How Getting Scope Creep Under Control Helped One Agency Improve Gross Profitability by 36% (And Four Tips for Managing Scope Creep)

Robert Patin May 5, 2021 10:00:00 AM
growth creeping upwards

Proper management of requirements that fall outside of the agreed project scope can boost your productivity and profits. Here are some excellent tips on how to achieve just that.

 

When it comes to billing, most marketing agencies operate on a similar model: charging by the hour with additional agency and outside fees.

One experiential marketing agency that we worked with followed this common principle, only to discover a significant flaw in the design:

The cost-plus-time model is exceptionally prone to scope creep. 

Unfortunately, our client had to find this out on their own. As a result, their business was at the risk of becoming unsustainable before we started working with them. 

Scope creep means that a company receives additional work for the same budget and timeline. The problem is that the work isn't authorized and can be particularly detrimental to large-scale projects. This is precisely what our client encountered, as they got bombarded with more and more requirements that were not part of the initial agreement.

The solution to this issue came quickly when, with our help, they changed the billing model to a fixed one. Charging by project value allowed for fixed rates and a clearly defined scope of work.

The agency moved its clients over to the fixed billing model in the course of 18 months. As a result of this change, their gross profitability increased by 36%. 

Managing scope creep means avoiding unauthorized requirements that take a toll on your effectiveness and profitability.

Here are some essential tips on how to deal with this issue and improve your business.

The Four Tips

Tip #1. Examine How You Initially Sell Projects to Clients

When offering your services to a potential client, it's crucial to have a well-defined niche in which your company's positioned with authority.

Your clients must have a clear understanding of the expertise behind your agency and how you work. If that aspect of the relationship's lacking, clients may try to push you towards working within their systems and processes when it should be the other way around.

This shift in perspective leaves the doors wide open for scope creep.

The best way to avoid any issues or misunderstandings is to thoroughly explain what you do, how you achieve results, what kind of timeline you follow, and what deliverables the client can expect. 

It would be best to define your clients' touchpoints and how you'll interface with them during the project. If you communicate the vital points clearly, there will be less or no space for additional unauthorized requirements. 

But this doesn't mean no additions are welcome or allowed. Rather, it will signal that it's necessary to mutually agree on any potential subsequent requirements before the project starts.

Tip #2. Review Your MSAs

Your Master Service Agreements (MSAs) can play a significant role in how you manage scope creep. There are several essential points the MSAs should cover, including:

  • Protection from liability
  • Protection of your assets
  • Charging fees and interests
  • The entire project scope, including precisely defined services
  • A thorough explanation of the financial terms
  • An outline for the process of handling any requests that fall out of the defined scope

Reviewing your MSAs to include all of these points and describe them in great detail will ensure that your clients fully understand what service they're getting within the project.

The outline of how you handle and charge for additional requests will also inform the client about what they can expect when issuing new requirements. If you formulate these terms clearly, it might encourage the client to re-examine their initial project requests, making the process more streamlined.

 

Tip #3. Don't Be Afraid to Say No

Sometimes, the changes your client proposes are constructive and add value to the current project. In other cases, however, they might contribute little to nothing in that regard. Even worse, new requirements could be detrimental to your work, causing you to break deadlines with no apparent benefits.

When faced with such a situation, you shouldn't shy away from refusing the additional work. 

Of course, there's no reason to assume a confrontational attitude about it. Instead, explain your viewpoint to the client as clearly as possible and engage them in discussing the most optimal way to move past the issue.

One example of a good compromise is to include the additional requirements into a new project separate from the one you're currently managing.

You can work with the client to create a subproject that will cover all of the new requests while you continue to work on the project at hand without hindrance. Finding a middle ground isn't as challenging as it seems and can prove mutually beneficial.

Tip #4. Set Up a Change Control Process

Most projects involve a certain amount of change, so the most efficient way to manage them is to expect change and set up a process that will help you control it.

The process is relatively straightforward, and it includes a handful of steps:

  • Suggesting the change
  • Reviewing the suggestion
  • Approving or rejecting the change
  • Incorporating approved changes

A change control process provides you with a framework that will help manage and organize any additional requests. If you explain the process to your clients, you'll remove any obstacles moving forward.

Reviewing and approving proposed changes requires particular attention. It's best to determine who will participate in those stages of the process and inform the client about it in advance.

Profit from Managing Scope Creep

Successfully dealing with scope creep will give your business the boost it needs. When your clients know what to expect and precisely understand the terms, your cooperation with them will become smoother and more productive.

Additionally, a properly set up change control process can make managing additional requests quite straightforward and leave your customers completely satisfied.

If you need help with working out the details that will set you free of scope creep, don't hesitate to schedule a profitability accelerator call.





















Leave a Comment