No jobs, no profit. No profit, no firm.
Obvious statements that every principal and firm owner knows to the depths of their souls.
BillQuick helps you monitor work in hand, and with a quick calculation, know whether normal or exceptional business development efforts are needed.
BillQuick’s Work in Hand Report monitors jobs under contract, including how much work remains to be done. Customers tell us they run the report at least monthly, and increasingly, after each billing they do during the month. The Work in Hand information reminds principals, owners and project managers of the efforts needed to complete current jobs. In addition, it reminds them to not shortchange their business development time budget. They need to keep the pipeline full and close new contracts on a regular basis.
The value of work in hand can be augmented with a quick calculation to determine Months Work in Hand. There are several methods for this calculation, ranging from complex to simple. The fastest and easiest is:
Unbilled Work / Average Billings per Month
Unbilled Work is taken directly from the Work in Hand report.
Average Billings per Month = Total Billings for the Last 12 Months / 12.
From the example (left), $186,922.44 / 12 = $15,676.87 average billings per month.
Plugging this into the first equation, the Months Work in Hand is:
$257,458.75 / $15,676.87 = 16.42 Months Work in Hand
This shows good depth in your backlog. Business development does not appear to require exceptional efforts. In short, you can feel comfortable staying the course with your business development efforts, keeping the pipeline filled and moving forward.
While Average Billings factors in seasonality by averaging the last 12 months, other factors unique to an industry, client base and so on may be incorporated into your calculations.
That’s Not The End
This is not the end of the management review. Looking at the full Work in Hand Report, you notice two over-contract projects (Factor Foundation, Widgets Inc.). Also, work in progress is greater than the amount you can bill per the contract for Global Tech (another over-contract project). These projects are eating time and your profit margin.
You need to understand why they are over-contract. The results may lead to reevaluating similar opportunities in your pipeline. Perhaps just sending in a bid is not good enough. You may need to establish greater value for what you do to justify a larger contract amount. Or the over-contract projects may indicate heavy price pressures from certain types of clients or jobs. This may lower the value of your pipeline.
In short, your analysis may tell you that exceptional business development efforts may be needed. Not only may you need to close more opportunities to offset lower profit projects, but also spend time to develop a strategy to win the right (most profitable) jobs. Again, no profit, no firm.