How do you know if you can afford a project

How do you know if you can afford a project?

It can be a million and several millions. Does it matter? If you do your maths, you could retain your business.

There are a few main issues I have experienced in working with Construction SMEs for the last 18 years:

1. What is your cash flow situation today? If your business finances another project without control, you may fall into a domino effect.
Therefore, cash flow and project profits must be controlled in real time.

2. How much money do we need to finance this project? When will the Customer pay? The first payment often comes later, and The contractor must pay for materials and labour.
Therefore, A project cash flow forecast is a must.

3. Is the project profitable “enough” to undertake? Although it may look profitable initially, it may appear otherwise after considering your business’s capacity and overhead costs.
Therefore, always calculate the company’s capacity to undertake the project and the profits to break even!
It would be best to calculate a gross profit margin, project length (Gantt Chart), and capacity (how many such projects can you undertake?).
And, of course, what are your business monthly overheads?

4. Are you up to date with the technology to control project costs?

Many Contractors are behind the current trends, one of the main reasons SMEs go bust.
Outdated and inaccurate information can kill a business because the Owners cannot make the right decision at the right time.

Therefore, Real-time Time Resource planning and control are crucial to success!

We have a fantastic tool for every contactor to do a simple high-level check, if you want the project or not:
https://www.profit-calc.co.uk/

Do you have any other points you’d like to add? Please, Comment below

#projectmanagement #realtimeresourceplaning #Xero