Do you remember the loveable children’s cartoon character Bob the Builder? His signature yellow hard hat and red toolbox are as recognizable as his famous saying, “Can we build it? YES WE CAN!” When presented with a project opportunity, many contractors quickly respond with enthusiasm like Bob’s before thoroughly considering whether taking on the project makes sense for their business.
A former professor at Arizona State University, Thomas C. Schleifer, PhD, wrote, “Many construction professionals believe they can design or build anything. The pertinent question is, can we build or design it at a profit. Construction isn’t that hard. Construction at a profit is.”[1]
Being awarded the project often leads to the famous adage, “The good news is we won the project, but the bad news is we won the project.” Fortunately, there is a better way to weigh projects that balances the excitement and optimism of a win with the practical need to make a profit.
When in a tough situation like this, many organizations apply a go/no-go test to assess the viability of a potential project, using criteria such as:
- Prior experience/relationship with client
- Geographic location
- Payment history
- Other likely bidders
However, this test does not include a risk assessment of profit potential. If profit potential is not already a measure in your business development efforts, consider including a risk matrix into the discussion before saying yes to the next opportunity.
This classic risk matrix is an effective tool for examining a project’s potential success.
Classic risk matrix
