We’ve all been there, sitting in front of that client we know we don’t want to work with. But the fear takes over. The fear of not having enough work. So we don’t walk away. We succumb to the pressure and lower our fee.
Or maybe it is our best client, and he is threatening to go to one of our competitors, telling us we are too expensive. What do we say? Do we just agree and go ahead and give him a break on his estimate – know we will lose money on the job?
Situations like this are happening every day and slowly killing the architecture and engineering services industry. The problem is, we really do start to believe that we can’t get the kind of fees that we need to be successful and profitable, but we still don’t know how to turn down work. It is just against our nature.
As our employees navigate these difficult situations every day, small amounts of money are being given away. Rather than believe we are adding additional value to our clients’ projects, we assume we are not any better than all of the other firms out there, and compete on fees. Even if we do believe we are better, many of our staff do not have the tools to articulate why we are better, and fail to have the right conversations with clients.
While it might not be quick and easy to transform your firm culture and practices away from accepting unprofitable work, it can be done. The highest performing and most profitable firms are the ones that are proud of who they are, understand where they are different and better, and willing to walk away from clients that do not have a win-win approach.
The following are six steps that can lead your firm closer to better and more profitable projects.
1. Understand your culture
First you must understand those cultural attributes that are directing your staff’s behavior. Most of this culture is formed based on the attitudes and beliefs of the firm’s leaders. Carefully examine those cultural traps such as “keep the client happy at all costs” and “our client doesn’t want us to make a profit” that are driving your fears and willingness to lower fees below acceptable levels. Openly confronting these traps can lead towards a stronger resolve that the firm can’t continue to thrive with these values.
2. Analyze your strategy
Does your firm have a strategic plan and stick with it? The first step is to determine what types of clients and projects are the best fit, and most profitable for your firm, and strategize how to get more of those types of projects. Are you able to add more value for certain types of clients? Is there a particular client mindset that is better to work with? Understanding where your firm can be more successful, and committing to pursue these types of clients, and avoid the others, is key to having a strategic plan that drives higher growth and profits.
3. Determine your true value
The key to selling on value rather than price is to really understand how you are different – and better. It is possible that many years of working with tightwad clients has forced you to overlook areas where you could excel. Or possibly you are intent on maintaining a reputation of high quality, despite the fact that your clients don’t appreciate or want to pay for it. Look at where you save clients’ money as a first step in calculating the additional value you bring to the table. Do your staff go above and beyond? Do you help clients avoid risk or get jobs done faster than other firms? Do you require less change orders or corrections to your drawings? One way to gather this information is to meet with your project managers (PMs) and discuss specific areas where your team has added value to projects. Putting a dollar value on these aspects of your work can start to give you the foundation for educating clients about how you will save them money even if your fees are not the lowest.
4. Educate your clients
The next step is to figure out how to communicate this value to your clients. Look for opportunities to discuss aspects of your proposals with clients. Offer them advice about how to save more money on their projects, and even on your fees! Show them that their success is your highest priority. Most reasonable clients will be willing to pay extra if you are able to show them a return on investment. Look at different ways to calculate this value and show clients that while you aren’t the cheapest – you are the best and this will ultimately save them money.
5. Train your staff to sell on value
After many years of being beaten down on fees, your PMs may be hesitant to increase fees with existing clients. It is important to ensure that they really understand the numbers, and the negative impact of accepting unprofitable work. The Find the Lost Dollars Online Training Program can give your project leaders the knowledge and confidence they need to have difficult conversations with clients about fees. Also, role–playing is a great way to prepare them so that they know exactly what to say and feel prepared with the topics come up. Being able to review the numbers with a client, and feel confident in having the tough conversations is the key to transforming your culture into one where your employees internalize the firm’s value, and are not afraid to turn away bad clients.
6. Walk away from bad projects
Ultimately you must be willing to walk away from clients that don’t want a true partnership with their consultants, or believe in your firm’s value. Wouldn’t it be better if your competitors has the cheap clients and your firm has the fair-minded clients? In order for this cultural strategic and transformation to be successful your firm’s leaders must first embrace the value you bring, and be able to communicate it regularly to your entire staff. Believing in your value is the first step to success in winning on value, and the next step is to walk away when clients don’t fit your new standards.
DID YOU MISS THIS YEAR'S PROFITABILITY SUMMIT?
That's okay! You can find your lost dollars by joining us for our next complimentary web training!
Find the Lost Dollars: 9 Areas Your A&E Firm is Losing Profit
Thursday, October 10th - 1:30pm ET
Many A&E firms are leaking profits due to ineffective processes, non-integrated systems, and a culture focused on technical excellence and not business success.
In this session you will learn how to improve 3 Key metrics – your win rate, utilization and project profit margin by improving business management and operational practices that will lead your firm to find the lost dollars in your company. You will gain useful best practices that can lead to increased financial success including sales & proposal success, estimating, project management, time management and client relationships. Learn how to identify problem areas by doing a company-wide assessment and getting valuable insight from your employees. This web training will focus on how to assess people, processes, and systems including what questions to ask and how to ask them.