How to increase profit if you are a consultant?
What are your greatest problems in managing a consulting company? You consume hours and hours solving problems of your clients, but do you have time for solving your own? Are you disciplined enough to take your own medicine, the one you prescribe to your clients?
Do you have time for business development? How much time do you spend finding new clients and partners? How much time do you spend thinking about the future of your business? Are you feeling that you spend too much time on operating stuff? What is your time frame in planning: five years, a year, a month, a day, a minute, a second? Do you feel that you do not have time for strategy, as you are overwhelmed with merely tactical issues?
As a general of your army, do you have time to get up on a hill and see how the battle goes on? Or you are losing your nerves in rough trench warfare?
Do you sometimes feel that you are the coach of the team, as well as a leading scorer, assistant, and a main defensive player? Consultancy is not a one-man show, you need to build a team on which you can rely on. Even Michael Jordan needed Pippen to win championships. John Lennon needed McCartney to form The Beatles.
As a captain of your consulting ship, do you know which direction it sails? Or you are too busy rowing below the deck with the rest of the crew?
Do you feel that you’ve got control over your business?
- Do you know for each employee on what project/client he/she is engaged in?
- How do you assess the work of your consultants?
- Are your employees satisfied? Are they ready to go the extra mile, an extra inch on each project? Do you have problems with employee turnover?
- Are clients satisfied with the services provided?
- Are services provided efficiently?
And finally, bottom – line:
Are you satisfied with your profit?
If these questions give you nightmares, well, you are not the only one.
Since we come from a consulting background (finance and tax advisory), we are facing the same internal problems as you are. In addition, many of our clients come from the service industry. Therefore, we may know a thing or two about managing service companies. In the following text, we would like to present you with our solution that will help you:
Take back control over your business. And over your time.
Bring more money at home. Plus fewer headaches.
What is our solution then?
Our solution, for our internal problems and of our clients’, and possibly of your own, is a time recording software for consultants. We put our expertise and experience into TimeAnalytics software, specialized for consulting companies, as well as other service companies.
In the following paragraphs, we are going to show why time recording software will help you solve many of your management issues.
P.S.: You may say that you are a boutique advisory firm with too few employees to implement a time recording software. However, our solution is applicable for both boutique firms and large-scale consultancies. Just because you are small does not mean your problems will not (eventually) get you strong headaches. Also, you will not be small forever. You have to prepare for times of scaling. Read Sun Tzu’s Art of War: solve great problems while they are still small and manageable. Or in his very own words:
Plan for what is difficult while it is easy, do what is great while it is small. The difficult things in this world are better to do while they are easy, the greatest things in the world are better to do while they are still small. For this reason, sages never do what is great, and this is why they achieve greatness.
Current global coronavirus pandemic made many companies organize work – from – home regime. Some experts believe that the current epidemic may accelerate the trend of remote work. Time recording software can enable companies to organize this new type of working regime more efficiently. Using the software, managers can coordinate the work of remote employees in a more structured and transparent manner.
What is the root of all problems?
Before we explain our time recording software and how it can help your consulting business, let’s take a step back. What is the key resource of each consulting practice? It’s not the fancy office space, nor your ERP system, nor your brand new computers. It’s your people, your employees.
You need to find a way to not only choose the right people but to make sure everyone works in a way that’s the best for him and for the consulting team.
How a time-recording software help you do that? Well, remember the words of Peter Drucker, the father of modern business management:
If you can’t measure it, you can’t improve it.
Our time recording software enables your employees to fill in quickly and simply the hours spent on different clients, projects and activities. By providing total hours spent by employees on clients, activities, projects and service lines, their work gets measured and quantified. You get a simple dashboard on the basis of which you can make management decisions and lead your people more effectively.
Now you’ve got the numbers. But how to read them? The answer to that question we provide in the following paragraphs.
As you may already know, KPIs or Key Performance Indicators are figures that show you the past, present and future of your business. By reading KPIs, you will understand the current state of your business. You can also see how well your company performed last year, last month etc. You can see if your company improves or not, by comparing current KPI results with previous results. In addition, you will use them to make strategic and tactical decisions on the future of the business. Our time recording software will help you define and track KPIs.
In previous paragraphs, we kind of already mentioned one KPI. Since the main resource of your consulting firm are your employees, i.e. their working time, the basic KPI is total spent hours. You should track the total amount of spent hours per each employee, as well as per client, activity, project and service line. You should also track the number of a total number of spent hours in a day, a week, a month, a year. In addition, the total number of spent hours should be compared from period to period, whether it is the day, a week, a month or a year.
After you get information on total spent hours, you may derive most of the rest of the necessary KPIs for consulting companies. We divided the rest of them into three groups:
- Financial KPIs
- Marketing KPIs
- Productivity KPIs
Using Time Analytics software enables you to track the following financial indicators per client, employee and service line:
- % of billable hours in total hours: how much of your work is billed to the client? Using this financial indicator, you see how well the company’s resources are utilized in providing services. In addition, you can see if you are providing free consulting services to the client. In addition, you can see how much time an employee spends on internal company activities (administration, preparation of invoices and agreements, sales activities etc.). Usually, a high % of billable hours in total hours means that employees are productive and that most of his/her work is billed to the clients. However, in some cases, certain % of non-billable hours is necessary (for example, senior managers need to spend some time identifying and communicating with potential new clients). In order to manage this KPI you can implement easy and free time tracking software for consultants.
- Revenue per hour: whether you are engaged by the client by the fixed or variable fee, this is one of the key KPIs to analyze the profitability of engagement. Also, this KPI provides you with information for pricing strategy, whether you want to renegotiate the terms with current clients or you are planning to negotiate new engagement.
- Costs per client (service line): you already know the revenue that you generate from each client/service line. But do you know the costs of each client/service line? Our time recording software helps you to simply calculate the costs of each client (service line). The costs are based on the costs of salaries and other indirect costs related to employees. For example, the costs of one employee are 100 EUR per hour. If that employee spends 10 hours on providing services to certain clients alone, the total costs of the client are 1.000 EUR. Costs of client/service line can be tracked in total amount and in amount per hour.
Using our time recording software for consultants enables you to analyze the position of consulting company on the market:
- A total number of clients: does your number of clients increase month to month, year to year? You may already know that is much less costly to keep a current client than to acquire a new one. Do you have problems with customer attrition? What is your CRM strategy?
- An average number of service lines per client: do you perform cross-selling? Do your largest clients know what types of services you may provide? You spend a lot of time with the CEO and other managers of the client. Sitting with them in conference rooms, on business lunches. Talking with them all the time on the phone, exchange many e-mails and SMS messages. Use this time to discuss their business, try to provide them advice on running a business. In that way, the client will look at you not as a specialist, but as a generalist. You will become his special strategic advisor. The client will then realize that you may provide an extensive portfolio of services
- The total number of hours spent on sales (marketing) activities: how much time you and your senior managers spend finding new clients? Maybe you need to put more hours on sales activities. Or maybe you need to change your approach, to spend working hours more efficiently.
Crucial consulting firm productivity KPIs you need to track using time recording software are:
- Did total spend hours per employee: are employees overwhelmed with work? Who carries the most of workload? Are they under risk of burnout? Which employee has some free working time to help other colleagues?
- Structure of an employee’s working activities: what do your managers do? Are they able to delegate routine activities to consultants? How much time do they spend finding new clients? Are they overwhelmed with administrative and reporting tasks? By looking at the structure of the working activities of employees you can identify new working positions that need to be opened. For example, you may realize that you need a person for administration activities. You may also realize that you need reporting or controlling specialist. Or you may see that you need to organize a new service sector
- Overtime: compare total planned hours with the total spent hours on a project. If much more time is spent than it was planned, you should analyze the reasons for it. Maybe you underestimated the necessary workload for a project. Or engaged consultants were not productive enough
- The number of engaged consultants per project (client): did you plan project execution well? If there are too many consultants on the same assignment, maybe planning was not efficient. Or if just one employee is engaged in a critical project, maybe you should provide him/her support of other colleagues
- Revenue/profit per employee: does the employee bring more money to you than you pay him/her?
After reading our text and if you are still not convinced that your consulting business needs time tracking software, the words of the famous French General Napoleon may help you:
Perhaps I owe my success to mathematical conceptions; a general must never imagine things; that is the most fatal of all
Each day, you as a manager need to make many decisions on your team and projects which will decide the very fate of your business. These decisions should be based on facts and numbers (or mathematical conceptions, as Napoleon said), not solely on your intuition, your gut.
In the end, you may say that our software cannot solve all problems of your consulting firm. That is true. But, our solution can be a reliable management tool.
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