estimate could possibly be out by an amount close to the entire profit margin of the job.
The net result is that despite winning work, you may struggle to make sufficient profit to make money in the business. This will typically manifest itself as a “cash flow problem” and you may find it difficult to pay wages or sub-contractors on time. This phenomenon really impacts the business owner most. Sure you can keep things running but at the end of the year, there is very little profit and there may be some months where the business owner has to take a dip in pay.
Quoting: So what to do?
Here are three important remedies that you can use:
- Clearly it is critically important that you have a clear intent and plan to ensure that the correct amount of profit is made for each and every job. If you cannot do the work and make the requisite amount of money, you should seriously consider withdrawing, so that you can spend your time focussing on more profitable opportunities. Sounds harsh, but unless you bring yourself to that point, you may never make money.
- Learn how to deal with a prospect putting your pricing under pressure.
- Learn how to project and sell the real value of what you do so that you minimise the impact of price on your work.
Getting to the point where you are able to confidently bring profitable work into the business is a major factor for the success of your business and your ultimate financial freedom. Once you achieve this and have the cash flow and profits that you need in the business, you will find it much easier to grow and prosper.
For more information on quoting successfully read the ebook