What Factors Affect Productivity and Profitability in Consulting?

25-Oct 2022
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Chelsea Williams SENIOR COPYWRITER

Notoriously fast-paced, consulting is an industry that many may assume is wildly productive.

However, despite the global consulting services market having been valued at $900 billion in 2021 and expected to reach $1.3 trillion by 2026, consulting industry revenue has struggled to keep up. Even before the COVID-19 pandemic — between 2015 and 2020 — many firms saw a steady decline in revenue. 

Despite skyrocketing demand due to a newly remote-first business landscape, consulting leaders are struggling to build and hold onto productive teams of consultants post-Great Resignation. Travel limitations and the desire for flexible work have made the typical high-pressure consulting job less appealing to recent grads.

While these trends have resulted in some unfortunate outcomes, all is not lost. Your consulting firm can still be highly productive — and profitable. Here’s how.

1. Supportive Work Environment and Competitive Pay

While you may want your consultants to come to an office at least a few days a week, it’s important not to overlook the impact of work environment on productivity. Open spaces for collaboration can be helpful, but your team also needs to be able to do focused independent work. Make sure your workspace is set up to accommodate all types of work styles.

Part of a supportive environment is having the tools necessary to do the job well. The risk of burnout, especially due to monotonous labor, is something most employees are hyper-aware of. If your team works from home or engages in a lot of on-site work with clients, equip them with the consulting tools they need to be productive anywhere without being overwhelmed. 

There’s another factor in how you treat employees that can make or break their motivation to get things done: how well they’re paid. The days of simply fair pay are long gone; if you want to attract top talent, you’ll need to offer competitive compensation.

When your people feel valued, they’ll be less tempted to engage in quiet quitting and thus do more — and better — work.

2. Awareness of Billable Time

In consulting, time matters. And it matters to individual consultants, not just your leadership team.

If your consultants don’t understand the impact of their billable time on the company’s overall financial health and, therefore, their own job security and impact, they may be resistant to time tracking. On the other hand, transparency about profitability and each person’s role in supporting profit goals can inspire them to be fully invested in keeping track of how they spend their time. Even if your team is comprised of contractors, there’s value in informing them about the why behind your time-tracking policies.

From your perspective as a leader, accurate time records are essential — and not just for billing your clients. You need robust reports that help you review actual vs. estimated and billable vs. non-billable time to make important decisions, such as when to bring on new consultants or when to go after your next big client.

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3. Smart Cost Management

A jump in productivity won’t have as large an impact as it could if you aren’t also minimizing operating expenses. One of the quickest ways to increase profitability and protect the growth your team is producing via productivity is to regularly review questions like:

  • Do we need to pay for that office that most of our team doesn’t use? 
  • How much are we spending on travel, and is every trip a must?
  • What unused and underutilized software can we cut?

Obvious though they may be, these questions are too often overlooked — and for too long. If you can no longer justify an expense, it’s time to make changes.

Increasing client costs could also be cutting into your profits. If you haven’t raised rates in a while, you’re likely to be surprised by the impact of inflation and rising labor costs. Dig into your project expenses to determine where you may be leaking money.

4. Client Retention

Getting the most value possible out of each client relationship will be difficult if you’re doing mostly one-off projects. Recurring work can protect your business from economic ups and downs and provide a source of consistent revenue even in times when your team’s productivity wavers.

Plus, the data leans heavily in favor of selling to existing clients. Invesp reports that the probability of selling to an existing customer is 60–70% versus just 5–20% for a new customer. Yet, only 18% of companies focus more on customer retention than acquisition.

That’s likely because retaining clients takes dedication and creativity. Long-term relationships may be hard to achieve with a team of contractors or consultants who are accustomed to short-term wins, but a shift to prioritize recurring client work could pay generous dividends.  

5. Universal Project Visibility

Especially if you’re managing recurring and one-time projects, your firm needs a single source of truth so your leaders and consultants can see task assignments and progress, budget usage and more for each client. In today’s digitized world, that visibility will come from a software platform. 

A single-function software won’t cut it, though. Having only a CRM or project management tool means each segment of your clients’ journeys will remain siloed. 

Instead, you need smart tech as a partner: a platform capable of giving everyone, no matter their role, the visibility they need to maximize efficiency and productivity. Ideally, you’ll have customizable permissions and a client portal to offer project visibility internally and externally.

6. Useful Applications of Automation

Perhaps the greatest benefit of having end-to-end software built for client work is the large number of mundane tasks you can automate. Every member of your team, no matter their responsibilities, has an opportunity to become more efficient.

If you haven’t already, consider offering your team access to:

When you choose the right tech stack for consulting, you’ll make everyone’s life easier — and clients happier. 

In today’s competitive labor climate, your team’s productivity and profitability depend heavily on holding onto great people. Get more customized advice for consulting: Download our guide

The People Factor: Retention Strategies for Consulting Businesses

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