Our reader poll today asks: How willing is your organization to walk away from low-margin business?
- Very — we do it all the time: 29.06%
- Somewhat — it has to be really low margin before we consider walking: 41.89%
- Rarely — we only walk away in extreme situations: 21.13%
- Never — if they’re buying, we’re selling! 7.92%
Is the work worth it? There’s no shortage of “opportunities” to do work at low margins. Unfortunately all too many of you take on work that’s likely not worth it. Even if something is marginal in terms of value, you’re likely losing money on it. The hidden costs of administration, contracting, selling and servicing are rarely factored into the value you’re delivering and how much you’re getting paid for it. Add to that the opportunity cost of not being able to pursue higher-margin work, and you’re definitely in a negative situation.
Sure, there are times to take on low-margin work, like a pilot or trying to land a new customer, but those should be strategic exceptions. If you’re finding a lot of low-margin work on your plate, take the time to do the analysis of the true cost of delivering that work and add to that the opportunity cost of lost higher-margin work. That might help you make a compelling case for walking away from that low-margin project (or at least help you to price it more appropriately).
Do you agree with these poll results? Let us know in the comments below!
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These results were originally a SmartPulse poll in SmartBrief on Leadership which tracks feedback from more than 240,000 business leaders. Get smarter on leadership and sign up for the SmartBrief on Leadership e-newsletter.