The Hidden Cost of Taking Projects That Don’t Fit Your Strategy

Introduction - Projects That Don’t Fit Your Strategy

In the fast-moving world of construction and engineering, not every project is a good project. Yet many SMEs still chase every tender, quote, or contract that comes their way.

At Jones Financial Accounts (JFA), we see the same issue repeatedly, companies taking on work that looks profitable on paper but quietly drains cash, time, and energy because it doesn’t align with their business strategy.

This blog explores why strategic alignment matters, what goes wrong when it’s ignored, and how to use financial insight to make better project choices.

(Related reading: How to Align Your Financial Strategy With Your Business Vision)

What You Need to Review

When deciding whether to take on a project, you need to assess more than just the headline revenue. A CFO-level review considers five key areas, each ranked by impact:

1. Profitability vs. Effort (Highest Impact)

   Many projects appear profitable until you factor in staff hours, site costs, or material volatility. Construction businesses often forget that a 20% gross margin can quickly shrink to 5% when variations, delays, or retentions hit. Always calculate profit after factoring in these risks.

   
   

2. Cash Flow Timing

   A profitable job that pays 90 days after completion is far riskier than a modest job with weekly valuations. Review your project cash cycle, how long before you see the cash? A misaligned project can lock up working capital for months, strangling your ability to fund future jobs.(You can test your exposure using our Working Capital Calculator).

   
   

3. Operational Capacity

   Before you say yes to new work, check if your current resources, staff, subcontractors, equipment, can deliver without burning out the team. Overstretching often leads to mistakes, overtime, and rework, eroding both profit and morale.

   
   

4. Strategic Fit

   Ask yourself: Does this project move us closer to our goals? If your company is targeting commercial growth but takes on small domestic jobs “to keep busy,” you’re splitting focus and diluting brand reputation. Every project should strengthen your positioning, not distract from it.

   
   

5. Client Relationship Potential (Long-Term Impact)

   A one-off project with a difficult client rarely leads to referrals. Projects aligned with your ideal customer profile (industry, size, payment reliability) often deliver repeat work and lower marketing costs long-term.

Why It Matters for Businesses

• A strategically aligned project contributes to your brand’s direction, strengthens your team, and produces consistent profits. For example, A civil engineering firm, turned away three low-margin projects and focused on a repeat contract with a developer aligned to their 3-year growth plan. Within six months, their average gross margin rose by 9%, and cash flow stabilised.

  
  

• When you take on projects that don’t fit your strategy, the real cost isn’t just low margin, it’s distraction. Unaligned work consumes management time, pulls key staff off strategic projects, and often damages supplier relationships due to stretched resources. The opportunity cost, what you could have earned instead, is the real loss.

  
  

Ignoring alignment also sends the wrong message internally. Your team stops understanding what “good business” looks like. You end up reactive rather than proactive, always busy, rarely profitable.

(Related post: Expanding Your Business? The Numbers You Need to Review First)

Strategy to Get It Right

Aligning your project decisions with strategy doesn’t mean saying no to growth, it means growing smart. Here’s how:

1. Create a Decision Filter

   
   

   Build a simple checklist before taking on any new job:

   • Does it fit our target client profile?

   • Does it meet our minimum margin threshold?

   • Does it strengthen our long-term goals (sector, geography, capability)?If the project fails two or more, walk away.

     
     

2. Use Financial Forecasting to Stress-Test Scenarios

   
   

   Before signing contracts, model how each project impacts cash flow and overhead absorption. If adding a £300k project means hiring extra labour or leasing new kit, the true margin may fall below target.(Free tool: Cash Flow Forecasting Template)

   
   

3. Review Margins Monthly

   Management accounts should show job-by-job profitability. Review gross margin variances early, a 3% drop caught in month one is easier to fix than 10% lost by project completion.(Learn more in: How Management Accounts Help You Make Smarter Business Decisions)

   
   

4. Empower Site and Finance Teams Together

   Strategic alignment isn’t just for directors, site managers should understand how project profitability links to business growth. Hold monthly finance reviews where site teams discuss costs, forecasts, and outcomes. It builds accountability and awareness.

   
   

5. Communicate Strategy Clearly

   Your estimating, finance, and operations teams should all understand your strategic priorities, sector focus, job size, preferred client type. Consistent communication reduces rogue decisions and keeps the company rowing in the same direction.

Common Mistakes

1. Chasing Turnover Over Profit

   Many firms mistake revenue growth for success. In reality, an extra £1m turnover at 10% margin is far less valuable than £500k at 25%. Chasing “busy work” burns cash and hides inefficiency.

   
   

2. Ignoring Opportunity Cost

   Every resource, from your estimator’s time to your project manager’s attention, has a cost. Saying yes to the wrong project often means saying no to a better one that comes later.

   
   

3. Lack of Post-Project Review

   Too few companies analyse which jobs actually delivered strategic value. Reviewing post-project financials isn’t just about margin, it’s about lessons learned: Did this client pay on time? Did it open new markets? Did it help the brand?

   
   

4. Misunderstanding Risk Pricing

   Underpricing complex projects to “win the job” may feel competitive, but it’s dangerous. It attracts clients looking for cheap work, not quality partnerships, and erodes brand value.

Misconceptions

“Every Project Builds Experience” Not always. Poorly aligned projects can damage reputation and morale faster than they build skills.

“We Can Afford a Low-Margin Job to Keep Busy” Low-margin work during quiet periods may keep your staff occupied, but it also ties up capital and reduces readiness for higher-value opportunities.

“We’ll Make Profit on Variations” Variations rarely cover the true additional cost once you factor in admin time, disputed claims, or delayed payments.

Why Professional Support Pays Off

At JFA, we help construction and engineering businesses move from busy to profitable. Using our JFA Growth Finance Framework™, we align your numbers, operations, and strategy, ensuring every project strengthens your financial position.

Our management reports, pricing reviews, and cash flow forecasts give directors full visibility before committing to new work. We help you build a system that rewards focus, not just effort. The result: predictable profits, stronger cash flow, and less stress.

If you’re unsure whether your current pipeline truly supports your strategy, book a review, we’ll help you uncover hidden risks and missed opportunities.

Key Takeaways

• Not all projects are good projects, align every opportunity with your long-term business strategy.

• Strategic alignment improves profit margins, cash flow, and operational control.

• Use financial forecasting and management accounts to test fit before saying yes.

• Saying “no” to the wrong job often creates space for the right one.

Wrapping up today's insights, tomorrow we simplify another accounting challenge.