How to Improve Profit Margins for Your Consulting Services

Research shows that gross profit margins above 60% are possible when consulting firms have visibility and the proper project management tools in place. Having one source of truth allows consulting firms to deliver higher quality projects and more satisfied clients while better supporting strategic and revenue goals. Annually, I partner with Deltek to put together Service Performance Insight’s (SPI) Professional Services Maturity™ Benchmark Report. This year’s findings support the three ways I believe consulting firms can increase profits through visibility.

1. Why revenue forecasting is valuable and its impact on KPI’s

Conditions can change quickly −flashback to how the economy was moving ahead just fine in February 2020−and then March happened! Professional services (PS) leaders who succeed during challenging times do so because they immediately adjust their plans and revenue forecasts to ensure their finances are in order. Professional services executives continually monitor their plans and forecasts so they can alter staffing requirements, sales initiatives, and cash flow, as conditions change.

You can see this reflected in Table 2 below in a table from this year’s SPI Benchmark Report.

2. How visibility can help firms easily adapt to market changes in real time

It’s not a surprise, but according to Forbes improving visibility and data quality should be a top priority for small business leaders. Consulting and professional services firm leaders who have visibility into project and company performance can modify strategic as well as tactical plans on they fly, concentrating on specific service offerings to make quarterly and annual goals. As services are being delivered, visibility across the organization shows leaders how margins and timelines could change and the impact they will make on both revenue growth and profitability.

In the table below, you can see that high performing firms provided 11% more real-time visibility compared to the rest.

3. Implementing software solutions to support your core business functions

As professional services organizations grow, so does the complexity associated with their management. For the past few decades leading professional services firms have implemented integrated business solutions such as project management software to help them improve operations. These solutions have given them the tools and resources to create better forecasts, market and sell strategically, hire people with the skills that meet the demands and cost of the services sold, and then execute efficiently and effectively to drive client satisfaction and meet financial objectives. This integration allows for greater visibility across the organization, yielding higher profitability and client satisfaction.

Want to learn more about how your firm can increase profits?

Join us on Tuesday, October 18, when Deltek and I will discuss how to improve revenue forecasting with project visibility. Also, check out the 2022 SPI Professional Services Maturity™ Benchmark Report to gain access to the latest industry benchmarks and learn how fellow consulting firms are increasing their profits in the market today.