A consulting business is predictable & profitable

However, processes, systems & rigeur are required to keep the business under control. Practice management is a continual juggling act, with the following issues to juggle:

• Planning & forecasting
• Bookings, backlog & pipeline
• Revenue & expenses
• Financial management & KPI’s
• Resources management
   

Planning & forecasting

In consulting, one sells people; people with knowledge; expert people; experts in specific areas. Their expertise/knowledge is not interchangeable & their time cannot be stocked. If there is no demand for a specific expertise, that consultant sits on the bench resulting in a loss for our business. Planning & forecasting is therefore important in order to "fine tune" the demand of our services & our capability to provide them.  Any dischord between demand & capability requires correction with training, hiring, relocation, etc.  Maximizing the utilization of human resources is paramount.

We have a specific process to prepare the budget: starting with the current head count, a resources plan, billability of the people, etc. permitting us to calculate the revenue from our own resources, but also to calculate revenue & margins from subcontractors.

Bookings, backlog & pipeline

The opportunities coming from Business Development, licenses salesmen or other sources can be qualified as pipeline (use a CRM system/etc.) & RACI's assigned to win the opportunity. A sales system is required to keep track of this.

Revenue & expenses

A good consulting practice should be able to recognize revenues in either of two methods:

1. Time & Materials: or Time worked at contract billing rate  (up to the contract estimation)
   1. It is important that "Time & Expenses" are  properly updated in a Work in Progress (WIP) system for billing
2. Fixed Price: Percentage of completion method = Time spent
   1. It is important that a Project P&L submitted to track margins internally

Financial management & KPI’s

Financial managment of a practice is critical for two major reasons:

1. to be able to measure (& if necessary correct) the current years success in "Planning & forecasting"
2. to present a stable, know base, upon which to carry out subsequent years "Planning & forecasting"

management & measurements include:

• Monthly & Quarterly results & forecasts (measured against budget & previous FY)
• Revenue per head. Revenue per €K of salary
• Backlog & bookings
• Billability & understanding of non-billable activities
• Training time & coverage of training plan
• Practice Shape (technologies, expertises, direction)

Resources management

And of equal importance to the other four balls to juggle, make sure that the "people/expertises" that you sell are adquately honed to your service offerings:

• Know their skills
• Know their assignments
• Follow their supervision, coaching, & management
• Follow performance & their professional development
• and……  assure their motivation ;-)