With the recovering economy, professional services businesses are no longer struggling to survive - they’re struggling to manage growth. While it’s a lot nicer to be hiring people than downsizing, growth can easily become a poison chalice for a professional services business. Increasing people costs that accompany growth acts like leverage, and what would have been a trivial problem when you were a smaller business can quickly become life threatening. The good news? There are now better ways than ever to keep an eye on potential side effects and prevent them before they become detrimental:
The professional services industry is about winning and delivering projects, and as your business grows, they're probably going to get bigger and more frequent, which is great! However, bigger projects tend to involve more people and run for a longer period of time. The longer a project runs, the more that can go wrong; the bigger the project, the bigger the consequences of a failure. According to a US Census, the average professional services business spends two-thirds of its revenue on payroll. Because of this, having a project go bad that represents even 20 percent of your quarterly revenue can be seriously dangerous for your business. Your ability to pay employees depends on happy clients paying for work. Thus, each project carries a lot of risks, and that risk only increases with its size and length.
The solution is to improve the quality of your project management with the size of your projects. You need to invest the time upfront to create a solid plan and be prepared to adjust to the inevitable changes that happen when you’re doing work for clients. You’ll also get the best results if you can make the tool you use to track and manage your projects part of your team’s day-to-day activities. This way, your project team can handle problems as they come up (like being over-budget or changing client expectations), rather than having to rely on catch-up meetings where people have a tendency to focus on the positive in front of their peers.
Variable workloads are a fact of life in professional services organizations. While some team members might be going insane with work this month, their workload could be unusually light next month. This creates a scenario where your most expensive resources are severely underutilized. Given the weight of payroll in a services company, someone having a single light week can wipe out any profit from that resource and essentially send the business backward.
A steady flow of work isn’t a realistic goal for many professional services firms. However, it’s important to get a handle on how your staff is being utilized so you can reallocate staff to other projects during slack periods. From a technology perspective, look for solutions that offer both a granular and global view of current projects that also enable you to accurately forecast staff requirements for new and recurring work.
As the tide from recession to growth changes and your business expands, you need to have a closer look at your clients. Are they the kinds of clients that are going to help you grow into the future, or are they like concrete boots that are going to keep you weighed down as the tide comes in? Are they drowning you in high-cost, low-return work? Do they demand a lot of attention but aren't prepared to pay for it?
Perhaps you only agreed to a client project because you were desperate at the time and now that things are coming back to normal, you're being held back by a client that doesn't fit your cost or business model. If so, don’t be afraid to let go.
Of course, given the cost of acquiring a client and the importance of reputation and word of mouth, you need to be very careful about working out which clients need to be fired as a survival decision versus those who might just irritate you. The saying "time is money" is never truer than in a professional service business. Having an accurate picture of the time you spend servicing a client account, including not just project time, but time for support, account management and more, and comparing that with revenue is key.
In today’s economic climate, there are plenty of variables that are beyond your control - the unnecessary flow of money out of your business isn’t one of them. By intelligently applying the right technologies to areas where money is being sucked out of your organization, you can improve your company’s bottom line and your ability to survive over the long term - so click here to start trialing the right business management platform today.