2024 Professional Services Benchmarks

By: David Hofferberth, Founder and Managing Director of SPI Research

Understanding key industry benchmarks is essential for consulting and professional services firms to evaluate their performance, set targets, understand client needs, manage finances, and gain a competitive advantage. The most successful firms are the ones that are consistently evaluating key performance indicators against past performance and their industry peers. 

My firm, SPI Research is dedicated to helping professional service organizations (PSOs) make improvements in productivity and profit. Each year, I team up with Deltek to conduct a benchmarking survey of thousands of consulting and professional services organizations. This year, a record number of respondents completed the benchmark survey. Here is what we learned:

Important 2024 Professional Services Benchmarks, KPIs and Trends

As shown in the table below, many important metrics went down last year, most notably deal pipelines, billable utilization, and project margin. Employee attrition went down slightly to 12.5% as uncertainty led to fewer people switching companies. One heightened area of concern for the industry centers around deal pipeline which was down last year to 154% (from 183% just a few years before), indicating a slower year for many PSOs.

Profitability or EBITDA (earnings before interest, taxes, depreciation, and amortization) decreased to 15.4% for consulting and professional services organizations. A “good” EBITDA margin is industry-specific, however, an EBITDA margin in excess of 10% is perceived positively by most, that said that is the lowest in the last 4 years. There are warning signs that professional services organizations may face increased headwinds. On-time project delivery decreased last year to 75.7% as clients demanded an increased level of service and professional services organizations took on larger projects.

The movement to remote service delivery appears to have peaked at around 65% in 2021, or two-thirds of all billable hours. PSOs have begun to shift some of their service delivery on site, but SPI Research doubts it will ever reach 50%, meaning the tools and technologies available to consultancies must continue to evolve and help improve overall productivity.

Below: Important Professional Services KPIs (5 Year Trends) from 2024 Professional Services Maturity™ Benchmark Report

AI Takes Center Stage

According to McKinsey, nearly every professional services organization wants to use AI, but only 65% of firms are successfully implementing AI now. fully expect AI to boost growth, productivity, client satisfaction, and profitability for professional service organizations (PSOs) in 2024 and beyond. Leading providers have integrated AI into their solutions for tasks like planning, sales, staffing, and governance, and its influence will only grow. As AI services expand, PSOs are aligning AI strategies with business goals, initially focusing on key processes to ensure results. While AI faces skepticism and potential regulation, its benefits—such as improved employee productivity and enhanced client strategies—are expected to outweigh the risks, ensuring it remains central to future business success.

Visibility Matters

As you can see in the table below, increasing levels of business process maturity do result in significant performance improvements across the board in terms of revenue, forecast, and utilization rate for professional services organizations. The firms that make investments in systems to provide visibility and appropriate levels of business control are clearly performing better. Nearly half of the highest performing professional services have PSA and project management systems integrated with their core financial solutions.  This integration gives executives the ability to understand project related data in real-time and leads to significant advantages in profitability and growth.  As you see below, the highest performing PSOs, those with better information visibility have an average deal pipeline of over 250%, a higher percentage of bids won, and a project margin greater than 50%.

Below: Maturity Levels of Professional Services Organizations as Reported in the 2024 Professional Services Maturity™ Benchmark Report

It's important to note that maturity does not mean time in the market. In fact, SPI Research found that high levels of performance have far more to do with leadership focus, organizational alignment, effective business processes, and disciplined execution. Relatively young and fast-growing organizations can and do demonstrate surprisingly high levels of maturity and performance excellence if they have a clear focus.  

Below: Comparison of High Performing Professional Services who Use PSA Solutions (from 2023 Professional Services Maturity™ Benchmark Report)

It wasn’t too many years ago that PSOs invested very little in information technology for internal use. Now, the market has clearly demonstrated the benefits of information, especially in real-time. Capabilities such as collaboration tools, machine learning (ML), professional services automation (PSA) tools, and artificial intelligence (AI) continue to improve operational visibility and increase efficiency for consulting and professional services firms. And the data from the Professional Services Maturity™ Benchmark Report shows a clear correlation between information visibility and performance. As shown above, over 83% of the highest-performing professional services firms (HPP) use PSA, and many have it integrated with their CRM and core financial management solutions, which gives executives the ability to understand project-related data in real-time.

Discover More Key Benchmarks & Industry Trends

With market uncertainty and growing competition remaining top of mind this year, it’s more important than ever to benchmark yourself against other professional services firms. I invite you to access the full 200+ page 2024 Professional Services Maturity™ Benchmark Report here or join me and other consulting leaders for the 2024 Professional Services Benchmarks Reveal On-Demand Webinar. Use these resources to understand how your firm compares to your competition and discover more key metrics that help you analyze and improve business outcomes.