Profit from Your History

A fellow web developer was recently telling me that business was good, lots of new sales and her pipeline of work was looking great for her team. However, they were only making the same profit in dollars as they were making when doing 30% less work a year ago.

We chatted over a coffee, and I brought up time tracking: were they using it? The answer? ‘Of course we are!’

We then went on to discuss recent projects, and it came to me to ask, ‘What are you learning form these time entries?’

The penny dropped – they’ve been eagerly collecting every hour of every project for the last five years, but they rarely ever looked at the end results.

We went our separate ways, until a call only yesterday reminded me of this chat. She rang to excitedly tell me they had spent a half day going through previous projects, and breaking down the hours into similar sized projects.

The result? What the person writing the quotation thought was a 20 hour job actually took 30. What looked to be a 30 hour job took 40 hours – you can see where this is going.

She thanked me eagerly. They had taken the time to actually use their history to find the profits, or in this case, identify where there was a chasm between expectation and reality.

My homework for you over the next week is to do the same – before you quote on the next project, look again at the ones you’ve done previously.

Are they actually taking the time you are thinking they are, or are they actually taking longer?

Let me know how you get on – send me an email to tribune@sitepoint.com – I’d be interested to see what you uncover!

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  • http://www.rakeconsulting.com Corinna

    I time-track my projects the old-fashioned way, pen to paper, and am often shocked when I go through my notes and discover that what I quoted 10hrs actually took 13 or 14… Then I start to discredit the extra time as “well, I got caught up with fixing that font issue” or “did I really work 3hrs straight on this project that day?”. Meanwhile, I usually shave a few minutes here and there and/or account for the distractions when I’m recording the time… Knowing these figures not only impacts the bottom line, but how many projects I can realistically handle and still meet deadlines.

    Thanks for the article – now I have to deduct this time from my current project entry…

  • http://dualmediasolutions.com Tim

    I hate to be “that guy” – But I should hope it wouldn’t take you that long to realize that you’re not quoting high enough!

    I guess it depends partly on your billing software, and how it is all set up, as well as how many people are involved in the process and their communication.
    For myself, I work mainly with local business and charge by the project. They need that kind of predictability, sometimes I go over by a few hours (and don’t charge) other times I’ll wind up a few hours shy, so it’s like a “bonus” for working hard, and also makes up for the times I put in the few extra hours.
    I use Billings for invoicing and time tracking. So I’ll put in the project amount, but also track my time (breaking it into sections of the project) so that I know where I’m at and if I’m spending too much time focusing on one thing or another.
    I may still ‘undercharge’ to some degree more often that not, but I’m always aware of when I am.
    This kind of tracking is a key that’s paramount to the sustainability of your business.

  • James

    Don’t forget Parkinson’s Law though:

    “Work expands so as to fill the time available for its completion”
    (http://en.wikipedia.org/wiki/Parkinson's_law).

    I think the only way to meet budgets is to bring to our work the attitude that unexpected problems will always arise. Knowing that, we should always aim to get things finished as fast as possible and not relax when we think there’s plenty of time left in the budget!

  • Ricki

    Like Tim I always work on a project sum agreed upon in advance, which I work out by simply estimating the time involved and multiplying that by my “hourly rate”. I always “pad” a little when quoting – adding extra hours to what I realistically think the project will take gives a bit of room for the little things that crop up, without ending up out of pocket.

    I usually make this proportional to the time that the project is estimated at – if it’s only a 10 hour job, then I would usually not add anything, but for a job that’s 100 hours, I’ll give myself a whole day extra, or even a day and half depending on what’s involved. And of course you can always be flexible with this if it seems like it makes your price a little high for the client.

  • http://www.jgreenwalt.com Jessica Greenwalt

    I’ve been tracking the time I spend on projects for years. It has helped me develop my estimates based on my past experience with a particular type of project, and now, I can’t live without my tracking tool. I recommend toggl.com to any freelance designer looking to easily record the time they spend on projects. You can break your project down into specific tasks and time yourself for each one. Just check it out. It’s free.