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Hidden project costs that limit project ROI

Last updated on
September 24, 2021

Return on investment is the guiding metric behind any effective project. But even the most organized project managers run into hidden project tasks that limit profitability. Obviously, the best way to minimize this risk is to understand everything that goes into your projects, and include these costs in your fees. But how exactly can you do that with military precision to ensure you don’t undersell your work or eat into project ROI? Paying attention to these common hidden project costs – and ultimately quantifying them – is essential place to start:

💡 Client engagement

In an ideal world, getting client approval would be easy, but it can be one of the most laborious aspects of project management. Unplanned iterations, tweaks, “scope creep” and changes of direction all devour project profitability, but client availability also has a huge impact. Even if you send over the work punctually and are ready and waiting to make amends, there’s no guarantee when it will be returned to you. Accounting for client unpredictability and total contact time represent two of the hardest project costs to gauge.

🚖 Travel and subsistence

Travel is another hidden project cost that often hits people unawares – especially in "scope creep" situations. The longer a project runs, the more travel costs will be incurred – from the cost of traveling to meetings to the cost of bringing in a new team member from another office. Subsistence costs fall into this bracket, too: expenses are par for the course when traveling, and this can greatly advance the budget… especially if your work finds you entertaining clients.

📩 Internal project communication

Client communication is often your top priority when scoping projects, but accounting for internal comms is equally important when shaping your project budget. Underestimating the sheer amount of communication that goes into delivering a project is another reason why costs creep up. We’re talking about the everyday efforts that go into project coordination and collaboration – things like Slack, email, updating Basecamp, managing Trello boards and Jira, project meetings, standups, presentations and ad hoc problem solving.

🤝 External contractors

Many projects necessitate hiring contractors, and naturally, this can incur hidden costs. Because external contractors aren’t part of your team, you can have no real control in how quickly they deliver their work – just like you can’t control how quickly clients get back to you. From hiring the right people to making sure the brief is properly understood, there are all manner of things that can wrong with external contractors – and even when the work is good, delays and setbacks are still common. Waiting for work to be delivered or having to find someone else to provide the service all push your budget up.

📊 Project management

From reporting and coordinating to effectively managing your team and delivering regular updates, there are seemingly limitless responsibilities that fall into the ‘project management’ hat. Many of these things can have an adverse impact on cost: from issues with capacity and overloaded workers to team member conflicts and employee illness, just keeping track of things can be a minefield. When it comes to streamlining project management, we often overlook the most essential part of the job – the processes, workflows, reporting and tools that makes the machine run smoothly in the first place.

How to quantify project costs

Once you've identified what's holding back your project ROI, you need to actually quantify your costs so you can cover them in your project rates. The most accurate way to do this is by automatically tracking all your project time to produce a flawless record of everything that goes into your work. You can then consult past project activity for similar new work to accurately gauge the amount of non-billable work you'll need to factor into your prices. This includes all the time you spend on:

  • Project email, calls and video conferences
  • Meetings and events
  • Internal communication
  • Project organization
  • Team management
  • Project tasks and phases
  • Documents and presentations
  • Reporting and analytics
  • Travel

You can then apply tags and monetary values to different activities, making it easy to see the total cost of your different activities:

Some automatic tracking apps also distill real-time project information into clean dashboards, so you can quickly see how you are using your budget and monitor time spent on different tasks:

...And what project tasks your team is working on without digging for any information:

project activity

Obviously, every project is slightly different; no one can’t fully predict every eventually and watch their project unfold exactly as planned. But gauging your average project costs – per project type and per client – is the best way of protecting project ROI from surprise expenses. The more you know about your projects, the more control you ultimately have over them.

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