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Going Over Budget

Managing the situation to prevent further damage

Sometimes plans just don’t work out. The situation looked good when you bid the job, and the job started out well, but over time, you found yourself spending too much money to get the work done properly and keep the customer happy.

The most common causes of overspending can include the following: You failed to accurately bid the work; you didn’t ask the right questions; you overlooked a detail or two of the specifications; you didn’t realize how difficult the customer was going to be; or you made an error in your calculations. It’s also possible the client gave you incorrect information upon which you based your bid.

Regardless of the reason, the bottom line is that you are losing money on the job. Now you have to figure out why this is happening and what are you going to do about it. You have several options.

Take the beating. Live with it and learn from it, and don’t make the same mistake again. This is easier to do when you are talking about a small or short-term financial loss. If it’s a matter of big dollars, it could put you out of business, in which case, you need to take action immediately.

Ask for more money. If the customer gave you incorrect information, you have a good reason to explain the situation and ask for more money. You may not get it, but you are on pretty firm ground to ask for and expect some adjustment in the pricing.

Go back to the customer, explain the situation, and ask for an increase that will allow you to provide the level of service they expect and deserve. Ask for the customer’s understanding and help in solving the problem, as you can’t afford to lose more money on the account.

Make adjustments in the way the work is done to reduce costs. This is all internal; you don’t need to involve the customer in the process unless you are contractually obligated to provide a set number of employees or hours on the job. As long as the work is acceptable to the customer, you should be OK. With this approach, maybe you can even break even or make a small profit on the job.

Walk away, although this is not a good option. If you have a formal contract to provide specific services, walking away may result in threats of legal action or an actual lawsuit. One thing you can pretty much count on: You’ll never get any work from that customer again. If the customer is well connected or you live in a small community, the word will get around, so be prepared to answer questions about the situation from potential customers.

Here are some tips to prevent losing money on future jobs:

Compare the bid and job to other accounts you’ve worked on in the past. Does it make sense? What’s different in the account that would drive the cost up or down? If something looks off, go back into the details and find what’s making the difference in the price. Look closely at the labor hours, as this is where the majority of your costs will be. At the same time, don’t overlook supply and equipment costs, overhead, and profit.

Double and triple check your numbers before submitting a bid. It’s always a good idea to have someone else read your proposal and check your numbers.

Avoid risky projects. Realize that large and complex jobs or unfamiliar types of work are the most risky projects to bid accurately. If you are not sure whether or not to proceed, get help from a consultant or friendly competitor. Chances are if you don’t know how to bid a job, you probably aren’t qualified to do the work. Stick with what you know and grow slow.

Track your costs and profit on every job. If you don’t monitor your costs and profit, you are bidding blind. There is no way you can build a successful, stable, profitable business without accurate financial information upon which to base your decisions and bids.

Best of luck. Keep it clean out there.

Posted On February 24, 2016
William R. Griffin

William R. Griffin

President of Cleaning Consultant Services, Inc.

William Griffin is the president of Cleaning Consultant Services, Inc. He is an industry consultant, author, and trainer with more than 35 years of experience. Contact him at wgriffin@cleaningconsultants.com or visit www.cleaningconsultants.com.

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