Where To Start In Boosting Profitability
When it comes to boosting your firm’s profitability, knowing just where to start can often be daunting. So, the first step to tightening up your operation is to break down the key areas of your business - the ones that have the most impact on profit - and carefully analyse each.
As a professional services firm, the key areas that have the biggest impact on revenue will include leverage - how your firm is structured in terms of manager to consultant ratio; utilisation – how it maximises billable time while avoiding staff burnout; fees – how it defines rates; and compensation – how much it invests in the right talent.
How much visibility do you have into each of the above elements of your business?
If the answer is ‘not much’ then the next step is to establish priorities for change. At this stage it's worth noting how external factors can restrict your decision making in two of the key areas; namely fees - where you are largely at mercy to the ‘going rate’; and compensation - as consultants will base their pay demands on changing market conditions. This means it can be practical to firstly improve resource and financial management as these exist solely within the realm of your control.
Here, using an integrated enterprise resource planning (ERP) system will give you the efficiency and visibility you need to take on all kinds of resource and finance issues; helping with maximising billable time, providing tighter control over costs, resolving the over/under staffing balance on projects, shortening billing cycles and monitoring variations in estimates. The impact could leverage the revenue you need to take your firm into the future.