Project pricing is one of those things that seems like it should be straightforward, but can actually be pretty tricky to work out. In fact, you won’t necessarily get it right straight away. Why? Because you need accurate data from previous projects to actually measure if your rates are profitable. That means knowing all the effort you put into a specific project, including communication costs and non-billable work. Once you have that data, you set a rate that covers all your bases while still staying competitive – striking the balance between what clients can afford without underselling your services. Here’s the project information you need to track to review your project pricing – and the best methods for doing so.
Map all project effort
The first thing you need to be clear about is how much billable work the project involves. That means understanding all the tasks that go into your project and how much resource (people and time) is required to complete each one. Collecting this data accurately offers several benefits that can directly improve the overall profitability of your project, which include:
Optimizing project workflows: Once you’re able to visualize where all project time is going, you can identify each and every task is involved in a project. This allows you to streamline the fundamentals, omit any unnecessary work, and identify any drains on your budget.
Quoting competitively for new work: Only once you know precisely how long each project task takes can you actually give an accurate estimate – and be confident that it’s going to be profitable for you, too. By divulging your minimum delivery requirements, task trackers empower you pitch competitively, but reasonably, for new work.
Billing clients accurately for all project work: A task tracker makes it incredibly easy to see precisely how long you’re spending on each billable task. This means you’re always confident you’re not missing or misrepresenting any of your work, and are able to produce an accurate record for clients and bill them accurately.
Capture all project costs
The next thing you need to be clear about is how long you’re spending on non-billable tasks. Non-billable tasks eat into project ROI because they can’t be expensed to a client, so your business has to swallow the costs. Common examples of non-billable time include internal project meetings and communication, training, research, project management and organization, and operation admin like tracking project time and invoicing clients. When combined, these activities can take up an inordinate amount of time – and if you can’t accurately capture your non-billable time, you’re at risk of making a loss.
There are other types of hidden costs that you should be aware of. Client engagement is a big one. Most of us have experience with clients who take forever to give feedback, or have a seemingly never-ending list of “quick” edits and tweaks they want made. Scope creep can eat into a project’s profitability at a frighteningly fast rate, so accounting for client engagement and unpredictability can have a huge effect on your ability to make accurate estimates. External contractors can be another hidden cost. Because they aren’t a real part of your team, you can’t control how quickly they work – and you don’t always have the same confidence that the work will be at the level you expect.
Tracking all these project costs can quickly reveal which clients are actually profitable. Once you realize which clients rack up the most non-billable hours, you can take steps to address the issue – including raising your prices for future projects, or introducing more streamlined communication processes.
How to track project activity accurately
Obtaining this project effort and cost information is a matter of getting a good project time tracking tool. This tool should be able to accurately capture all the time you spend on project tasks – whether directly billable or non-billable, spent at the office or on the go, performed within core hours or outside of them. Many project managers still use manual timer-based methods to do so, even though more sophisticated and efficient automatic tracking tools do exist.
Automatic project tracking tools allow capture every activity your project team spends time on – from research and concept meetings, to presentations, development, internal communication and project coordination itself. By capturing the time individual employees spend in different work apps, emails, calendar events and even GPS locations, all project activity is accurately reported.
Not only do automatic tracking tools allow you to make accurate estimates, they surface insights that help you weed out operational inefficiencies, optimize workflows, identify hidden costs and even find more billable hours. That means you not only bill for all your work and set better project estimates; you can make project processes smarter and more effective, too.
Review your project pricing regularly
Sadly, project pricing isn’t something you can do once and happily forget about; to stay profitable and offer clients the best value possible, you need to keep monitoring and adjusting it. It’s not sustainable or realistic to be able to adjust pricing project by project as you learn more about tasks and costs – indeed, regular pricing fluctuations can negatively impact your reliability and credibility n the eyes of clients. But even if you only adjust pricing on a yearly basis, you should still closely follow the profitability of all your projects. Learnings from one piece of client work can be used to optimize pricing for new clients – as well improve timeline estimations and resource planning for all work. Ultimately, when it comes to delivering smarter projects, the more insights, the better.