Are you a strategy consultant, marketing consultant, IT consultant, management consultant, HR consultant, or operations consultant who has ever wondered what numbers you should track?
These numbers are your key performance indicators. Key performance indicators provide instant feedback on how well your firm is performing.
These critical numbers act as your business’s levers. If you pull on them correctly, you can make it rain money in your firm.
Today, I will provide four key performance indicators you should leverage to scale your firm faster, smarter, and consistently.
Accounts Receivables Days Out – this is the number of days on average it takes your clients to pay their invoices. The goal is to keep the number of days as lows as possible. This KPI directly affects your cash flow. Therefore, a more extended A/R period means the longer your bank balance is low and cash is few and far between.
Annual Revenue per Billable Consultant – Annual revenue per billable consultant measures the total revenue divided by the number of billable consultants employed by your firm. A key indicator of financial success is clarifying how much revenue your firm is earning per consultant. You want to compare this number by your total labor cost to determine the overall impact on your firm’s bottom line.
Average profit margin per project – these numbers identify whether you are using all of your resources to their advantage. Project margin is the percentage of revenue that remains after paying for the direct costs of completing a project. For example, do you have a consultant taking too long to complete a project, and therefore you have to pay them more money which cuts into your profit. Or perhaps, your out-of-pocket cost was budgeted too low, and you have to spend more money to complete the job, which again reduces your profit. Keeping project margins high is essential as it ultimately drives overall profits. To achieve a high-profit margin goal – you want to:
Operating Cash Flow (or Net Cash on Hand) – To remain solvent in business, you must monitor your cash flow closely. Operational cash flow measures the amount of cash generated by a company’s regular business operations. This key number indicates whether a company controls the money cycle. Monitoring your fixed and variable costs is one way to improve your operating cash flow.