We all know the drill - sell the gig, work with the client on delivery of project pieces, noted by milestones, and bill along the way - always trying to keep track of the time you allotted, the total cost of resources on the project, and the landmarks reached that determine when the client can be billed..

But project-driven companies - large or small - often get tangled in the knickers of the project at hand (understandably) and lose track of the total big picture of the business.

PSA solutions have proven the boon of the last decade for consultants - software explicitly written to assist consultants in managing their time, resources, and costs of doing business.  This software, defined by board member David Hofferberth, is a system that “supports the core business processes of services-centric organizations to more efficiently utilize people and streamline the project lifecycle to save time, cut costs and increase revenues.” Yet many businesses that make their revenue from billable services fail to reach the potential of this definition because both consultants and their management cannot see beyond the project at hand.

The goal of all companies that sell services is to have all their billable resources at 100% use levels at all times.  But we know that does not necessarily happen.  Lapsed times between engagements is a cost, and the delicate balance of the right person on the project for just the right amount of time teeters as scare resources are deployed to be expedient in the short term, which may mean that the optimal staffing for the next new project is negatively impacted. 

But while consulting companies track billable hours and know the billing rate to the client of each person per hour, they often have trouble correlating this with the actual cost of the consultant.  In other words, loaded employee cost, including overhead, is a key factor in determining profitability.  Yet often companies almost randomly assign their staff to projects without a clear picture of the real cost to the firm - as opposed to the project cost to the client.  Hence expected revenue may well not prove a reasonable return on the investment or resources.  The issue becomes exacerbated when companies work with third-party partners, vendors, and sub-contractors - or are sub-contractors themselves—to win and service complex projects.

Thus, in this sector with high profile consultants that are the sole intellectual property of a firm, margin shrinkage can occur because the true cost of doing business is not visible during the bidding process.  And while I am sure we have all worked on projects that may barely break even or may even lose money, we know that is not the desired outcome.

It is easy to say that better planning makes for better revenue intake, but consultants and the firms they work for are often in opportunistic mode - selling whatever project they can without all the data on the impact of actually fulfilling the entire statement of work.

The goal for many businesses is to get away from the opportunist and actually select their clients - finding their “best customer.” However, this tactic is easier said that done.  I have recently interviewed smaller firms that offer billable services to clients - they uniformly claim they know all they need to know about their customers.  Truth is, they don’t.  It is easy to assume that the client who returns for a second or third project is the best customer (clearly loyal), or that the client in a given year who spends the most with you is the best customer.  Or perhaps the customer who complains the least - the easiest customer - proves the best customer because demands on the consultant’s time are predictable.  But these companies really cannot quantify what makes the best customer, nor accurately predict the likely cost vs. revenue implications of that client on their resources over time. 

In the absence of more far-reaching analytics, consulting firms, often apply rather serendipitous measures to evaluating what contracts to pursue and which to decline (yeah, right; I know).  Yet without the means to accurately access opportunity cost, risk of project slippage, and the loaded cost of people resources, these decisions cannot be made judiciously.

In companies in which the providers of the service are themselves quota-driven, the problem is increased because they will always snatch at the ring available - whether it is brass or tin.  In these companies, the push for quarter-driven client acquisition often undercuts the ability to target services to the most desired clients and also leads to sometimes-desperate project discounting.  The results are often a haphazard collection of projects opportunistically derived that prove a poor use of valuable resources and a resulting resource drain at the expense of longer term revenue goals.

While these very consultants preach the value of business analytics to their customers, pointing to the requirement for good decision support tools to make decisions, far too often, these professionals who bill by the hour or the project, do not have the tools at hand to make the best business decisions for their own practices.