11 Metrics That Should Not Be Missing in Your Consulting Firm Strategy
It is essential to keep track of certain key metrics within a consulting firm. Not only is this helpful in terms of evaluating and improving performance, but it’s also crucial to review and amend the overall consulting firm strategy. Furthermore, it helps with understanding the impact and results it has on consulting firm revenue.
1. The number of potential customers you need to reach
Whether it’s on a daily, weekly, monthly basis, there’s a specific number of potential clients you need to reach. This is necessary in order to close the number of deals required to keep the business operational. You might have a specific number in mind based on start-up projections or past findings. Either way, it’s an important metric to keep track of. It ensures that the organization isn’t slowly creeping towards its end.
2. The number of potential customers you have reached
Once again, this can be on a daily, weekly, monthly basis. But the only way to avoid a problem is being able to identify it in time. It’s not going to help the business much if they find out that they reached the potential customers needed too late. This would be the case, once they only realize they have to use the missing money and they don’t have it.
3. The number of overall conversions
This is how many sales you have made in the certain period of time. For obvious reasons, this metric will give profound insight into consulting firm revenue.
5. The number of proposals you’ve sent
Often clients will request something in writing after a sales call. They might be happy with the service. However, often they want a detailed outline of the services and pricing to discuss with the board or simply send through to the accounting department. Either way, they essentially need something on paper in order for them to make their final decision.
This is an extremely important metric to keep track of. The reason is that making and sending proposals can take up a lot of your time. If you end up sending out 20 proposals a day and making only 1 sale something is seriously wrong somewhere. Once again, this could have several reasons. This could be due to the specific target audience or the person making the sales calls or creating the proposals. Also, it might be an even bigger issue in terms of your service offerings and pricing.
6. The number of proposal deals that are closed
As we’ve already mentioned, this is one of your consulting firm performance metrics that has a direct impact on your consulting firm revenue stream. You need to compare this number with the amount of proposals being sent. This enables you to make certain assumptions for further investigation.
7. The average revenue amount per project
The devil is in the details as they say. If the ROI per project doesn’t make sense, you will be feeling it in your pocket when it comes to overall revenue.
8. The average monthly revenue
This is obviously what per project pricing and ROI has the most impact on. In the end, this is what is making or breaking a business. Without enough monthly revenue to cover general overheads and team member’s salaries, the organization is bound to shut its doors sometime in the future.
9. The resource utilization rate
This is how many of the team’s hours are billable. According to the average consulting performance metrics, your consulting firm strategy should be built around 4 billable days per workweek. 5 billable work days would be ideal. However, it’s simply not realistic when you take the time spent on daily operational activities such as admin and meetings into account.
10. The churn rate
Getting a customer is one thing, keeping them is quite another. The churn rate is the amount of existing customers that you’ve lost in a certain amount of time (which is usually monthly, quarterly or yearly). The consulting performance metrics or seeing whether there might be an issue with the current consulting firm strategy are reasons why you should keep track of this. There is another good reason though. It’s actually more expensive to onboard a new client than keeping an existing one. Also, you should not lose clients faster than you gain them. The consequence would be that your business might be a hop, skip and a jump away from permanently closing its doors.
11. The number of days sales are outstanding
Sales outstanding is just a fancy way of saying “clients that owe us money”. This is a general business problem that most complain about and isn’t consulting firm specific. But you will still need to build your consulting firm strategy in such a way that you mitigate the risk that comes along with this problem. Imagine your team billing for two weeks’ worth of hours, but the client doesn’t pay? In certain cases, this can be disastrous.
Most businesses adapt their consulting firm strategy to include a buffer. Thus, any clients who don’t pay won’t have such a profound impact on the day-to-day operations of the company. That being said, the thumb rule is that once an invoice is 50+ days overdue, you need to start asking yourself some difficult questions. Are you targeting the wrong market segment in your consulting firm strategy? Is there a pricing issue or is it a reflection of a difficult time the economy is entering?
The more overdue days you are working with, the more “save the day” cashflow you will need. In order to get that buffer in the first place, you will need to increase your conversion rate. This, in turn, requires more productive and effective working hours from the team.
You can clearly see what a dramatic domino effect one of these metrics have on an organization. For this reason, it’s so important to keep track of each of them. Whether it’s reviewing and amending the consulting firm strategy, evaluating and improving performance or keeping track of revenue – each metric plays a vital part in keeping your consulting firm operational and successful.
If you would like to get your hands on more valuable resources that will fast-track your consulting business on its journey to achievement, please visit the Consulport Academy here.