5 Essential KPIs That Every Professional Service Business Should Measure
Posted on 30th March 2017 in KPIs
Written by Freya Hughes
If you’ve obtained special training in your field, then you’re labelled as being in the professional services industry. In this broad sector, it’s no surprise that KPIs are actually quite niche when you dive deeper. This blog gets you started with 5 essential KPIs to monitor in your business.
There’s a lot of competition out there so giving a great, reliable service will give you an edge over your competitors. If you want your business to peak into the higher realms of your industry and start earning serious profits, KPIs will help you distinguish the financial factors you should be monitoring. This will free you up for service with a smile.
We’re obsessed with metrics (as you may have noticed) and our KPI Library has hundreds of niche KPIs that you can use to measure aspects of your business. If the loss of one client could equal absolute disaster for your bank account then you need to be prepared. We spoke to our client, digital agency Komodo, a while back who gave us a great account of how swing factors can cause huge upheaval to the discourse of his operation. As their MD says, the focus for you should be on delivering your services, not wasting hours on Forecasting – and that’s where FUTRLI can help. You can read the full case study here. If you’re about to win a huge deal and need to employ a few new faces and it doesn’t pay off as much as you first thought, are you ready to cope with this? Measuring your KPIs is a surefire way to ensure that you are on the ball when it comes to your business so you can avoid threats and identify opportunities.
Sales: Actual Vs Forecast
You need to be able to compare your actual figures with your forecasted figures to know if your business is heading in the right direction. If you were to only compare your figures monthly, let’s say, then by the time you reach the month end, it would be too late to repair any losses. Your forecast is about the future and what could be achieved. Using your actual data to see how far you need to go to reach your goal, you’ll be able to implement changes to get your business on course for your target.
You’ll need to have clarity when it comes to the future if you want to grow. You can measure your success with ease, breaking your figures down to shorter time frames. Forecasting is a step towards growing your sales and your business. When you’re ready, construct a 3-way forecast (which include Profit & Loss, your Balance Sheet and Cash Flow) which will help you focus on the most vital part of running your business – your Cash Flow forecast. Discover how Forecasting can work for you.
Quite simply, the more satisfied your clients/customers are, the more likely they’ll return to you, thus increasing your profits. You need to be aware of how much time and revenue you should spend on account managing your clients. Existing clients should take up less of your time than winning back or gaining new clients. It’s a good idea to measure your clients’ worth in terms of how long their contract is, therefore giving you an idea of how much cash they bring in for you per month. Once you know this, you can focus on winning back past clients, repairing any issues with forced them to cancel and, of course, hunting new clients. You’ll be able to approach these clients with confidence as you’ll know how long – and how much – time and effort to spend on them. See how Forecasting can help you manage your time and cash effectively.
Wage expenditure is a crucial KPI to measure. If there’s a negative proportion of incoming sales against your outgoing wages then within months your cash reserves could be drained. Forecasting whether or not you can afford to employ in-house staff members will give you a great idea of how risky this move would be. Also, consider your rates by skill level – a junior member of staff may be cheaper but a more experienced employee will likely save you precious time in training. Calculate your revenue per employee with FUTRLI. Of course, if the figures are not stacking up then you still have options. Using sites such as Upwork and People Per Hour you’re able to find freelancers which will allow you to pay per hour or on a project.
Return on Assets Vs Return on Excess Cash
Here, your focus should be on your return on assets because your assets are an investment with an expected return. Excess cash will just sit in your account and not aid you in making more cash, therefore it must be reinvested to grow. Conversely, if your cash is diminishing then ensure there’s enough to cover your outgoings and then try to increase your income as soon as possible. FUTRLI can help you prepare a Forecast or prepare Scenarios to prepare for potential impact on your Cash Flow.
Project Margins (Per Service)
You need to be able to tell if you can afford to deliver the service a client has ordered. Have you priced it correctly? Is there enough cash to cover the service or project, plus all your other outgoings? If you’re not sure, use a Forecast to give yourself an idea of how much cash is required to cover all outgoings. You’re running a business so don’t forget the inevitable “surprises” either, make sure your planning is comprehensive.