Professional Services KPIs to Grow Your Business
Professional services departments already face many unique challenges, from acquiring and retaining customers to rolling out new product integrations and features to user training and onboarding. They are the people down in the trenches, representing the face of your company day to day. The work they do is the linchpin of positive customer relationships.
In an economic downturn, when potential for growth may be limited and your company revenue is especially reliant on current customers, the performance of professional services staff is even more crucial. Now more than ever, organizations need to focus on delivering high-value and high-margin services in order to survive.
But in professional services, growing in a meaningful way means investing in people — including the team members who roll out your product or service to customers, those managing implementations, the engineers working on integrations and customization, the training department, and more. That’s where the oft-quoted business adage “What gets measured, gets managed” applies. A good set of key performance indicators (KPIs) will help you invest in your people and therefore ensure your business’s continued success.
Billable Utilization Rate
This refers to the percentage of time spent working on billable tasks. It doesn’t include time spent on business development or internal projects (also known as overhead) because that time is not billed to the client.
Because the billable utilization rate provides a value for services rendered, it’s a major indicator of opportunity. With the professional services industry currently experiencing a slowdown in billable hours, this KPI is crucial for continued success. Tracking the billable utilization rate helps you better forecast adjusted revenue from customers and projects. It also identifies where there are discrepancies between projected and actual billable hours so you can adjust workflows and, if necessary, make cuts to shrink that deficit.
Average Billing Rate
This is the measure of the actual pricing-per-hour for all billable client hours, which excludes non-customer work but includes any work that’s given away as a result of a fixed-fee engagement or similar arrangement. Because the billing rate doesn’t include unbilled time, it works in tandem with the Billable Utilization Rate. A successful business should strive for a billable rate that far exceeds the actual total cost of the labor (including benefits and other overhead costs of the employee or contractor who is doing the work). This helps ensure profitability, even after factoring in unbilled time.
The Average Billing Rate directly reflects the financial outcome of your work. And because the economic repercussions of the coronavirus pandemic have caused a dramatic drop in billable hours for many businesses, it’s more important than ever to make sure these numbers are accurate.
Estimate to Actual Ratio
The Estimate to Actual Ratio serves as a measurement of the accuracy of a project’s estimated time versus the amount of time it took to complete. There are many reasons why this KPI is an important one for your bottom line, especially when you’re already dealing with a drop in billable hours. If you’re working on a “time and materials” model — as opposed to a fixed-fee project — your numbers for estimated time and actual time spent must match. If your calculations are off, your clients will receive a higher bill than they were expecting. During an already stressful pandemic, this miscalculation could be unforgivable.
Cost Control of Labor
In the professional services industry, billable resources are our most valuable assets, which means resource management affects all aspects of an organization. Maintaining efficiency and minimizing the impact of potential downsizing is only possible when you understand exactly how and when labor time is being spent.
It’s not just our constantly evolving workforce that makes that a challenge. The current pandemic has rapidly changed the schedules and workflows of employees around the globe, which means understanding and tracking labor time at a granular level is critical for success. Some of the factors that affect the cost control of labor include:
- Distributed workforce. More than ever before, our businesses are increasingly interdependent. We’re globally connected, conducting business internally, between companies, and across time zones — and we’re doing it 24/7. As a result, the ability to successfully track time touches every aspect of your business, from your labor supply and supply chain to where and how you market your goods and services.
This globalization changes the way we think about who is working and when and how they’re doing their jobs. It even calls into question the conditions of an employee’s workspace, from data or physical security to compliance frameworks. These are all important factors to consider, not just when you’re launching a new project or implementing a new solution, but even when assessing your own team.
- Mobile. As we adapt to remote work, there is a more urgent need for an easier, more automated time tracking method to ensure accuracy and precision. That’s because, for many businesses that are facing downsizing or restructuring, shifting to remote work models may help you retain employees, keep morale high and even streamline inefficiencies.
- Fluidity. Employees who work from home are the gatekeepers of their own schedules, starting and stopping their work throughout the day or switching tasks as they see fit. And now that stay-at-home measures have so many of us working remotely, that sense of fluidity in the workday has skyrocketed. People all over the globe are suddenly juggling the needs of their family, caring for children and even taking on teaching duties in addition to performing their own regular jobs. This new era of a world working from home creates an urgent need for a simple, automated way to track time with guaranteed accuracy.
Having a precise understanding of your key performance indicators will help measure the success and health of your organization and prevent any unexpected surprises from causing financial damage.
Our integrative, project-oriented time tracking solution will help make your team — the heart of your revenue — more efficient and drive greater enterprise value for your business.
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Journyx helps you track time for projects, payroll, and more. Learn how Journyx can help you use time to your advantage in your business.