Consulting & Practice Management
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:
- Time & Materials: or Time worked at contract billing rate (up to the contract estimation)
- It is important that "Time & Expenses" are properly updated in a Work in Progress (WIP) system for billing
- Fixed Price: Percentage of completion method = Time spent
- 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:
- to be able to measure (& if necessary correct) the current years success in "Planning & forecasting"
- 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)
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 ;-)