Professional services companies, from lawyers to consultants to marketers, have a bright future ahead, according to Service Performance Insight (SPI Research). With revenue growth rates in excess of 10% for the past two years, the future is there, but it is critical or a company to take advantage of the opportunities at hand.
As companies (including your competitors) brace for growth, there arise a number of key issues that could limit this growth in your company.
Five Professional Services KPIs (and Why They Matter)
In the wake of challenges—talent shortages, increased client demands, geographically dispersed resources, and more—professional services organizations need to continue focusing on delivering high-value and high-margin services in order to meet profit objectives.
Thanks to Intacct and Service Performance Insight, we bring to you the five most important trends and KPIs on which companies in professional services need to focus in 2015 and beyond.
- Annual Revenue Per Billable Consultant (Total Revenue/# of Billable Consultants): This measure of consultant productivity is highly regarded by SPI Research, but must be measured in conjunction with labor cost. Depending on the industry, a fair expectation for this KPI should minimally equal one- to two-times the fully loaded cost of the consultant—with revenue multipliers of three or higher for architectural, engineering, legal and management consulting.
- Annual Revenue Per Employee (Total Revenue/# of Total Employees): Annual revenue per employee is different from revenue per billable employee, as it measures overall organizational effectiveness. Revenue per employee is a powerful indicator of the overall profitability of the firm because if the average cost per employee is known, profit can be estimated representing the difference in cost per employee and overall revenue per employee.
- Billable Utilization (Billable Hours/2,000): Utilization is a major indicator of opportunity and workload balance as well as a signal to expand or contract the workforce. Although PS firms would like to abandon the billable utilization metric (and all the accompanying time tracking it entails), unfortunately there is no other metric which provides as good a picture of workforce productivity.
- Project Overrun (Percentage above Budgeted Cost/Time vs. Actual Time): This KPI is important because any time a project goes over budget in either time or cost; it cuts directly into the PSO’s profitability.
- Project Margin (% of Revenue after Costs): Because project margin is the fuel that drives overall profit, PSO financial performance suffers greatly when margins drop below 40% on average.
Get Key Data, Takeaways, and Opportunities to Improve upon KPIs
The aforementioned information is just a preview. Download the entire report from Intacct and SPI Research, and get the numbers behind the insights, as well as how your professional services firm can adopt these to maximize profits in 2016.
Looking for more? Check out the top killers of office productivity (and how to fix them), and download our webcast recap, The Secrets of Perfecting Project Management.