How do you optimize project profitability?

Agree with this overall. Would like to suggest marking out interim milestones to be achieved while keeping the end goal in sight.

Very well aligned with the para. My additions to this is to enable project charter guiding you to define project scope, milestones etc, an organization should facilitate a Pre-Study by specialist consulting firm. A Pre-Study report contribute in design the charter/SoW which posses high chances to get the nod of Sponsors.

Consider to elaborate more on changes and issues. Beside objectives and scope, reporting and change management are equal important. For change management and agreed process must be defined. Only with this you can avoid putting in more resources than planned.

Typically, project profitability is calculated and aligned at RFP and proposal stage with project manager monitoring it throughout to ensure it is achieved. When we start talking about “optimising profitability” during a project, it could mean that something went wrong such as inaccurate costing at proposal / signature stage, resourcing mix not aligned (eg more senior resourcing, etc), scope creep : rework or higher external expenses.

Objectives should be defined based on a SWOT analysis and full vetting of core KPIs. Those that pursue evaluation first of the deficiencies or business “trends” that are actively impacting the need for a project’s profitability, build a scope of work based on a clearly defined criteria where goals are vetted against historical, deficiencies and projections are set realistically based on the opportunity realized through a SWOT analysis. Survey, research, then build. 📈

Everything in a project does not always have to be completed by the most seasoned, experienced and expensive resources. Often times, there are several tasks/activities that can be completed by junior and less expensive resources to improve margins on the project.

While preparing the budgets draw cash flow statements to be able to manage cash flow efficiently. The pricing model will normally be specific to sectors.

Here, an emphasis on meticulous financial planning, transparent pricing models, and vigilant monitoring resonates with contemporary project management paradigms. However, augmenting the article with tangible strategies to mitigate financial challenges would provide readers with a more comprehensive toolkit for navigating the intricacies of project finance. As organizations navigate the intricate balance between project objectives and financial realities, this article serves as an invaluable compass for project managers seeking to optimize profitability.

From an external consulting perspective, this phase is where the classical project management triangle should be observed and financially quantified. The (idealised) project management triangle suggests that the eventual quality (outcome) of work is constrained by the project's a) scope, b) budget, and c) deadlines. Accordingly in this phase (if not before) it is about quantifying and trading off between the three fundamental constraints.

In my experience (even with very senior consultants), I have found misunderstanding of effort and schedule estimates. In a project, you first estimate the effort e.g. this project with take 200 person days. Then you do resource loading e.g. 4 consultants and 1 senior consultant will work (assuming full time). This will tell you that the project can be completed in 40 weeks - this is schedule. Finally, based on the rates of the consultant and teh senior consultant, you estimate the project cost. You may add some other elements also, including the contingency. Any component getting touched in the equation, the end result will change. This is where Project Economics start playing a role in optimising project profitability.

In addition to risks and issues, I also recommend that you manage actions and decisions. Managing actions ensures that the details of your project are not dropped. And managing decisions helps to make them stick. I recommend you document all four in a way that makes it easy to report to your team and to your leadership. You should be reporting to these groups on a regular cadence to ensure they have visibility and can support keeping the project on track. Some good vehicles for reporting include weekly v-team meetings, bi-weekly Steering Committee meetings, and weekly status reports.

A robust and economical way to manage a project - including not least risks and issues and delivering quality and value to your client (cf next step) - is to base your project governance on a proven good project management principles. Depending on the nature of the project (and practice of your or your client's company) possibly even a standardised and well documented project management framework such as Prince2, Scrum, a.o.

Again, just to have a project risk register and an issue log, will not solve any of the issues if not a clear process on how to deal with issues is agreed with the customer.

Weekly status reporting and active management oversight should be able to identify issues at the earliest onset allowing for proactive escalation and decision making. Keeping all stakeholders in the loop broadens the pool of knowledge to formulate the best path forward for everyone.

Factor in risks into the budget & keep some buffer for cost or time escalation. Any deviation from the agreed milestones must be transparently reported to clients before they spot it through their own mechanism

I would add that, to ensure profitability, one should not hesitate to go back to the negotiation table. If the project manager observes a tendency of "scope creep" with increasing expectations from the client, he/she (or the project director who holds the relationship) needs to have the discussion with the client to discuss the necessary trade offs (i.e, increase the budget, decrease the quality, limit the scope, etc).

Building on this, I believe a couple of key points are missing: 1. Listen well. Be crystal clear on what you are solving for. Scoping the project goes beyond what the client is asking for; sometimes, the client knows they have an opportunity or issue, but they don’t have the expertise or experience to see the solution or aren’t aware there are alternate/better ways to achieve the outcome. 2. Clearly explain project interdependencies. Be proactive in explaining what you need from the client to achieve each Milestone and let them know early if the project or timelines are at risk because you are waiting on something. 3. Peer review. Build an internal QA system by getting peers to review and provide feedback on one another’s work

Besides delivering, it is very important for project profitability to count on customer engagement, identify key people in customer’s team as well as their alignment with project objectives and, finally, ensure the project is supported by a strongly committed sponsor within stakeholders group.

This article is about project profitability. This section talks about meeting or even exceeding expectations and implement any changes or improvements that may enhance quality and value. This sounds good, but is against profitability. Since profitability is the topic of this article the strategy here must be to make sure that better performance in execution must lead to higher revenue and this can only be achieved by clear change management processes.

Set clear measures of success from the beginning. A key piece of providing value and quality is determining with the client what success looks like and making sure all key stakeholders are involved in that definition and aligned with it. Value is subjective and establishing clear measures of success is crucial to establishing what value the client wants to receive from the engagement.

In my experience, it may not be possible to staff the dream team of associates and analysts, but,"... you go to war with the army you have..." and its your and the firms responsibility to be coaching an developing the skills of less-experienced team.

Leveraging your team’s expertise allows companies to grow in immense ways, not only in profitability but also with in the teams. Coming from a pro football background I understand how leveraging people’s skills help strategize and win games, and it’s almost the same in the corporate world. Skills = Expertise = Profit = Growth.

I partially disagree here. We do not need to discuss that people are the most important asset in a company, this is not only true for consulting projects. However, the profitability of a consulting practice is base on the percentage of your people in a project throughout the year. There is no such thing as a ideal situation and you will have to assign the people available to the job. More important here is the mix of the staff you have available. Make sure your team is as divers in skills as possible. Avoid too many start and rather look for smart team players.

Great points made by all contributors! Clear project scope & considerations of previous project learns will also assist in optimisation…

I would add that to increase the project's profitability, preference of business value creation over development costs should be given by senior management. It'll be very hard to increase profitability while driving the same technology as before or leaving the constraints of the actual technology used in place.

Of course, you will benefit from doing the above. However, for even greater impact, try Retrospectives throughout the project - where the team come together and consider what’s working well, what could be better, and what’s currently confusing. By doing this monthly for example, you’ll be able to continuously improve as a project team and implement positive changes well before the project’s over. Pro Tip: If you have ten ideas for change coming out of a single Retrospective session, try voting as a group to identify the one or two you’ll implement. If you try to do all ten, you’ll probably do none of them, or none well. But if you pick one or two you can really make an improvement.

You can really scope the project well, be cognizant of the risks and have the right budget to ensure success, but I feel the critical component is bringing the team with right skillsets, past experience with a good program governance and most of all with the right attitude to work as a team. That will automatically enable the team to acknowledge strength of every one in the team and collaborate to bring efficiency and profitability while being focused on customer satisfaction.

This article asks the wrong question. You don't optimise the profitability of a project. Project profitability must be forecast and committed to prior to contract signing. Project managers can take steps to reduce costs but their primary role is to deliver on budget. If you want to improve the profitability of a project then this is most effectively done pre-award. Make sure the delivery team have input into the cost forecasts and that these are reflected in the business case that drives the bid pricing. Changes to bid pricing during contract negotiations should only be on the basis of reduced scope or reduced margin. If the price is reduced but the scope is not then you are never going to "optimise the profitability of the project".

An excellent way to optimise project profitability: 𝘄𝗵𝗶𝗹𝗲 𝗲𝗻𝗴𝗮𝗴𝗶𝗻𝗴 𝘄𝗶𝘁𝗵 𝘁𝗵𝗲 𝗰𝗹𝗶𝗲𝗻𝘁 𝗼𝗻 𝘆𝗼𝘂𝗿 𝗰𝘂𝗿𝗿𝗲𝗻𝘁 𝗽𝗿𝗼𝗷𝗲𝗰𝘁, 𝗳𝗶𝗻𝗱 𝗼𝘁𝗵𝗲𝗿 𝗿𝗲𝗹𝗮𝘁𝗲𝗱 𝗽𝗿𝗼𝗷𝗲𝗰𝘁𝘀 𝘁𝗵𝗮𝘁 𝗰𝗮𝗻 𝗮𝗱𝗱 𝘃𝗮𝗹𝘂𝗲 𝘁𝗼 𝘁𝗵𝗲 𝗰𝗹𝗶𝗲𝗻𝘁. Typically these will be awarded as a DAC (Direct Award of Contract) which means you avoid the delay and expense of a competitive procurement and the client gets good results faster. And, since you put decent day rates for any extra work into the original bid (you did, didn't you?) your overall margin will improve. Win-win, even though the extra profits might end up being booked under a new project or as a follow-on phase to the original project.

While looking at Project Profitability , We should take into account following dimensions. 1. Impact - What kind of impact the project will bring to the environment, economy and the society 2. Experience for Stakeholders - How do the various stakeholders ( Client Project Teams - Business, IT and Support Functions , Any Third Party Stakeholders involved Our Project Team, Support Functions - HR , Finance , Operations etc ) feel throughout the project lifecycle. Eg. Does this project interest and excite all stakeholders in terms of Knowledge Gain, Satisfaction, Experience, Sense of Accomplishment. This data is extremely crucial which provide actionable insights for Continuous Improvement actions,drive stakeholder decisions&direction

My Top Tips: 1. Even the greatest consultants need to know project/ program management. 2. Even the greatest project/ program managers need to know finances, to be able to control the project profitability. 3. Know these terms - Gross Profit Margin, Net Profit Margin, Breakeven Point, and Profitability Index. 4. Know how to calculate these. 5. Develop these for your project in the beginning, keep playing throughout, and learn through this game.

Setting boundaries in projects is like following a recipe for baking a cake. I once managed a systems integration project for a major client and & was quickly introduced to the complexities different teams face. Just as straying from a recipe can alter the final dish, any deviations from our plan needed careful consideration. Despite tempting pitches for changes or innovative ideas, or scope creep, we always checked them against our "recipe" – our scope, budget, & timeline. This wasn’t to stifle creativity but to ensure we achieved the desired outcome. Through this, I learned that meticulous planning is like a trusted recipe; it ensures success & builds lasting professional relationships. It’s good for the bottom line too!