Picture this all-too-common scenario: You’re 12 revisions into a client project, when you promised only four. You’ve now spent almost triple the time you intended on the project, which gives you less time (and energy) to devote to other clients. It’s a frustrating situation, for sure, but the damage goes beyond that — it’s also hurting your bottom line.
Scope creep is the ever-lurking monster under the bed for marketing agencies. A recent Deltek study on agency workflows, for instance, found that nearly 40 percent of agencies exceed their budgets because of scope creep.
It whittles away at your profitability, and when you’re constantly handing out a dozen or more revisions, it also sets unrealistic expectations for your clients. If left unchecked, it can mean less time for your agency to grow its business.
Of course, there’s a fine line between providing good service to your clients — which sometimes does require going above and beyond — and flat-out giving away your services for free.
I’m not suggesting you nickel-and-dime clients to death, but it is essential to set strict limitations on what you will (and won’t) do and stick to them. Otherwise, your profits will continue to seep out of the hole you’ve failed to block up at the bottom of your boat.
Scope Creep Starts with Vague Proposal Documents
It’s easy to blame clients for scope creep, but truthfully the blame sits right at your feet. At the end of the day, it’s your responsibility to serve as the gatekeeper of your agency’s services. Scope creep is entirely yours — not your client’s — to control.
Vague proposal documents are the number one culprit when it comes to this problem.They lead to over-servicing your clients, which in turn leads to lower profits.
The key: Set limits, set boundaries, and be very specific. Good scope documents include assumptions about both the project and the processes. Clearly outline the ripple effect that will happen if one piece of the project is delayed or altered, and detail how changes should be addressed, should the need arise.
Your clients need to know explicitly what they can and cannot expect from your team. If you specifically outline the deliverables you will provide each quarter, with little room for interpretation, then you’ll be setting yourself up for success.
It’s a Numbers Game: Know the Math, Increase Profits
OK, so you know you need to tighten up your language on your proposal documents, but where do you start?
Before you add in any additional fees for excessive revisions or change orders, you must intimately know the math and exactly how your agency makes money.
You may find that you are literally paying for the privilege of working with certain clients. If you run profitability reports for your clients (and you should), you might see that certain clients — those who consistently exceed scope with “small projects” and “just one more revision” — are actually costing you money.
But it’s not just agency leaders who need to be financially savvy. Your account team also should have a clear understanding of how the business works. After all, they are the ones in charge of communicating with the client and monitoring the budget.
If they don’t understand agency math — or how you spend your AGI — then how are they supposed to know when to say “yes” or “no” to a client request?
3 Strategies for Stopping Scope Creep in Its Tracks
Scope creep is an issue all agencies face, but it’s not impossible to stamp out of your business practices. Here are three strategies to ensure you’re both maximizing profitability and providing clients with top-shelf service.
1) Teach Your Employees the Rules of the Game
Every single day, your agency is either making money or losing money.
If your team members don’t understand the dollars-and-cents of the business, they will continue to believe their greatest priority is keeping clients happy. The easiest way to do this, of course, is to over-service clients — not a great tactic for maximizing profits.
if you educate all employees on the costs of your goods and services, they’ll be better able to balance keeping clients happy and servicing your firm.
2) Leave No Room for Misinterpretation in Your Scope Documents
At the very least, your scope documents should define your deliverables, the number of revisions you’re willing to do, and each project’s timetable.
Use language that leaves no room for interpretation, such as “With this estimate, you are going to be granted four revisions. Any revision after the fourth will result in a $250 fee.”
The number of revisions and the fee amount should be tailored to your agency, but the important thing is that your client knows from the very beginning of your contracted relationship exactly what they’re agreeing to. Once the client signs the document, there doesn’t have to be a big discussion every time the fifth revision rolls around.
3) Don’t Be Afraid to Issue Change Orders
Change orders give your scope documents some teeth. How you treat changes in scope helps train your clients with how much you’re willing to bend. So try not to bend.
The biggest reason change orders aren’t issued is that agency leaders and employees think they don’t have enough time or it’s not worth the headache. Here’s how the thinking usually goes: “By the time I calculate the change order cost, write up a document, and get it signed by the client, I could have just made the change.”
The reality, though, is that you can’t afford to not issue change orders. By doing this, you’ll prevent the client from future abuse of scope. You want to make the client happy, but you are also running a business. And businesses run on profitability.
There will be times when the client or the circumstance justifies waiving that change order fee. But by having the fees in place, those free revisions become a gift you are giving clients, not a right. Giving one revision out gratis sure beats handing out 10 for free — which is what you may be doing now.
Being specific and firm with your scope won’t damage your client relationships. Rather, being firm will train them to get their ducks in a row before they request changes or revisions.
It’s tough love, sure, but you’ll be surprised how receptive your clients will be to having firm parameters to operate within. Most importantly, you’ll no longer have to watch project scope continually creep and profitability shrink.
This article was written by Drew McLellan and was first published on HubSpot.