This article was originally published on the Deltek Vision Professional Services blog by Patricia Baago Ishoj
Professional services firms thrive on devising best-practices for their clients that are measured against standard benchmarks. To grow profitably, project-based firms must maintain absolute control over the four areas that run the business:
- Leverage – how is the firm structured in terms of partner-to-consultant ratio?
- Utilization – how does one maximize billable hours, while avoiding burnout?
- Fees – should billable hours be determined by the firm or the market?
- Compensation – can a firm afford market rates for top talent, and if so, should it?
Consulting firms face an interesting conundrum. One could assume that all four levers are equally weighted in terms of controllability. The leadership of the firm can manage the business by making smart, effective decisions in deploying resources, staffing engagements, charging appropriately for services, and paying its talent. However, it’s difficult to spread your attention by dealing directly with all four areas, and leverage ratios and utilization you have more influence over, while fees and compensation are tied to market conditions. So what’s a professional services firm to do?
With the continuing economic roller coaster, controlling the uncontrollable means consulting firms must truly optimize project and financial management capabilities within their cyclical business. This, in turn will help your firm profit consistently. Historically, firms used point solutions for planning, staffing, and financial reporting – each individually effective, yet divisive when it comes to information sharing and visibility.
The strong consulting firms today are moving to connected, project-based solutions to manage their business and processes. If your firm is still working with a fragmented view of projects, financials, clients and resources, maybe it’s time to optimize your own business management functions, as you do so wonderfully for your clients. Wouldn’t a single, connected, project-based ERP system like Deltek Vision, that can support profitability and growth, make sense? Then your firm will have a better grasp on the ‘uncontrollable’.
Did you find this article interesting? You might also enjoy reading the 4 Benefits of the Agile Professional Services Firm.
Patricia Baago Ishoj is a tenured consultant with Deltek’s professional services team.
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