KPIs that Matter to Consultants
As a consultant, are you gauging performance with KPIs that matter?
KPIs, called Key Performance Indicators, are important tools that use both metrics and targets to track how your business is performing. They are related to your company’s strategic goals, such as increasing sales, decreasing costs, improving customer satisfaction, and decreasing unbillable time.
6 KPIs that matter
Revenue
Understanding the amount of money that you are making and where it is coming from is crucial for a healthy business. You are in business to be profitable and that requires understanding what money you are making in sales as well as what you are losing. If you have different market sectors that your sales come from, you want to know which sectors are doing better than others and how well they are growing over time. Additionally, other questions to analyze are: How stable is the revenue and how much of it is recurring? Who are your key customers? What is the proportion of sales per customer? Are there fluctuations in your revenue by season?
Customer Acquisition
Revenue is important, but an over-reliance on it can lead to an unstable and incomplete view of your company. In addition to asking yourself where your money is coming from, you want to work on improving your sales process by monitoring it and adjusting it. How effective is your sales process for growing leads? How many are you converting into customers and how much money are you spending on retention and conversion?
Operating Cash Flow
You have probably heard the phrase that “Cash is King”, but did you know that “Cash flow is Queen”? Do you have enough available cash to operate and grow your business? If something were to happen that stopped your revenue stream, such as what we saw with many businesses during the 2020 pandemic, how much time would you have until you ran out of money?
Managing cash flow is just as important as generating revenue. Other questions to help you understand cash flow include: How old is your Day Sales Outstanding rate? Are customers paying on time? Are they consistent in their payments?
Customer Satisfaction
Particularly look at loyalty and churn rate. Every company should anticipate some customer turnover but understanding the churn rate helps signal a change in buying habits, customer service issues and other problems. Understanding your customer engagement is also a signal of how satisfied they are, as well as help verify long-term success. Ask questions like, are they showing up and providing repetitive business?
Human Capital
Historically, the KPIs for human capital for consultants and other service-oriented companies have focused on how productive employees are planned to be and the ability to schedule and actively manage all projects and resources. With the growing concern about the Great Resignation, the KPIs for hiring and retaining staff have been placed front and center in many companies.
Technology
As a consultant, you probably rely on technology and security continues to be a top concern in many companies. How reliable is it? What is the condition of your technology and are you able to maintain it? What would happen if you had a problem with technology and it was not available, or if you lost data? Do you have a backup of what you need? How long could you continue to work easily and smoothly without technology?
Every KPI should be designed to improve the overall success of the company. Since they are unique to every business, you must look at your own unique situation and problems.
The Profit Enhancer Analysis evaluates these key areas of a business and positions you as a consultant to better support and guide your clients. Use the Profit Enhancer Analysis to guide the KPI conversation and develop growth goals for your clients.
How Does Technology Help Increase Efficiency for Consultants?
Investing in new technology can be a big investment for consultants, but the long-term benefits can help change the way your firm or individual consultancy works by increasing your competitiveness, customer management and improving your efficiency.
Keeping up with the hundreds of different technologies available to help you become more efficient can be difficult. ln addition, you will need resources for adapting to new technology. The adaptation process can require a significant up-front investment for education, training, software, licenses, equipment, implementation, maintenance and updates. But, having the right technology long-term can offer incredible growth opportunities that boost your bottom line.
5 ways technology like the Profit Enhancer Analysis increases competitiveness and improves efficiency
Enables collaboration between teams
Technology can make it easier for everyone involved on a project to collaborate more quickly and effectively. Collecting information through online software and mobile apps and sharing it in real-time with others can allow them to ask questions and provide input before the project wraps up. Think about the benefits of collaborating with CRMs, bid management software, online plan rooms and virtual meeting platforms. The Profit Enhancer Analysis is a cloud based predictive model software that offers these same features.
Make more timely and informed decisions
With assessments, processes, modeling, and other artificial intelligence, consultants can review the data as soon as it is entered and use it immediately to predict different scenarios that help evaluate factors such as customer communication, planning, costs and time. Informed decisions can be made quicker while also helping to keep projects within set budgets and on time.
Decreases downtime and errors
Technological advances can help increase real-time communication and connectivity with employees, clients, shareholders and others to help decrease downtime and errors. Automation and electronic recordings help reduce errors, improve accuracy and cut processing costs since paper is eliminated. A good example is a software for tracking employee hours. As a consultant, time is money. Being able to track billable hours in real time streamlines the process, decreasing the errors and inefficiencies involved in paper-based record keeping while improving the bottom line.
Simplifies and automates the capturing process
Having technology that simplifies and automates the information-capturing process stores the data in the cloud, making it readily available for multiple reports while meeting document and compliance standards. The tedious process of extracting and reformatting data can also be eliminated depending on the software capabilities so only the information needed is accessed for easier approval. The Profit Enhancer Analysis provides this ability to consultant firms. Having the ability to capture and record client information and then making it readily available in real-time from any device completely supports the client management process.
Increases employee and client engagement
When employees no longer need to spend time manually gathering data, sending and separating what data goes to whom in what format, they can focus on their work. Additionally, when information is transmitted quicker and more seamlessly to clients for review or approval there is a decrease in wait times and other unnecessary delays. The increased engagement improves productivity across the entire spectrum of the company.
As more new technologies emerge in the consulting industry, it is important to understand which technologies can make the best impact for your business. Start with an evaluation of your current systems against your requirements and processes. Through this evaluation and research company leaders will have understanding about what needs adjustment and which options would best help solve the company’s biggest challenges.
If you discover that your company needs better automation, communication, engagement, systemization and streamlining explore how the Profit Enhancer Analysis can support your consulting business.
Are You Setting the Right Performance Goals?
Setting performance goals is a common practice in most organizations. These goals relate to areas such as accountability, productivity, motivation and job satisfaction.
Every leader knows that the right performance goals can have a positive impact on the people and the organization. When the goals are achievable, employees look forward to their success and are determined to accomplish their goals.
However, one of the worst mistakes a manager or supervisor can make is to set an unrealistic goal. The employee strives hard to achieve the goal. Unlike a realistic goal, where he will achieve it and feel good about the accomplishment, an unrealistic goal causes demotivation. The employee loses ambition once he thinks he is failing. This adds stress that decreases his productivity.
The right goals are relevant, and if they are not relevant then the employee might lose interest. They must be clear and measurable, or the employee might become frustrated.
What to consider when setting performance goals
To increase motivation and job satisfaction and improve productivity and accountability, it is essential to set the right performance goals for employees. Aspects to consider when setting the goals are:
- Reasons for pursuing the goal and why these reasons matter
- Intended results or outcomes
- Measures of success
- Expected benefits and potential consequences or costs
- Alignment with the company's vision and mission
- Consistency with the company’s values, principles, and strategies
- Available resources and capabilities
- Milestones for achievement
- Potential roadblocks
It is important that the goals do not lack critical details and are not too rigid. You don't want them to inhibit creative ideas or be so inflexible that adjustments cannot be made to achieve a better outcome than originally intended.
How to make performance goals effective
Additionally, the goals must be clearly communicated in how they relate to the company’s specific goals and the employee’s job responsibilities. For effectiveness, goals should be:
- Monitored throughout the year to track progress
- Discussed between both the employee and manager / supervisor regularly
- Clearly defined in the direction
- Evaluated for adjustments to stay on track with achieving the goal
- Connected to the overall short-term and long-term goals of the company
- Engaging to the employee and providing a sense of fulfilment
- Acting as a guideline for the employee’s performance review
Setting the right goals
Setting the right goals requires understanding what is important for the company and each individual employee. Do you know which employees perform to expectations and which do not? Are the goals accurately communicated in a way that guides employees in the direction that helps both the company and them to grow?
These are only a few of the questions about performance goals that the Profit Enhancer Analysis will help consulting firms to better evaluate how to improve the company and the performance of their team members.
What Do You Know About Company Performance?
Company performance is key for business success and reaching defined short-term and long-term goals. It’s a vital part of monitoring for growth and progress. As a consultant, knowing your performance is essential to protect your business against any financial and operational issues.
Is your company performing its best?
You’ve put in the investment, and you want to know that your investment is performing its best. You want to feel confident that you are making the best decisions about your business.
Yet, some business owners might only look at the finances as an indicator for performance. Or worse, they might only look at the profit. The finances and profit do not give enough information to make great decisions about your performance.
Not having enough data is risky when you want to grow and prosper.
Think of it like this, you look at the bank balance and see that you have money. Your accountant says you are making money. So, you have profits. Do you see consistent profits every month? How much? What have you been doing with your profits? Is it enough for the growth you plan? Is it enough to buy equipment or hire more employees?
More data will help you answer these and other questions to help you feel confident in your business decisions. Consider how confident you are in how your company makes decisions, tracks and improves its performance regarding the following:
Goal Setting
A common business goal is to run a profitable operation, which typically means increasing revenue while limiting expenses. More specifically, a company might look at employee performance goals to improve productivity. Understanding the needs of employees to meet such goals would be necessary.
Improving Efficiency and Effectiveness
Incorporating a method that is both effective and efficient is the goal of every business. Essentially a company looks at ratios, such as those that serve as a comparison of expenses made to revenues generated, and how they can improve that ratio. For example, a company might improve efficiency and competitiveness by keeping inventory levels down and speeding up collection of accounts receivable.
Managing Change
There is an interesting concern about company performance and managing change. Unless something is done at the beginning of the process to bring both the employer and the employee closer together, both parties will often travel down different paths and fail to arrive at the same destination.
An example of managing change is how companies performed over the last 20 months. The pandemic created a lot of chaos that required companies to pivot. If you didn’t pivot and if you didn’t analyze and review your company’s performance, you might find yourself in a different frame of mind compared to your employees. But it is not only employees. You could be well behind the competition. You want to be able to manage change effectively and knowing your performance overall and how it compares to the industry (benchmarking) and your competitors (competitive analysis) is essential to do this.
The knowledge that comes from understanding various metrics on performance is essential to making better business decisions for setting goals, improving efficiency, managing change and other important matters. If you are interested in reviewing and analyzing your company performance, the Profit Enhancer is a great place to start.
Which Consulting Model Is the Best Model For You?
The industry of Consulting has been around for thousands of years. In the 1890’s consulting companies emerged as firms launched by university professors. These firms typical specialized in the area of expertise that the professor was in. In 1914, Booz Allen Hamilton launched a consulting firm that provided service to both private corporations and government. As the industry has evolved so have the types of consulting specializations; such as marketing consulting, financial consulting, HR consulting, IT consulting and many more. Consulting has even been able to drill down to have specialization in industries, such as financial consultants primarily for restaurants or healthcare. Today, consulting has become a $250 billion industry.
With the ever changing profession and demands on consultants, the industry has further evolved its consulting models. Let’s explore four primary consulting models. Each model has its own purpose and functionality. Each model will have a different growth pattern and end goal. Even though a consulting firm may begin with one model they may find that another model aligns better with their ultimate vision.
The four primary consulting models are, Leverage, Product-Based, Customized and Hybrid. Let’s take a deeper look at each one. Determine which consulting model your firm currently operates as and then determine if it is in alignment with your ultimate vision.
Leverage Model: This is where there are various consultants on staff to service the clients with a team focused approach. The entire firm operates under one business model and service delivery model. The consultants bill as a set rate for the work done and the owner/consulting firm is paid a set percentage of the bill rate. The firm will have one primary administrative team and operations support team who work for the firm, not the individual consultant. Consultants adhere to the policies, procedures and bill rates set forth by the consulting firm. The owners’ primary role is to focus on sales, marketing and operations. The team depends on the owner / consulting firm to bring in enough clients to keep their calendar full. This model requires a solid marketing strategy to bring in new clients and to attract qualified consultants. The model demands a larger number of consultants on staff than a traditional firm. Often times, consulting firms who have adopted the Leverage Model host large events or have large advertising budgets to capture more market share. This type of consulting firm is one that can be easily sold or acquired.
Product-Based Model: This model is the only one that does not tie income to time. The consultant packages their expertise and services into products for purchase. In this model the client does the actual work with the guidance of the consultant by way of the products. Packaging expertise can be done in courses, memberships or subscriptions for access to information, templates, systems and processes. Clients who are looking for roadmaps and guidance typical gravitate to these consulting models. Consultants who specialize in specific industries can package their services for their market. For example consultants who work with coaches, restaurant owners, cosmetologist, educators, speakers, authors and so on develop products specific to their target markets industry. Again, this model is more focused on moving products not moving services therefore time spent working with clients is not tied to income levels. Often times, consulting firms who have adopted the Product-Based Model have a strong product development team, marketing team and consistent advertising campaigns. This model requires very strong supply chain management and internal processes for streamlining. This type of consulting firm is one that can be easily sold or acquired.
Customized Model: This is the traditional consulting model that many if not all consultants start with. The Customized Model is where the owner is the primary consultant that is very hands on with every client and guides the service delivery for each client. Each client receives a customized plan therefore this model is where income is directly tied to time. Often times, this model is referred to the feast or famine model. If a few clients stop service, the consulting firm is affected financially. The owner is not only focused on bringing in new clients consistently but they are also focused on service delivery, operations and everything else needed to run a business. This model typical has an income ceiling and growth ceiling for the consultant. The primary consultant typical hires support team members to service the client; however the consultant remains the leader and face of the business. In order for this model to be financially successful, clear systems and processes are mandatory otherwise the consultant will suffer from burn out and income stagnation. Consulting firms who adopt and remain as a Customized Model must have strong business networking, stellar service delivery and loyal clients. This type of consulting firm is hard to sell or be acquired.
Hybrid Model: This is one that is more contemporary and offers the consultant and the firm more flexibility, revenue growth and opportunities to have the best of both worlds. This is the best option for consultants who enjoy being hands on, but don’t want their income to be 100% tied to time spent servicing clients. The Hybrid Model gives the consultant a healthier balance between marketing, advertising, product development, team size and client management. This consulting firm model is a blend of either Leverage or Customized with Product-Based. The consulting firm can choose which model will be primary and which will be secondary. Many consultants who launched as a Customized Model firm have adopted Product-Based easier than switching over to the Leverage Model. This type of consulting firm is not as hard as Customized to sell or be acquired. But it does have a unique feature to it, where a portion of the business can be sold or acquired instead of the whole business.
Through the evolution of consulting and the demands of the marketplace, consultants are now faced with so many options and opportunities today. Determine your current consulting firm model, evaluate your ultimate vision for the firm and then adopt or sharpen the model that is the best fit for you.
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