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When big projects turn bad

AMBLIQUE, an online marketing company founded by 26-year-old Justus Wilde, has found solid success in developing websites and eCommerce solutions. In 2008-09, it recorded revenue of about $1.8 million and has over 20 employees.

The company has a strong pipeline of projects, but Wilde says the company was hurt in the beginning by misjudging its own abilities. Amblique took on a project, but the costs blew out by 40% and it was months overdue.

Wilde says the project hurt the company's profitability, and maintains businesses need to make sure they don't grow too fast.

How has the past year been for you?

It's been a pretty good year for us. We've been focusing on online retail, and we've got the online retail expo in Sydney next week which we'll be attending. The business has grown, not quite as fast as the last three years, but we're looking at about 35% growth for this year which is quite nice.

Describe the project that went overdue. What happened?

It was a very big eCommerce project, and it required a lot of custom development. It actually wasn't the project that was the issue, we could do it. It was just the business was small. We slowly started getting bigger and bigger, and then we suddenly made the leap to this huge project size.

Big projects always look interesting from the outside, and more hours mean a bigger budget. You assume it's going to be nice and profitable, but we learnt that bigger projects aren't necessarily giving you more money.

Why did you think you could do the project beforehand?

It was quite the eye opener. We went in naively, thinking that it was going to be like running a smaller project. But a fair way in, we found that we just went through our costs. We couldn't give up on it, and we were determined to deliver quality, but it was definitely a hard job.

We were talking to the client through this whole time, showing them that everything was being done, and so on, because if you don't talk to the clients then they're going to get uncomfortable and leave. We were having timing problems but he was satisfied.

What did you miss out on by taking the project when you weren't ready?

What you're missing out on are really opportunity costs. You're essentially selling hours in this business, and a project takes up a huge amount of time. We had four people working on this job, with no money coming in, but a list of expenses that kept going up. It stopped us from putting people on to other jobs where we could have gotten money.

It obviously had an impact on our profitability because of all those costs. It didn't kill us but it definitely had an impact.

Did you lose other work?

We had a lot more people on the job, therefore we had a lot more risk. And I didn't like that, because our model is not to have 100s of small clients, but 20-30 key accounts where we can give a good amount of attention. We couldn't give that with this job, and it's better for us to have highly engaged clients where we can give them more attentive work.

What should growing businesses do to make sure they aren't trapped by growth?

I would definitely make sure you have the right systems in place, and it's really not complicated. You need to track where you are in a project, and we've done that by having our workers put down the hours left on tasks, the cost remaining, and so on. We can track projects and say it has "x hours" or "x money" left and we know what we've spent so far in each.

When you're doing lots of projects at the same time, it's easy to just get started on them and not think. But that's the challenge for businesses as they grow, to just look at it objectively and get working while making sure everything will work.

This article first appeared on SmartCompany.com.au, Australia’s premier site for business advice, news, forums and blogs.

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