By Shane Istre On November 19, 2009
Are you making enough money? Looking at the market information available for the systems integration industry, a few things become readily apparent. Companies in our industry typically fall into two categories: $200,000 gross per year or $5 million-plus. Which one are you? How does a company grow to its potential?
Good project management is one key. In a business where hourly rates for service range from $85 to $125 per hour, everyone should be doing extremely well. But the truth is that most integrators do not bill for every hour worked, or even close. This means that if your actual hourly rate on a project were calculated, your pay would more likely be $50 to $75 per hour. At an average of seven percent profit, most sole-proprietors are taking home about $45,000 per year, or less. One key to making profit grow is to bill for every hour worked. How is it done?
You need to put a concrete process in place that defines what you do and how to bill for it. The first step is to define the scope of the project. What does the customer want? What do they expect the system to do once it is in place? How much are they willing to spend? As an integrator it is your job to lead them through a process to get to these answers. Your knowledge of new technology and industry trends is valuable to a customer who will likely have only a cursory knowledge of what you do. By guiding them through their design, you can define the scope.
Based on your experience, you can then begin to chart how long the project will take. Start with the building blocks of drops, installation times, and programming, adding each one until a complete schedule begins to build. We never start completely from scratch, meaning that we have some idea of how long each service takes us and how much time it takes to program the equipment we normally install. With some basic analysis, an integrator can plan a list of install times that applies to average projects for their market and customer base. Look at the last couple of projects you completed and average their install times. If you don’t keep records of install times, then record these times on your next couple of jobs and start from there.
After you have the basic tasks down in your project schedule, add travel time to and from the job. Add setup and cleanup time. And don’t forget to add time for all of the detail work you do to customize and label your work. Once you have defined these items, add 10 percent on the top for design and management. This time covers the numerous meetings, phone calls, catalog searches, and administrative work that you have always done, but rarely plan for.
After you have a scope and a schedule, a budget is much easier to complete. All you have to do is multiply the hours defined in the last step by your hourly rate. You’ll be surprised at how much higher the total number is than what you expected, but this number is how much you should be making. Some analysis of past projects using this new process should verify what you’ve always suspected: You haven’t been charging enough.
Armed with a process, your company can begin to show its true potential for profit. A project is only as good as its scope, schedule, and budget. If any one of these three tenets of project management is neglected, the customer will be unhappy and your bottom line will suffer. You’ve always loved your work; it’s time for your work to love you back.