Industry News

How willing is your organization to walk away from low-margin business?

SmartPulse -- our weekly nonscientific reader poll in SmartBrief on Leadership -- tracks feedback from more than 200,000 business leaders. We run the poll question each week in our newsletter.

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).

 

Mike Figliuolo is managing director of thoughtLEADERS, which includes TITAN -- the firm’s e-learning platform. Previously, he worked at McKinsey & Co., Capital One and Scotts Miracle-Gro. He is a West Point graduate and author of three leadership books: "One Piece of Paper," "Lead Inside the Box" and "The Elegant Pitch."