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Scope creep 4: How to deal with scope creepby
In this final part of his series, Mark Wickersham explores the most effective ways of dealing with scope creep so you don’t end up overworking, losing money and getting taken advantage of by your clients.
You can check out the first part of this series, ‘What is scope creep?’, here.
You can check out the second part, ‘When to deal with scope creep’, here.
You can check out the third part, ‘The four types of scope creep’, here.
Scouting for scope creep
Now that you are aware of the four categories of scope creep, you need to look out for them.
There will be several common tasks that frequently cause the scope of your work to increase. Brainstorm these sorts of issues and write them all down.
As you work with more and more clients you will encounter new scope creep problems, so you can keep updating this list.
Share this list with your team. Educate all of your client facing team members to make sure they know what to look out for. Everyone needs to be able to identify scope creep when it happens so that they can deal with it straight away.
The pricing stage
The best time to deal with scope creep is during the pricing stage.
As part of your pricing system, you should ask the right scope questions to determine the scope of the work and try to avoid any unexpected problems that might arise.
You also need to prepare for the unfulfilled promises and project extensions by managing the clients’ expectations. You need to make the client aware that certain tasks are not included and may incur an extra fee, or that the price may change or be subject to review if the business circumstances change significantly.
The way you deal with scope creep is by having systems.
You need to have systems and scripts in place so that you are prepared to deal with scope creep when you identify it.
Let’s look at an example of an unfulfilled promise…
Imagine you are a firm of accountants and you are pricing end of year financial statements.
Let’s imagine the client does their own bookkeeping and you are just pricing the end of year work - pulling together annual financial statements and doing the corporation tax calculations and tax returns and so on.
The client has done their own bookkeeping which makes life easier for you, and when you ask the scope question ‘have you reconciled all of your bank accounts’, they tell you that they have.
So, you come up with a price for them based on the assumption that they actually have reconciled their bank accounts.
But what happens if you start the work and find out they haven’t actually done that?
You need to manage expectations from the pricing conversation. You may say something like this:
“We’ve agreed on this price on the basis that you said you have reconciled your bank accounts. Just so you know, if we discover when we start the work that you haven’t correctly reconciled the bank accounts, we will have to either send work back to you to get it done, or we will have to charge an additional fee. Here’s what that price would be…”
The client has already agreed to your price, so they are unlikely to object to this. They know that they have reconciled the bank accounts so that extra fee shouldn’t actually affect them.
But you are now covered.
I recommend you go a step further and put this into your fixed price agreement and have the client sign it.
This way, if you do discover down the line that the bank accounts really haven’t been reconciled, the conversation is much easier:
“My team has just started your work and they have noticed straight away that it doesn’t fully reconcile. There are two things we can do. We can either bill you the extra amount that we agreed on in the engagement letter, or we can send the work back to you and you can complete the reconciliations yourself.”
The client now has a choice to either do the work themselves, saving you the extra work, or to pay you the extra amount for you to do it. It’s likely they will get you to just add it to your job, but at least you will now be paid for that extra work.
Let’s look at an example of a project extension…
Imagine you have priced up some bookkeeping work for a client. One of the scope questions you asked to help you decide on your price was how many transactions there were in a typical month.
Let’s say the client said 50, so you came up with your price based on a range of around 30-60 transactions a month. But you also work out the price for if it falls into the 61-100 range and show that to the client.
Then you say this to the client:
“Just to clarify, your price is on the basis that we will do 50 transactions a month. That falls into the category of 30-60. Just so that you know, if your business changes in the future, if for example your transactions come down, the price will actually lower. But if your transactions go up, the price will go up to this amount. Does that make sense?”
The client will likely agree to this because it is fair.
If you tell them upfront what the price will be should their circumstances change, then when that time comes, they will not object to the change in price because they were told beforehand. You have managed their expectations.
For bookkeeping, the most common project extension is an increase in transactions. For payroll, it will be an increase in employees. For whatever service it is, tell the client upfront what the change in scope will do to the price.
Then at some point in the future when that change comes about you can tell them:
“Great news! Your business is growing! As we mentioned when we agreed the price and you signed the fixed price agreement, because your business has now moved into the next bracket for transactions, we need to adjust the price.”
It’s now a much easier conversation to have because the client is expecting it.
When you deal with scope creep from the outset it helps to manage your client’s expectations around the price, and it will make all your price adjustment conversations so much smoother. It means you can stop writing off time, over working and throwing away thousands of dollars of profit by doing stuff for free!
Whilst scope creep is largely seen as a project management issue, the best time to deal with it is at the pricing stage. When you become aware of the different types of scope creep, you can manage clients’ expectations when agreeing the price. When you do that you either avoid the problem or make it easier to deal with later on if something arises.
The key is to have clarity at the pricing stage and in your fixed price agreement. Clarity over the scope of the project, and more importantly, clarity over what is not included or what constitutes a change of scope.
Wishing you every success on your pricing journey!
If you have found this useful and want to learn more about value pricing, marketing and business strategy, I run a free live training session online every month with a different topic chosen by you. I also take Q&A at the end to answer your burning questions live. Click here to register and I will send you an invitation to the next session.
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Mark Wickersham FCA is a Chartered Accountant and public speaker. He is well known for being an excellent profit improvement expert in the accounting community.
Mark is also a widely published author on practice issues. In May 2011 his first book, “Effective Pricing for Accountants”, was a number 1 Amazon bestseller.
In 2015 Mark...