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Profit & Growth Tips for Digital Agencies

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How to Use the Project Management Triangle to Improve Agency Profitability

Posted by Nicolas Jacobeus on Aug 1, 2016

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All of your agency projects are bound by three constraints: scope, cost and time. This is known as the Project Management Triangle (or Iron Triangle) and these three constraints directly affect the quality of your projects, as well as how profitable your projects are. Today I’m looking at how you can use the Project Management Triangle to improve your agency’s profitability.

Using the Project Management Triangle to Manage Customer Expectations

The Project Management Triangle is a really simple, yet effective, way to manage your customer’s expectations of the outcomes of their project. It provides a clear depiction of what is limiting their project, and encourages them to consider what their top priorities are:

  • If they’re working to a tight time schedule with a fixed deadline, then they will need to be flexible in terms of the cost and scope of their project.
  • If they’ve want a fixed cost for the project, then the scope or the project schedule may need to adjust to fit their budget.
  • If they have a clearly defined scope for the project, which cannot be altered, then they will need to be more flexible in terms of their schedule and budget.

Discussing the constraints on a project within the context of the Iron Triangle model will encourage your customer to consider the trade-offs that may be necessary in order for your agency to fulfil their project requirements.

It will also help your agency to understand your customer’s priorities for the project. This will help you align your team with your customer’s needs, and will also shape how you position your communication with the customer: do you focus on helping them meet their deadline, fitting the work to a fixed cost, or do you focus on the scope of the work you’re delivering?

How to Improve Project Profitability

Using the Project Management Triangle to manage customer expectations is a great way to improve your customer relationships. Your agency will be aligned with what the customer needs from the project and you’ll have a clear understanding of their priorities. But how can you use this to make your agency projects more profitable?

It’s vital that your customer understands that the scope, schedule and cost of their project is all linked. Your customer’s requirements for their project are likely to change while you work, so it’s important that they are aware from the outset that if any one of those constraints changes – whether that’s cost, scope or schedule – it will affect the other two constraints.

The best thing you can do is to make cost the starting point for your agency projects, so the scope and the schedule of the project changes to fit the budget. Working to a fixed budget will keep your customer focused on what they actually need, rather than what they think they need from the project.

More importantly, it makes it clear that if the scope or schedule of the project changes, your customer will have to pay more to accommodate that change. This means your agency won’t have to bear the costs associated with scope creep, and as such will be able to keep the project running in a profitable way.

To learn more about improving your agency profitability, download our free eGuide.

how to make your digital agency profitable

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