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.
A KPI that tracks increased license sales or subscription revenue, however, is interesting.
That’s the sound bite for this KPI. It’s a compelling reason for a sales professional to promote and sell Professional Services to their new customers. This KPI is ultimately an internal marketing campaign, rather than an outward facing one. This is telling the sales professional that their initial investment of time in selling Professional Services will have a direct reward on their quota attainment the next fiscal year. Few sales professionals will turn this down – anything that makes quota attainment easier is worth a serious look.
The analysis to get to the sound bite is a bit harder than it looks. On the surface, you need to be able to differentiate new customers who bought professional services vs those who did not. You then need to be able to look at how much they spent a year later. For the data to be credible, you’ll need at least three years, as anything shorter can be discounted as a market blip and not a trend.
The reasons this can be hard to calculate have to do with back end financial systems, and how deals are structured. The financials are easy: you need a product category or SKU(s) to identify Services in the ledger, dates of sale, and the ability to track transactions per client over time. How deals are structured is the harder part. It’s not uncommon to see two transactions from a single client if that client had separate budgets for capital expenditures and operational expenditures (or some other financial categories). Under those circumstances, the client should be treated as though they bought Services as part of the initial deal, even if the transaction dates were different.
Although the initial implementation can be a challenge, the advantage is that this KPI has both short term and long-term benefits. In the short term, it motivates sales of services; in the long term, it increases revenues for the firm. Those revenues come from customers who remain satisfied a year later from an initial Services engagement.