How to Use Good Project Management to Increase Profitability

Updated: September 16, 2010

Rule #1 - No fixed price contract

Never, ever take fixed price contract unless you are absolutely certain you can deliver the project in less time than the customers think it takes. Like if you already have done a very very similar project you can re-use and simply change the logo, colors and stuff like that, it's safe to assume you will be making money.

Most of the time, customers think they know what they want but actually don't. So they say yes to the solution you are proposing and as the project progresses, they will realize it's not exactly what they wanted and will ask for some small modifications that is often hard to say no to.

Rule #2 - Manage change request early on

Do not say yes to any of the modifications the customer ask because if you say yes, it will be a lot harder to say no when you feel he asked for too much. He has to realize that deviating from the initial plan costs something.Control the scope of the project with change request.

Sometimes it simply does not make sense to fill a change request for a tiny change, I'll give you that. But when that happens, wait until you have a few of them and then fill a change request that includes multiple small change. Evaluate the work it will require and expose that to the customer so he understands that changes have consequences. Even if you charge an extra of only $50, this will stop him from abusing.

Rule #3 - Use the appropriate tools

Managing a $5000 project does not require the same set of tools that a $100M project. If you try to use tools designed for large project on a small project, it most likely will kill your project. Too much work for too little results. You could use a few excel document to follow the deliverables, costs and schedule. On the contrary, if you only use a few excel documents for your $100M project, you will most likely forget to track important metrics and it will rapidly become out of hands.

There are a wide variety of tools available. Some are program you install on your computer, like MS Project and some are application available on the internet.

Rule #4 - Trust your team, do not try to do everything

A good project manager will be able to put emphasis on every team member's forces while minimizing the impact of everyone's caveat. When I first started out, I was trying to do everything or be directly involved in everything. I learned that it was better if I had an excellent big picture of the project and to facilitate the life of every team member so they can do what they are good at.

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