Forecasting Bottom Line Profitability at the Professional Services Organization

Forecasting Bottom Line Profitability at the Professional Services Organization

Kayne McGladrey

Most Professional Services managers or directors annually participate in the management accounting exercise of forecasting future billings and profitability. The prevalent model in experience-based Professional Services Organizations (PSO) are time and materials-based billing projects, where charges to the client are based on the actual hours consumed, typically up to a not-to-exceed number. However, the dominant model in an efficiency-based PSO is deliverable-based billing, often at a fixed price. Two distinctly different formulas are required to calculate billings and profitability across these practice areas and billing types.

Strategic Client Portfolio Management for the Professional Services Firm

Strategic Client Portfolio Management for the Professional Services Firm

Kayne McGladrey

Strategic client portfolio management is a challenge for most Professional Services firms. As a result, professional services managers at a significant number of firms are just avoiding the topic. This is unfortunate, as it means sales teams and senior partners are pursuing potential and existing clients based solely on their own intuition rather than a systematic assessment. Firms that strategically decide on which clients are the most important for their limited sales and marketing resources have a competitive advantage when compared to spreading these resources too thin.

Standard terms and conditions can still confuse clients

Standard terms and conditions can still confuse clients

Kayne McGladrey

Statement of Work documents are one of the most common contracts a Professional Services Manager will touch in the course of their day. These documents are typically based on a master template that incorporates many common terms, conditions, and assumptions.  These standard terms can confuse potential clients, even well after an engagement has been booked.

A KPI as a marketing campaign to drive Professional Services sales

Kayne McGladrey

Traditionally, Professional Services Key Progress Indicators (KPIs) focus on the financials of the embedded Professional Services Organization or firm. KPIs are useful as a dashboard for understanding and communicating the health of the business, and for decision-making. However, those decisions primarily concern the Professional Services Organization and are of limited interest to the rest of the firm. Bookings, billings, backlog, revenue per region, utilization – these are not top of mind for a sales team.

The Utilization Key Progress Indicator

Kayne McGladrey

Utilization is one of the more common Key Progress Indicators (KPI) for a Professional Services firm. Firms will often set the utilization KPI between 65% and 80%, and expect their professionals to spend the rest of the year on non-billable activities, training, holidays, and vacation. While the number of days in a calendar year is a standard amount, there are several ways of calculating the number of possible workdays in a year. It is important to understand the ramifications of that calculation and how it affects the Utilization KPI.

Marketing for an embedded professional services organization

Kayne McGladrey

Outside of the disciplines of advertising and public relations, professional services firms historically have struggled with marketing activities. Unless there’s a Request For Proposal out in the vertical market served by a given firm, there’s not a lot of effort to differentiate the value of a services firm to potential clients. At external professional services firms, a senior partner might have a personal book of business that they manage and that could generate opportunities for the firm. The buyer’s side of the equation is similar. Clients primarily hear about new services firms from their existing network, or indirect sources of advertising about the value and capabilities of a firm.

Tools for Professional Services Managers

Kayne McGladrey

I've been transitioning some of the operational parts of the business to our team lead. This has given me reason to review the tools I use to manage the Professional Services organization. There's one tool that I use above all others - something I pick up many times in the same hour even when I'm not in the office.

Customer surveys for professional service engagements

Kayne McGladrey

I thought about our old customer survey process in the course of preparing for upcoming staff reviews. The old process consisted of sending a customer a short email and a link to a five question survey. If the customer hadn't replied within a week, we sent them a reminder about the survey. The email addressed the customer by name and included my phone number in case the customer wanted to speak to me. The customer survey used the Netflix rating system, which is a five point rating scale ranging from "I hated it," to "I loved it." This isn't a unique process. We recently chose to replace it with a process we feel will be more effective.

Scheduling a lack of productivity

Kayne McGladrey

Scheduling new Professional Services engagements is a major area of focus for an effective Professional Services Manager. Consultants don’t typically like extended downtime between customers, and customers rarely want to wait for their engagement to start. I’ve stripped the scheduling process to the bare minimum, which is a stark contrast to how I’ve seen other Services Managers historically conduct this job function.

The role of consultants

Kayne McGladrey

The team I support deals in matters of regulatory and security compliance. We have specific competencies in privilege management and auditing of privileged users. It's an honor to be the trusted advisors to Fortune 500 and Global 1000 companies.

Staff retention and measurements

Kayne McGladrey

My colleagues produce art, and I apply engineering methods to measure that art. This simple discipline has become part of our staff retention efforts.

A consultant typically has a simple set of tools to work with. They might have a basic template for a document that they will prepare for a client, or some template illustrations that can be re-used across clients. In the hands of the untrained practitioner, these templates might seem like a simple exercise of filling in the blanks on a form, or re-arranging box and line illustrations. The consultant uses these basic tools only as a guideline, alongside a series of conversations or workshops with customers. Those conversations are an inherently artistic, creative process - to use the existing tools and their individual experience to create something new for a client.

Recruiting

Kayne McGladrey

Recruiting is one of the continuing responsibilities for me at work. Lately, I’ve been looking into expanding into new markets of candidates outside of the smart people that I know on LinkedIn. I support two Air Force veterans and a former SEAL on my team, although that’s not a population I’ve specifically recruited.