When my new clients build a proposal, they tend to start with the equipment, then add labor until they hit a budget number they’re comfortable presenting.
But when you do it that way, you cut corners on labor. If you start with labor, on the other hand, you optimize equipment.
The process of designing a project to match the customer’s budget is called value engineering. However, this isn’t about making compromises. Value engineering is about delivering optimal results, which means balancing the scope of work against resources.
If you’re looking to build better proposals, start with labor, not equipment. Here’s a link [11:27–21:27] to one of our previous webinars that illustrates this point.
How to Value Engineer Effectively
A common mistake in value engineering is to build roles around specific individuals to take advantage of their dexterity. You end up asking people to do two or three jobs instead of concentrating on one.
This is what I call bidding yourself into a corner. You’ve created only one way to accomplish a job, and it’s through a unique group of individuals you can’t find.
It’s much easier to value engineer a technology specification than a human specification. When you carry this idea through, you put together a team appropriately sized for the baseline scope of work the customer requires.
You already know you’re going to need audio and video. You also know you’re going to need some lighting and decoration. The place to start, however, is with baseline labor. Then you can put together the baseline equipment that the baseline labor supports.
All the technological wants that arise after that become options, enhancements, or upgrades.
Value engineering in this direction allows you to create a “Not to go below” number. If your baseline labor is X and your baseline equipment is Y, then X + Y = Your Minimum Budget. And a minimum budget gives you a firm foundation to stand on.
The Application and Benefits of Value Engineering
So, why is this valuable?
If you’re good at putting together baseline budgets quickly, you can zero in on a customer’s budget.
If you say, “Hey, here’s a $50K to $80K solution,” and they come back with, “Oh, my goodness, we don’t have that kind of money,” great! You can stop talking about that price range and move on to a more value-based solution or an entirely different approach.
This way, you don’t waste time talking about options that don’t meet the customer’s needs or that they simply can’t afford.
Another thing about baseline budgets is that they’re very easy to communicate to your internal teams. Baseline solutions are provider-specific solutions.
For example, how do you put in ground-supported sound for 500 people at a banquet in a hotel ballroom? You have your company’s solution for that. That’s the baseline. Is there an upgrade? Of course there is. But at minimum, it’s going to cost X.
When I was in second grade, my mom gave me $10 to go to the cafeteria at my new school. We were living in a hotel, and she didn’t have a way to pack a lunch for me.
When you get into line at a cafeteria, your goal is to have dessert, and you want the chocolate cream pie that’s at the end of the line. If you don’t put it on your tray first, you’re going to end up with too many things on your tray when you get to the end of the line.
You’re not going to have the budget for the chocolate cream pie.
This is what happens when you put together budgets for clients. You forget about the things that are most important to make the budget work, like having the right people in the right roles and the right positions.
When that happens, you put things on a tray that’s already full, like video walls, flying sound systems, and moving lights. I call these budget killers. You don’t have room left for the people who are going to make the equipment work.
In the process of creating a budget, you promise the client technology without considering the cost of the people needed to deliver it. Now you have to walk your promise back. Nobody wants that.
So, start with what’s most important: PEOPLE. Then, you can have a realistic conversation about what technological capabilities the customer can actually afford.
If you want to explore value engineering further, take a look at this video [11:27–21:27].
Leave a Reply