Revenue leakage is insidious. It’s hiding in your data.
When looking at utilization it always affects the company’s profitability. This occurs at PSOs (Professional Services Organizations) of all sizes, however when automated tools are not in place or don’t talk to each other, you don’t know what you don’t know. It’s difficult to find the issues.
The symptoms of revenue leakage include: taking on debt to make payroll, consultants are not available when you expect them to be free for new projects and your managers spending countless hours trying to figure out the issues which ends up superseding sales or delivery work. And this compounds your profitability concerns.
PSA (Professional Services Automation) tools that can show the baseline forecast of both a consultant and a project, their actuals and the consultant’s goals, go a long way to help you uncovering issues. It keeps your managers out of spreadsheets and more engaged with underlying data, so they can prevent profitability issues.
Not every consultancy is ready to invest in a PSA. However uncovering revenue leakage is a core competency of all PSOs.
Some initial items you can investigate are:
- What is the utilization rate (in hours) for a given staffer per week?
- What is their week-to-week billing hours?
- In newer consultancies, many people are a “jack/jill of all trades”. So they’re doing both sales and delivery. This should be part of your review, in what are they doing to bring profitability to the company.
Overall, depending on where you are in your journey as a PSO, your utilization rates will change. The good news, as long as you can obtain the data, you can uncover the issues.
Interested in learning more for your professional services organization? Contact me at [email protected]
