If you could pick just eight KPIs on which to run your consultancy, which would you choose? And how would you bring them together so that analysing and comparing performance was as easy as possible?
How confident would you be in your choices?
Having spoken to dozens of founder-led consultancy owners about their KPIs, given the importance of KPI reporting on your consultancy’s success I estimate you’d have less confidence than you’re comfortable with.
One of my most successful clients had a £24m financial services business with 100% growth. He ran his firm by focusing on just six KPIs. After doing a lot of research into KPIs, scorecards and dashboards, I concluded that his success was heavily influenced by that laser KPI focus. I ended up advising major corporations on which KPIs they should concentrate on and what their dashboard reporting needed to look like to fuel their success.
Below you will find the four areas within which lie eight dashboard metrics that consultancies should have on their performance dashboard.
You will also find a link to download a simple performance dashboard template that we have created specifically for founder-led consultancies. It shows the full list of KPIs and supporting measures, and how often you should look at them.
“Since 41% of consulting firms’ new business comes from referrals*, understanding how likely they are to recommend you is critical to your growth.”Peter Czapp
Co-founderThe Wow Company
Your first dashboard KPI is your net promoter score (NPS), the universal measure of customer satisfaction. This metric helps your clients compare your services to that of other consultancy firms and any other business they interact with.
Peter Czapp is a co-founder of The Wow Company, an accountancy firm. He is a regular contributor to The Consultancy Growth Network’s events and a big advocate of getting your performance dashboard right. “Client satisfaction is a key determinant of how long they will stay with you, so it’s a great place to start on your performance dashboard,” says Peter. “It also determines their propensity to refer you to others. Since 41% of consulting firms’ new business comes from referrals*, understanding how likely they are to recommend you is critical to your growth.”
Employee NPS (or eNPS) is important because it’s a leading indicator of staff turnover – if your team are happy and engaged they’re less likely to choose to leave. Finding and nurturing talent is a real challenge at the moment, so initiate a robust people strategy to optimise your eNPS.
We also advocate checking your utilisation rates every month, to see how much time each consultant, each team and the business as a whole has spent doing client work or what percentage of available hours were utilised. This will show you what resource you will need in three to six months from now, and whether or not you have that within your team or your associate network.
On average equity
partners are billable
of the time
As Peter says, “Consulting leaders talk a lot about building businesses that can succeed without them, or at least that are not dependent on them. We also know that on average equity partners are billable 47% of the time. The fact that this metric is so high is the single biggest barrier to achieving the ambition of creating a business that is not dependent on the owner and creating a culture within which your team can thrive in the long term.”
Analysing how well you perform against your revenue targets is obvious. The top-performing consulting firms do this properly: they plan their projected revenues by service, sector, client, and partner and then evaluate them monthly.
“…you don’t need to wait until the end of a project to assess your gross margin. Monitor GM through out the project and change course to deliver on profitability at margins that suit your business’s needs.”
Next is your net profit, a key determinant of which is your gross margin. Peter suggests you measure it by client and project. “The best performers don’t just look at how things are going as a whole,” he explains. “Instead, they examine all of the individual elements that make up their performance and determine which clients are profitable and which are not.”
Remember, you don’t need to wait until the end of a project to assess your gross margin. Reflect midway instead and change course to deliver on profitability at margins that suit your business’s needs.
The third financial KPI will monitor your financial stability: your cash-to-overhead ratio. “This needs to be looked at monthly,” suggests Peter. “It represents the number of months of total business costs, including remuneration for owners, that you have as cash in the bank. Essentially it ensures you have a business in 6 to 12 months time.”
Marketing and sales
Your key marketing metric is your MQLs – marketing qualified leads. Each MQL represents a conversation your consultancy has had with someone in the right role in the right kind of company. Looking at how many of these conversations you have each month is an excellent indicator of what will happen in the future.
You can also track the source of your MQLs, ie where they heard about you and what prompted them to get in touch with you. Other supporting measures include your growth in opted-in contacts and your monthly new social media followers (by campaign). Measuring engagement stats more closely, such as report downloads, event attendees and social media engagement, tells you what campaigns resonate with people and where you’re adding value.
In terms of your sales, it’s a no brainer to measure the number, value and source of your new clients on a monthly basis. There are also a bunch of supporting measures with regards to your sales that should be measured quarterly, including your sales conversion rate at every stage of the funnel.
The Consultancy Dashboard template
Now that you know which KPIs to focus on to lead your consultancy, pull them together into a dashboard and have them presented to you so you can see trends and variances to target. This will make it easy for you and your team to analyse the data and make better decisions. We have provided a simple template below to get you started with what you should measure and how frequently.
Article | Financial Strategy and Leadership
The Consultancy Growth Network