The most mature professional services organizations and the ones who consistently deliver successful projects and foster long-term customer relationships, are those that offer high levels of organizational visibility across departments, have optimized business processes and integrated systems, focus on profit improvements, and have moved away from a one-time project focus to an increased emphasis on delivering great customer experiences for life.
These organizations have largely accomplished this by tracking 5 important and influential metrics for the professional services market. These metrics are not only imperative to a profitable business, but also critical in keeping customers happy through improved service delivery experiences. We recommend that all organizations who deliver projects to clients, start tracking these 5 key metrics immediately if you aren’t already:
1. Annual Revenue per Billable Consultant
Annual Revenue per Billable Consultant is a measure of a business’s total revenue divided by the number of billable consultants they employ. Understanding how much revenue each consultant is producing is a key indicator of financial success as well as consultant productivity, but it must be assessed in relation to labor costs. Revenue per billable consultant should ideally equal one- to two-times the labor costs of employing each consultant. Organizations with high annual revenue per billable consultant tend to do well because higher rates indicate better consultant productivity with respect to larger projects, more revenue in backlog, as well as more on-time and on-budget completions.
Tracking consultant productivity is key to improving customer success because you will have greater insight into when and how you should better utilize your consultants in order to improve their productivity and speed up project timelines and delivery.
2. Annual Revenue per Employee
Another core metric, Annual Revenue per Employee, is measured by dividing total revenue by the total number of both billable and non-billable employees. Similar to annual revenue per billable consultant, high annual revenue per employee is strongly correlated with profitability and efficiency. By measuring how much revenue each employee brings in relative to how much they cost, you can accurately determine the financial health of an organization. While not everyone on staff can provide billable services, it is important to be aware of the risks of too many overhead costs in relation to revenue per employee.
This metric can also be important for professional services organizations hoping to optimize business processes because business leaders can see departments where they may be spending too much money on employees, and can better re-allocate budgets to hire employees in areas that will make the business more successful. A successful business is one that has the right number of employees in each department in order to successfully manage client expectations and provide the support necessary to maintain loyal customers for life.
3. Billable Utilization
Employee utilization is defined by SPI Research on a 2,000 hour per year basis, and is calculated by dividing the total billable hours by 2,000. Utilization is central to accurately determining organizational profitability, as well as a key signal to expand or contract the workforce. By tracking work hours for billable employees, an organization can get a better picture of workforce productivity.
Your utilization rate tells you how much of your employees’ available time is spent on billable work. If this rate is too high, you likely need to add more resources. Too low and it means that you’re not bringing in enough work.
Tracking this metric can help you improve customer success because overworked employees are often tired, unhappy employees, and may even become so rundown that they are unable to perform to the best of their ability. On the other hand, underworked employees may become bored or uninterested in their work which can also affect the quality of the work they deliver. Both of these circumstances can be damaging to your organization’s reputation if the work your employees are performing does not measure up to customer expectations.
4. Project Overrun
Project overrun is the percentage above budgeted cost versus the actual cost of a project. This KPI is important because anytime a project goes over budget in either time or cost; it cuts directly into profitability. Whether a project goes over in either budget or allotted person-hours, it can limit future work and in many cases reveal internal efficiency or management issues, which also negatively impact bottom-line results. Project overruns are also detrimental to client satisfaction and even incoming sales opportunities.
By tracking project overrun, you can identify which projects are consistently going over budget, and identify ways to improve internal efficiency in order to manage projects better and stay on schedule. This will greatly improve your number of projects delivered on time, on budget, and to your customers satisfaction.
5. Profit Margin
Profit margin is the percentage of revenue which remains after paying for the direct costs of completing a project. Keeping profit margins high is essential as it ultimately drives overall revenue. Poor financial performance can often be directly correlated to low profit margins, as organizations are no longer able to invest in future growth activities.
An organization that has revenue to invest in the future growth of the company is one that can remain innovative, continuously enhance and improve their product or service, and foster long-term relationships with their customers. Tracking profit margin is therefore crucial to the ongoing success of a professional services organization.
Service-based clients can differ wildly from purchase-based customers — especially when you want to build lasting relationships with them to create repeat business. That’s why client retention can be so different from customer retention.
Here, we’ve compiled four expert tips for how to retain clients that we believe are specifically helpful to service-based businesses.
1. Highlight the Human Component
While customer-based businesses often focus on selling the value or quality of a product, client-based service businesses can promote themselves as people who provide professional services with top-quality expertise, experience, or connections. The relationships between your organization and its clients helps ensure they’re happy enough to keep using your services.
As Joey Coleman, author of the book Never Lose a Customer Again, likes to say: “The fact is, whether you are B2B or B2C, the core of the conversation is that your business is H2H — human to human.”
Positioning your organization as humans delivering premium services to other humans can quickly change your clients’ perceptions of who it is they’re doing business with in the first place. This can give you an advantage that keeps clients invested in your business relationship beyond numbers and deliverables.
2. Focus on Clients Individually
The second “human” in the human-to-human strategy is your client, but typical customer retention metrics may leave your clients feeling like just another number. A capable professional services automation (PSA) system can help your organization focus on the client’s needs from front end sales to back end office management. Besides using powerful tools to keep clients at the center of your business, Mark Klein of Loyalty Builders Inc. explains client loyalty with a macro vs. micro concept. Rather than focusing on customer retention — a high-level or macro idea that looks at your entire client base as a whole — loyalty is a micro metric that highlights the value of each client individually.
Klein’s company evaluates every customer with a risk score, which focuses on the customer’s likelihood of making a purchase within the next 12 months. Your metrics may be based on your client’s likelihood of using your services again within a certain period of time. These measurements allow Klein’s company to incentivize customers, rewarding customers with higher loyalty, and making offers specific to each customer’s preexisting buying behaviors. Viewing each of your customers as individual assets will allow you to market to each of them in a way that maximizes the relationship — making everyone a winner.
3. Ask Tough Questions About Client Relationships
It can be easy to evaluate client relationships in terms of the rapport between contacts, but Mike Schultz, Co-President of global sales training company RAIN Group, recommends looking at the actual business value your company provides for each client. He suggests organizations ask a series of tough questions about their clients, including whether the client views you as a partner, and what your client would say if a rival service suggested your client replace you.
If you find the answers to these questions show that you’re an essential partner, you’re in a good position to retain clients long term. If the answers aren’t what you had hoped, you now have goals for where you want the client relationship to be. That may include developing the relationship to the point that they would never consider replacing you with another service company.
4. Keep Your ‘Why’ Close
An intuitive way to further develop the connection between your organization and its clients is to keep your company’s “why” at the forefront of your business. John L. Evans, Jr., Executive Director of Knowledge Labs Professional Development, explains that an individual’s “why” may be what leads to “purpose beyond self,” but that for an organization, the “why” leads each employee to “create extraordinary moments for clients” — something clients will see when it’s apparent your employees aren’t just going through the motions.
- If your organization has a mission statement or even an unspoken but deeply held vision, make sure employees know what values should drive their service delivery for your clients.
- If your organization doesn’t have a compelling “why,” get started on one by evaluating what your organization has set out to accomplish.
- If your employees don’t know why they’re fulfilling your service orders, your clients may not know why either.
Retaining clients for a service-based business may require a different strategy than retaining a purchase-based customer, but the end goal is the same: keep your clients coming back for more.
Does your Company love to celebrate new clients?
Of course, any sales win is worth a celebration! But in the world of professional services, signing the contract is only the first step.
The goal in services is always to gain customers who purchase your services again and again. That’s why the experience you provide is so critical. Wow them from the start and they’ll be much more likely to buy again later and recommend you to others.
Basic Questions for After the Sale
When you sign up a new client or customer, there are a series of questions you’ll need to answer with them:
- What—exactly—is supposed to happen?
- Who’s supposed to do what?
- When are they supposed to be where?
- Is everyone on the same page?
Once these items are set, you have the foundation for a smooth onboarding process.
Keep Changes to a Minimum
Beware the biggest disruption to the customer experience: change. Changing times, changing schedules, changing staff. There are also changes to flights, hotel rooms, teaching modules, and a hundred other details. All these are major causes of stress—both for your clients and for your staff. Often, managing a client onboarding process can be quite a stressful time for a business leader in itself. However, a good onboarding process will help you minimize these frustrating changes. But after the Sale, what should happen next?
Here are 5 strategies you can use to impress new customers, without stressing out your employees in the process:
1. Confirm All Details
The first thing is to ensure everyone knows what’s supposed to happen, on what dates, and at what locations. It sounds simple, but we’ve all had situations where we’ve shown up at the wrong time because we neglected this step. That’s never a good feeling. You might even assign one person from your staff to be responsible for working out schedules with the client. Once everything is set, have that person send the client an email and calendar invitations with confirmations of all appointments, dates, and times.
If you’re delivering your service remotely, don’t forget to include any private webinar links or shared documents as soon as you can.
2. Reconfirm the Appointment
As you get close to the date of the service, reconfirm the dates and times with the client, just to make sure nothing’s changed. This will help prevent last-minute changes, and it makes your organization look professional.
Confirming details can be the job of the sales team, the service delivery team, or an administrative staffer.
3. Deliver a Consistent Experience
New clients will interact with multiple members of your team as they receive the service they purchased from you.
Every time they talk with someone from your organization, they should get the same, consistent, positive experience.
4. Be Transparent Internally and Externally
The best way to help employees deliver a great experience is to ensure everyone is working from the same information. Your service delivery team will be able to provide better services if they can see what sales reps are doing in their CRM system.
Giving everyone access to the same data means everyone can be transparent with clients and potential customers. And that’s true no matter who takes the call or receives the email.
5. Make Use of Good Technology
Finally, using Professional Services Automation software (PSA software) will enable all your employees to see “the whole picture” for each client and prospect in your system. Sales staff will be able to see who’s going to deliver the service and when. Your service delivery teams will be able to review all notes from the sales process with a new client.
Your administrative team will be able to keep track of it all!
Having a consistent process you follow with new clients makes everyone’s job easier, and it results in a better, more consistent experience for the customer.
As we stated in the introduction, the goal is always to create repeat buyers, not just one-time buyers. Wowing customers right from the start is a great way to help make that happen.