Recession fears abound today. Executives worry about their bottom line while employees worry about their jobs. At times like these, some companies resort to harmful measures like laying off employees and reducing spending on crucial programs. This might seem like a good idea at first, until the recession ends and they find that they have less talent to work with and no strategy for growth. Fortunately, there is a better way to cut costs intelligently and keep your business successful in good times and bad. All it takes is insight into which customers and projects are most profitable, allowing companies to focus on the most profitable work.

Understanding Profitability

It seems like a simple solution, but it is one that is often overlooked. Think about it: How many executives at your company really know which projects were successful? Which clients were profitable and which ones were a drain on resources? How many employees worked on each project, and for how long?

Having this information in hand while planning future projects and budgets empowers executives to make much more informed, cost-saving decisions. If you don’t know which projects were on-time and on-budget, you don’t know which projects were successful and should be replicated.

When your employees track their time on a per-project basis, you will get a red flag when projects are in trouble much earlier, giving you the opportunity to do something about it before it is too late. You can also learn the truth about projects that are consuming more labor hours than you thought, or customers you deemed expensive who are actually cheap to service. When the economy is down, this gives you the option to “fire” your unprofitable customers and keep the profitable ones happy.

The Result

If your developers, support staff, marketing team and salespeople all knew which customers were making money for you and which were not, they would alter their behavior in order to make the company more profitable. This gives you an enormous advantage over your competitors during a recession. After all, you know where your profits are coming from and they don’t. You can eliminate the unprofitable work and calculate ROI on anything with ease. When you need to cut, you will be able to cut intelligently. Though the economy continually changes, having strong processes in place to understand per-project profitability is the key to weathering any financial storm.

- Curt Finch, Journyx CEO