I was talking with one of our clients the other day and she was expressing frustration about how a new project is already set to fail because the proposal was under-estimated when it was delivered to the prospect.  This is such a common practice in Agencies – basically do anything you can to get the prospect to say yes to the deal, even if that means there’s no physical way to get the project done within your client’s allocated budget.

I know that many Agency Principals are responsible for new business development in their firms, so yes, I’m calling you out, Mr./Ms. Principal!  Include your Project Manager in the proposal process from the beginning and you’ll have a better-scoped and estimated project, resulting in a smoother Project Life Cycle, higher utilizations, higher effective hourly rates, and more overall agency profit.  Sounds like the Holy Grail, huh?

As we tell all of our clients, it’s a Creative Performance Best Practice to have your Project Manager estimate your proposed project BEFORE any costs are ever shared with your prospect.  For an accurate estimate you need someone with a clear and deep understanding of what it REALLY takes to get a project to completion.  The project manager should create an accurate project architecture of tasks and an estimate by each task AND service which will help you capture all costs as well as a reasonable timeline.  It is critical that this be completed BEFORE you deliver a proposal to your prospect.  Backing into a scope from an already delivered proposal is a project manager’s nightmare and usually results in a fit of curses directed towards the said salesperson!

We are not saying that you should never take work that doesn’t meet your fully scoped rates, but rather you should be estimating the full price of the work and offering a discount to your client so they can really appreciate the amount of work you are doing.  This also helps set the stage for future engagements to be profitable and gives the account and project managers more negotiating power if the project starts to creep out of scope.  (Keep in mind that we are assuming that there aren’t any deliverables that can be pulled out that wouldn’t compromise the campaign/project objectives.)

Once the difference between the client needs and the client’s budget has been established, there needs to be an internal declaration of investment from an agency executive/principal stating they are willing to make this investment in this particular client prior to delivering the SOW to the client.  It is critical to document these investments, as many principals/executives do not realize how much investing they are doing by taking on low budget projects.  Once this happens the project manager should manage the budget to the original estimated hours.   Any hours above the client’s budget but below the originally scoped price should be written off and tagged as CLIENT INVESTMENT.  Any hours above the originally scoped estimate should be considered truly over budget and should be reviewed and written off as either OVER-SERVICING/DELIVERING, MIS-SCOPING or UNCAPTURED SCOPE CREEP.  Only something determined beforehand by an agency principal/executive should be labeled as CLIENT INVESTMENT.  Anything else that goes out of scope should be tagged as UNCAPTURED SCOPE CREEP or transferred to another project to be captured in the next project.

The ideal steps to go from proposal to project are something like this – from the 50,000-foot view:

  1. Salesperson/Principal gives Project Manager a draft SOW with detailed deliverables that the Project Manager can use to set up a new project
  2. Project Manager creates the new project with an estimate of the REALISTIC hours by specific service it will take to accomplish the tasks (considering your team and prospect’s idiosyncrasies, like your Graphic Designer’s need to create 4 options instead of just 2; or your Prospect who is extremely detail oriented and will likely want at least 6 rounds of revisions)
  3. Project Manager delivers estimate to Salesperson/Principal; together they discuss any changes that need to be made to the estimate to match up with the prospect’s expectations (it is very rare that the work actually being completed and what is presented to the client match 100%.  Example: Most clients are unaware of how much client services time it actually takes to complete their projects and many agencies hide this under some form of design of digital programming.)
  4. Project Manager creates new estimate with the rearranged hours (keeping original estimate for future reference and trafficking)
  5. Salesperson/Principal delivers SOW with estimate to prospect; prospect approves or gives agency allocated budget.
  6. Principal/Executive approves client investment amount to make up difference and delivers SOW with clear client investment discount so prospect understands the value of the work being delivered.
  7. Project Manager approves original estimate, which becomes the budget, and work begins on the project
  8. Team members enter their actual hours spent (that’s a whole other blog post!) into timesheets throughout the project lifecycle
  9. Project Manager reviews budget by service AND task (may only be possible with certain technologies) on daily basis to make sure hours are in scope; checks in with team members re: deadlines and deliverables
  10. Project Manager discusses budget red flags with Principal to make adjustments to the amount of time allocated to tasks if project is in jeopardy of going over budget
  11. At the end of the project, Project Manager pulls a final budget report to show Salesperson/Principal how time was actually spent on project.  Any time above the client’s budget but below the original scope should be written off and tagged as CLIENT INVESTMENT.  Anything over the original budget should be discussed in an official post-mortem with the team and written off and tagged correctly.
  12. Salesperson/Principal use post-mortem and write off information to inform future SOW’s & estimates

Including your Project Manager in the proposal process from the very beginning not only results in a happier Project Manager, but it allows you to get paid by your client for the work you are actually going to do – again, resulting in higher utilizations, higher effective hourly rates and more overall agency profit.