Tuesday, May 28, 2013

5 Ways to Measure Social Media's ROI

For A/E firms, it's not all about dollars, leads, and closed contracts. Marketers in all industries are constantly on the hook for ROI. That's the nature of our job function. When it comes to social media for architects, engineers, and contractors however, the calculation of such a financial metric is distorted and difficult at best.

First, you have to assume that your firm can assign a dollar amount to the "investment." Often marketing staff hours are all dumped into one, large overhead bucket. Given that approach, mixed with the assumption that all social media will cost is time – there isn't even a great place to start!

A second reason that ROI is difficult to nail down is that the "return" is normally based on leads or closed contracts. To be quite honest, rarely are marketers (to be read as a separate function from BD professionals) given credit for closing a new contract. It is generally much easier to assign the win to the referral, past performance, or repeat business column.

So, what can we do to measure up and show some sort of success for our time spent cultivating relationships through social media profiles?
1. Define success first! Every principal is different, and many marketing teams aren't expected to go out and win business on their own. So when it comes to social media, have the conversation up front about what success is in the eyes of your team. It could be leads, email list sign-ups, web traffic, surpassing competitor benchmarks…any number of things.
2. What if success is still defined as closed contracts? Set realistic expectations and clear parameters on what markets your firm's social media will focus on. The only way to make an impact and PROVE that you made the impact is by eliminating the confusion on which leads came from which source.

3. More about benchmarks… When it comes to successful social media, engage and interact with as many target clients as you can. This doesn't always mean huge numbers though, and unfortunately managers that aren't connected with social media may not understand why the Facebook page doesn't have 2,000 likes yet! Benchmarking against some of your competitors can help show if you're gaining ground with followers as well as set realistic expectations from management.
4. Seek ways to define your firm's expertise in the market. Social media is one of the most effective ways to share your expertise in a non-promotional way and that has a significant tie-in with what conference planners and publishers are looking for. Securing a speaking engagement at a conference of your clients is a huge win. Period.
5. Choose a problem to solve for your clients. If you want to prove that you care about your clients, solve their problems. Investing your time and energy into developing an online resource or community that doesn't start with your firm's name is great for your relationships, but it also opens up a number of ways to define success by making a tangible difference in your industry.
Social media is a communications tool and communications efforts can have a number of goals. It's important to determine what those goals are before assessing the success of your efforts.

Monday, May 20, 2013

Basic Accounting Terminology for PMs

Professional service firms use accrual based accounting methodology, not cash-based, and once this is understood everything gets much simpler.

Revenue is recognized on an accrual basis when it is earned and when expenses are incurred without regard to the time of receipt or payment of cash. The determination of income and recognition of revenue rests upon the collection of cash and payment of expenses in a cash-based system. Taxes are calculated on a cash basis, regardless of the accounting methodology used for recognizing revenue.

Accrual-based accounting is best, as it more accurately measures real progress and work-in-place on projects while providing “real-time” profit calculations. You invoice and collect cash based on the terms in your contracts. You earn revenue based on the level of completeness of your projects, and the billing and earning schedules on a project can be different.

The most visible application for accrual accounting to project managers is setting-up and monitoring the project work plan. The work plan establishes the budget by phase by which the project will earn revenue, and it includes contingency amounts not visible on the billing/cash side to clients. Contingencies in themselves create differences in the amounts billed to clients and revenue earned internally.

In addition to understanding the difference between accrual-based and cash-based accounting, here are a number of other accounting terms with which all A/E project managers should be familiar:

• Gross Fee: Total fee paid to the firm for all services including consultants

• Consultant Fee: Fees paid to consultants by the A/E of Record

• Net Service Revenue (NSR): Gross Fee minus Consultant Fee

• Overhead: Fringe benefits, rent, utilities, management (including indirect labor) and marketing expenses.

• Direct Expenses: Expenses that are charged to a project or task and NOT billed directly to the client; the cost of these expenses must be absorbed by the project or task. They include supplies and unreimbursed travel.

• Reimbursable Expenses: Expenses that are charged to a project or task and billed directly to the client for payment. These are outside the scope of the Gross Fee.

• Billed/Invoiced Amounts: Amounts billed to clients based on contract compensation amounts and percent complete.

• Earned Revenue Amounts: Revenue recognized in the accrual accounting system based on subjective percent complete times Net Service Revenue.

• Percent Complete: Current, workin - place for the project, phase or task expressed as a subjective percent complete and not based on the percentage of labor hours or dollar amounts spent.

Monday, May 13, 2013

Control Your Marketing

There is a lack of management control in many facets of A/E firm marketing. Following are five areas needing closer direction if your marketing strategy is to bring results.

1. The cost of proposals. Does your firm adequately measure proposal cost as a percentage of gross fee on the anticipated project? Also, do you gauge your potential success in securing the project? Many firms prepare proposal after proposal for projects they have no right to pursue.

2. Charges to marketing by technical personnel. Does your marketing director adequately measure the amount of time technical personnel charge to marketing? In many firms, marketing becomes a “dump-all” for people who take someone to lunch or otherwise pretend to expend marketing effort. Your marketing director should answer for all charges to marketing time.

3. General entertainment. One of the hardest marketing areas to manage, this category can become a catch-all for club dues, general lunches, office parties, Christmas celebrations, and other events that fit into no other pigeon hole.

Ask yourself if your firm’s marketing director really has a handle on general entertainment expense and whether he or she has the authority to manage it adequately.

4. Presentation tools. How much has your firm invested in brochures, Web sites, PowerPoint presentations, AV equipment, handouts, business cards, and other marketing media in the past five years? What percentage of your overall budget does this expenditure constitute? Is your return on investment adequate?

Many design firms spend thousands of dollars on materials they later toss out because of uncoordinated graphics or inadequate testing prior to purchase.

5. The marketing plan. Many such a plan turns out to be a pie-in-the-sky vision statement the firm “hopes” to pursue. Ask yourself if your marketing plan has “teeth.” Does each objective link clearly defined tasks to specific individuals? Is each task budgeted with a specific dollar amount and time frame?

Is there someone in your firm whose entire raison d’etre is to successfully manage your marketing schedule and finances? Don’t let your marketing plan be a blue-sky wish list. Give it a schedule and budget, and make someone responsible for carrying it through.

Monday, May 6, 2013

Money Management Rules For Every PM

To understand the financial end of your project does not require that you have a degree in accounting. However you will find it most helpful to understand some basic accounting terms, concepts, and practices.

You will find it easier to communicate with financial professionals within your firm and to understand their concerns regarding your project and the financial health of the firm from their perspective.

The PM’s key financial responsibility is to deliver the “as-sold” performance level. The “as-sold” financial performance is determined when the contract is signed with the client. It is usually represented by financial measures such as direct labor multiplier, dollars of gross profit, collection period for invoices, etc.

These performance measures should be established independently for each project. A successful PM meets or beats these financial parameters.

The PM’s primary method of meeting the financial goals is by using a strong project control system. By implementing a project management plan with the associated scope of work, schedule, and budget control systems, the PM has the best opportunity to meet the project’s financial goals.

A strong change control program is extremely vital to a financially successful effort.

Collecting invoice payments is not the job of accounting. It’s the PM’s job! The owner of any business understands that profits are good— but cash is king! Allowing clients to drag out payments is like providing them with interest free loans.

The PM must take an active role in enforcing the payment terms of the contract. Bringing in cash is too important to leave the job to anyone else.

Don’t be afraid to take action with slow paying clients. Too many firms are reluctant to initiate collection activities with their clients because they might result in poor client relations. Clients demand that you fulfill your contractual obligations to provide service—why not the reverse?

Effective PMs understand the fundamentals of accounting. The PM is not an accountant, but must understand some accounting. The business world measures performance in terms of dollars—revenues, profits, financial ratios, etc. A project manager needs a basic understanding of how the firm’s financial process operates to succeed.

Making a profit is an absolute necessity to stay in business. Profit is not just something that ends up in the owner’s pocket at the end of the year. Profits are used to buy assets (computers, office furniture), pay bonuses to key employees, fund contributions to retirement accounts and more.

The PM must focus on delivering the “as-sold” gross profit to the firm. Without this, the firm will have difficulty making what it needs to continue in business.
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