The High Cost of Scope Creep for Your Design Practice
A while back I did a survey on the various pricing methods used by interior designers nationwide.
Among the many findings that surprised me, is how much legitimate, billable time designers lose because of inefficient tracking tools or a lack of self-discipline.
"The stunning number is that the vast majority of designers say they lose at least 25% of hours that could be legitimate billable time each month."
The stunning number is that the vast majority of designers say they lose at least 25% of hours that could be legitimate billable time each month. Perhaps they didn’t capture the hours promptly and, weeks later, as they study their Outlook calendar, Post-it Notes, and hen-scratchings, they just can’t piece Humpty Dumpty back together again. So, they start modifying. . . always in favor of the client.
There are also instances where the principal simply gets squeamish when they’re going over final invoices and uses their “gut feel” to arbitrarily reduce the total billable amount.
While there’s nothing wrong with applying a little gut feel every now and then, to consistently use it in only one direction (in favor of the client) is incredibly costly over the long-term.
In my article on “How Design Firms Work,” we saw an example of a small design practice that was billing $150,000 annually in design fees. If they were also losing 25% of their time, that means they were giving up $50,000 a year! As shocking as that sounds, it is extremely common among my coaching and consulting clients when I first encounter them. (Hopefully, not after we're done!)
Given the “miracle of compounding,” if this firm were to capture that $50,000 for five consecutive years and invest it at 8%, they would have accumulated $317,000. As I always assign to coaching clients: “Go back in time five years and ask whether having an additional $317,000 today would have been worth a little more diligence and aggressiveness beginning five years ago.” The answer is always, “Yes!” Which leads to my next question: “Ok, then will you please stop leaving money on the table today?”
The Problem is Probably Scope Creep
While close to half of the foregone profits I described are due to inefficiency and a lack of self-discipline, the other half is more likely the victim of scope creep, that is, doing more work than you had budgeted for on a given job, without increasing the budget!
You know the feeling? It all starts so innocently with the request by a "good" client to just see another few samples. And then to include another room they hadn’t planned on when they signed your LOA. (“Hey, it’s just one room!”) And then they announce that they’ve decided to do some radical remodeling and doubled their architectural budget but don’t see how that should impact your original quote. And, “Can you do us a favor and check on the status of those items we ordered ourselves or through our builder?”
If you don't have a plan to avoid scope creep before a job begins, by the time you get hit by it, it's probably too late. It’s not until you have the painful “Aha!” moment that you decide you have to speak with your client, but so many of the “thousand cuts” have already occurred, that now they’ll be confused. “Why do you bring this up now? We asked you to do this weeks ago and you didn’t say anything.”
By the way, the response you’d like to give (“I was trying to do you a freakin’ favor!”) is not the one that you probably should give.
If you were doing a substantial engineering project, say building a bridge for a municipality, every step in the process would have been detailed in the budget that the city council approved prior to the job starting.
And the instant anyone associated with the city asked for even the tiniest little change, the engineering firm would not move a muscle until that change was detailed and approved. They would, in other words, issue a “change order" and also adjust the price—upward—as necessary.
Maybe that’s what you should do as well. However, I have to admit that I’m not sure how practical it is to stop the presses the first time your client calls and says, “Do you think you could find a smaller ottoman to go in front of the sofa than the first one you showed us.”
Bad Response: “Jesus Christ! Do you think I don’t have anything better to do than find ottomans for you? Were you drunk when you approved the first one? Yeah, I’ll get you a smaller ottoman. . so small that you can stick it where the sun don’t shine!"
Seriously, that’s a bad response and I strongly recommend that you avoid it, no matter how tempting.
Most Likely Response: “Sure, I’ll get back to you in a day or two.” At that moment, it truly seems like no big deal and there’s no way to know whether or not that’s a one-off, or the first indication of imminent scope creep.
Best Response: “I’d be happy to, and I won’t charge you for that additional time." This serves as an unspoken friendly reminder that you make a living billing for your time, and time is finite. In this way, the perception is that you're actually doing them a favor! (Which you are.)
LOA and NCO
Setting expectations for an entire project is actually a result of your sales skills. Whether it is landing the original prospect, getting your LOA signed, or making your New Client Orientation (NCO) presentation showing how the project will flow, it is upfront (and only up front!) that you have a chance to ward off many a potential scope-threat evil.
I have always advocated that you should think of your LOA as a marketing document more than a legal one. I like to see them pretty, clean, short, and written in layperson language. (Some of my coaching clients are even including sentences about how much “fun” this or that phase will be!) LOAs should follow the one-cup-of-coffee rule meaning they can be explained, line by line, at Starbucks over one cup of coffee. You should expect the client to sign on the dotted line at the end of that cup.
Likewise, your LOA should be converted to a PowerPoint presentation that follows it paragraph by paragraph, but which can be supplemented with beautiful images and light, non-intimidating graphics. This topic is only now coming across my radar screen in a serious way, but I can certainly imagine a graphic for scope creep. Here’s a sample:
If I were helping to prepare your presentation to a client, the one you’re making BEFORE the project begins, I might include a script like this:
“Now Jean, as you can see from the budget I provided and the LOA scope of work we went over, I try to build in every step necessary to deliver to you the end result you’re dreaming of. And based on my 20+ years of experience, I’m confident that I’ve done that.
“However, what I cannot predict is what might happen inside your mind as the project progresses, as you see things coming together, or perhaps you discover new ideas in a magazine or online, It’s not unusual for clients to start to ask for things that weren’t in our original agreement.
That’s human nature and would lead us to a phase I call, “Scope Creeping.”
“Because I value our client relationship more than anything, I’ll always try to be flexible and accommodate unanticipated requests. . . until they start to jeopardize the entire project as originally conceived, and my firm’s ability to deliver what we promised under those original terms. That’s what I call a “Scope Creep Crisis.”
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“You may remember, there’s even a paragraph in the Agreement you signed that addresses this very issue. So, throughout the project, you might hear me say something like, ‘Jean, that’s not exactly in the original Scope, but I’ll be happy to take care of it for you this time around.’
“But you should also know that each time I reference the concept of “scope,” I am also trying to say that the project is moving closer to a full-on “Scope Creep Crisis.” And just as stated in our Agreement, at that moment, the project will need to take a pause while we revise it, and I will need to replace the initial Agreement with one that will cover the increasing or changing nature of the project, just like any architect or engineer would do.
“Does that make sense? Great. . .”
That’s a three-minute conversation and one that makes it oh-so-easy for the client to agree to. “Sure, that makes sense,” Jean says.
And then, 60 or 90 days later when Scope Creep #1 hits your inbox, you only have to say, “Well, remember that conversation we had about “scope creep. . ., but sure, I’d be happy to do this for you this time at no additional charge.”
With each reference, you are warning Jean that the meter is getting closer and closer to running again, and if and when you must pause the project to update the pricing, it’s fully expected by her.
In summary, scope creep will infect your projects and will cost you significant sums of money over time if you don't prevent it. Prevention begins before the project and even before the first bill is sent. It's your money, so please don't leave it in someone else's pocket!