Four Steps to Increased Project Profitability

It’s everybody’s dream, right? Bring in a project, product, or other large work task on budget and make a positive impact on the overall company bottom line. Too often, we as project managers must repeatedly apologize for our projects because the budget ran over and we seemed to have no control over it. Optimism abounds at the outset, but by the end of the engagement the budget has usually been sucked dry and we’re left wondering how and why.

There are four key strategies that I follow on my projects to help ensure that project budgets don’t get out of hand to the point of failure, that team members help me maintain profitability on the project, and that the customer remains satisfied while at the same time often paying more than the originally agreed upon price for the engagement.

These four strategies are:

• Forecast the budget with your project team on a weekly basis
• Add resources in a timely fashion
• Be financially accountable to senior management
• Don’t be afraid to initiate change orders

Let’s look at each of these in more detail…

Forecast the budget with your project team on a weekly basis. It’s important for the project manager to stay on top of the budget at all times. Too many times we set up a budget and then only review it periodically or worse…almost not at all. Then one day we wake up to find that our project is 50% over budget and it’s far too late to take any corrective action and any hope of bringing a profitable project into the winner’s circle is completely gone. Failure. Don’t let this happen to you….ever again.

Your team is not only smart and skilled, they are also the biggest spender of your project budget. Often your resources are hitting the project budget at $150 or $200 for every hour they spend on it. Make them part of the budget oversight process. Why? Because we’ve all been at that point where we’re sitting at our desk on a Friday afternoon trying to remember where we spent that last five hours of our 50-hour week as we fill out our timesheets, right? I can tell you from experience that if your project resources are working on multiple projects, then whatever project that has the least budget oversight is going to get those ‘grey hours’ charged against it. Don’t let that be your project! If you save three hours per week at $200/hour on a year-long project, that’s $31,200 of ‘grey hours’ you saved – and that’s probably just from a single resource!

Add resources in a timely fashion. We rarely start our projects with the full team assigned at the outset. We review the statement of work, plan out our project schedule in detail, and start assigning tasks. Then we fill out resource requests to staff our projects with the right skill sets. If this sounds like your scenario, then one thing you can do to help ensure greater project profitability is to onboard your resources only as they are needed. Idle expensive resources are going to cost your project money because they’ll find something to do on the project. If each of your assigned resources is striving for 100% utilization, I guarantee you they won’t be sitting around for free. Ask for the resources you need, but only ask for them when you need them and look for times to remove them from your project when they are going to be idle for an extended period of time.

Be financially accountable to senior management. One of the best ways to force yourself to closely manage the project financials is to make yourself accountable to your senior management. Include detailed project budget status information on your weekly project status reports and distribute these reports to your senior management on a regular basis – even if no other project managers are doing it. It will serve two key purposes: you won’t be able to hide your head in the sand if the budget is in trouble AND, as an added bonus, it will make you and your project more visible in the organization which may come in handy later on if issues arise that you need assistance with.

Don’t be afraid to initiate change orders. Finally, NEVER be afraid to initiate change orders. Watch project scope carefully and revisit requirements frequently. If work is being requested that does not fit properly within the scope you agreed to with the customer, then it should not be started without a change order in place. It will only cause you pain and suffering in the end as your budget can quickly spiral out of control from this unplanned work.

If it’s work that your customer wants and needs, they’ll be happy to pay for it. I was leading a long-term software implementation project where my customer’s satisfaction remained very high even though I added over $100,000 in change orders within a four-month period. I presented them with well-documented change orders and the customer understood clearly that the work was not part of the original requirements but it definitely added significant value to the project. Well-documented and timely produced change orders can actually make the customer happy and increase the profitability of the project.

About the Author: Brad Egeland is an IT/Project Management consultant, business strategist, and author with over 25 years of software development, management, and project management experience leading initiatives in Manufacturing, Government Contracting, Gaming and Hospitality, Retail Operations, Aviation and Airline, Pharmaceutical, Start-ups, Healthcare, Higher Education, Non-profit, High-Tech, Engineering and general IT. He has been highly recognized for his ability to work with C-level business leaders in both startups and established organizations to create best practice processes for business management and project management and has overseen the creation and execution of multiple project management offices. He is a married, father of 7 living in Las Vegas, NV. He can be reached at brad at


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