Consulting Firm Metrics that REALLY Matter

Posted by Shari Gardner on May 4, 2017

Consulting Firm Metrics

A panel of industry experts share their tips with consulting firms...

As your firm goes through the year and works through your business plan, you’re probably looking for that edge.  How can you get better profitability out of your current projects and win new clients and new projects to drive additional revenue?

In a recent webcast, “Consulting Firm Metrics that REALLY Matter in 2017”, Brian LaMee, Deltek’s Sr. Director of Product Marketing, facilitated a candid and informative conversation with a panel of industry experts about consulting firm metrics. The panelists: Michael Fauscette, Chief Research Officer at G2Crowd; Tom Rodenhauser, General Manager of ALM Intelligence; Dave Hofferberth, Founder and Managing Director at Service Performance Insight;, and Amy Champigny, Director of Finance at Carpedia International, Ltd. shared their insights around data and what they believe are the most important metrics consulting firms should be tracking.

<Watch the webinar>

Following is a recap of the webinar/panel discussion:

How does having key data at your fingertips impact your role within your firm or your clients’ firms?

The internet has really changed the way businesses are run today because it has given firms access to so much more data. When a firm has access to better data and is able to quickly get that data to the right people (and in the right context), it can significantly improve decision-making and the firm’s bottom line.

Technology has advanced significantly in recent years. If you look back a decade or two, you can see the tremendous progress we’ve made in terms of data. Back then, you may have had access to a monthly or quarterly report. Now you can get detailed reports on-demand that enable faster and more accurate decision making, and that tell you more precisely what you need to do.  Data reporting can be tailored to role-based needs and provide tremendous insights.

For example: What are the skills that are making our firm the most money or growing demand more quickly? What are the variances between what we planned and what actually happened? There’s no doubt access to detailed, real-time information helps firms gain insight, make better decisions and increase firm profitability.

Which metrics are most important to your firm and the consulting firms with whom you work?

There are lots of metrics consulting firms can track, but which ones should they be focused on to guide the business?

Most consulting firms track financial metrics around revenue growth, backlog, pipeline, average order value and profitability.  These metrics tell them what their cash flow looks like and how successful they are in terms of growing the firm and delivering profit.

Since very few firms deliver more than 90% of their work on time and within budget, every firm should be tracking metrics that show how effective they are in getting projects completed on time and within budget. Fees and compensation are also important for every consulting firm to track, since they are profit drivers for firms.

A firm’s business model and size/type of business is key in determining which metrics to track.  “Billable Utilization” is usually more important for large firms to track, while “Days Sales Outstanding” and “Bid to Win” are generally more important for smaller firms.   Smaller firms, especially those experiencing fast growth, should also be tracking accounts receivable in conjunction with their cash position, since periods of fast growth can wreak havoc on a firm’s cash flow. For firms using a fixed fee billing model it’s important to track costs and how they fluctuate relative to revenue.  

Well-performing consulting organizations, regardless of their firm size or firm type, tend to have a more disciplined approach to measurement and tracking. In terms of metrics, it’s important that firms stay focused on the outcomes they are trying to achieve and to measure the things that drive to that outcome. If you’re not getting the outcomes you want, be willing to adjust and try different things. Ensure you are using the right tools and have a systematic way to collect and report on data.

<Watch the webinar>

Has there ever been a time you could not measure a specific part of the business?

How did that impact your firm (or client’s firm) and what you were trying to do?

Everyone has a story to tell about a time they weren’t able to get the data they needed in a way they wanted to see it.  Usually this is because they didn’t design a systematic way to collect the data or are not using the right tools. Firms need to have a single source of truth for managing and consuming data.  If you don’t have a systemic approach to data collection, you will never have your data in a way that is usable and dependable. Data will be hard to find, you’ll be piecing together reports, and you won’t be able to trust the accuracy of the results.

This is where technology comes into play. The systems you are using and how they are implemented is extremely important. One of the biggest breakdowns occurs when firms use several systems to run their business and these systems aren’t integrated. If your PSA, CRM, and financial systems aren’t tightly integrated and talking to one another, you won’t have a single source of truth for data collection, data flow, measurement and reporting.  Being able to accurately track and benchmark KPIs is predicated on having that single source of truth.

Words of Wisdom and Advice?

In the webinar the panelists shared many practical tips. Here are just a few:

“There’s a very disciplined trajectory firms follow when they grow from 10M to 50M to 100M. The specific obstacles they run into when they hit each threshold is usually based on incomplete information. They just don’t have enough information to make insightful decisions or know where to go next.” 

Tom Rodenhauser, General Manager, ALM Intelligence

The larger you get, the more you have to track...Figure out where you’re struggling the most, then determine the KPIs to track that. Start tracking real-time to help you improve performance. Every year it will change…What’s important is to be consistently focused on improving.”    

Dave Hofferberth, Founder and Managing Director at Service Performance Insight

“Be willing to adjust, try different things if you’re not getting the outcomes that you want. If profitability is not where you want it, then figure out what you can adjust.”

Michael Fauscette, Chief Research Officer at G2Crowd

“If you’re new to this, one place to start is with your financials. Take your budget vs actuals and look at the biggest variances that have a major impact on your profitability, and work backwards from there.”   

Amy Champigny, Director of Finance at Carpedia International, Ltd.

Next Steps

  1. Watch the full on-demand webinar, “Consulting Firm Metrics that REALLY Matter in 2017”
  2. Download a free copy of 2017 SPI Benchmark Report, compliments of Deltek
  3. Learn more about Deltek’s Professional Services Automation solutions for Consulting Firms