Overview

As a leader of a consulting business, it's crucial to know which metrics matter most. Measuring too many can lead to analysis paralysis, while too few might cause you to miss critical details. In the 15 years I’ve been running tech services companies I’ve found myself at either end of the spectrum at times. I’ve also found what I think is a happy medium for a small but growing services organisation to ensure you stay on track and grow effectively.

The starting point is making sure you have the right systems in place. Trying to measure anything manually is time-consuming and error-prone. If you don’t have systems in place across marketing, sales, delivery, people, operations and finance then make this a priority.

Once you have the systems then you can start measuring. I’ve listed the ones that I believe are key and how you can implement these in your business.

Marketing

Marketing Qualified Leads (MQLs)

Even if you’re not actively investing in marketing, tracking your MQLs is essential. These leads come from referrals or organic inquiries and indicate potential clients interested in your services. By monitoring MQLs, you will get an understanding of how well your marketing efforts are working and where to improve.

Tip: Start simple and for each inbound inquiry, just ask where they heard about you. Your CRM system should allow you to note the lead source. Make this a mandatory field!

Sales

Sales Closed (Month, Quarter, Year)

Sales are the lifeblood of any business. Without them, there's no revenue. Track the number of sales closed each month, quarter, and year. This helps you see trends, set realistic goals, and adjust your strategies as needed.

Tip: take the time to define what a closed sale is for your business so that there is no confusion. For me, it’s a signed contract (or the day that you start work at risk if it’s with an existing client while waiting for paperwork to get signed). Also be specific in your CRM. Update the deal value to match exactly the Statement of Work the client is signing. No rounding!!!

Weighted Pipeline Value

The weighted pipeline value is a measure of the potential revenue from all your active deals, adjusted by their probability of closing. This metric helps you forecast revenue more accurately and identify where to focus your sales efforts to maximise outcomes.

Tip: Be realistic on your close dates. You will regret being overly optimistic. Being overly pessimistic can cause headaches if deals close sooner. But I’ll take the problem of resourcing multiple signed deals over wondering how to keep people busy because a deal has slipped any day of the week.

Delivery

Project Margin/Profitability

Once a project is sold, it needs to be delivered profitably. Monitor the margin on each project to ensure you're not only covering costs but also making a profit. This helps in evaluating the financial health of your projects.

Tip: take the time to ensure you can capture all direct costs against your projects. Any travel expenses, any specific tools or subscriptions required, subcontractor costs, any other related fees. Getting in the habit of doing this diligently will give you the ability to run project level P&L reports which will be hugely helpful as you scale.

Client Satisfaction (CSAT)

Happy clients are repeat clients. Unhappy clients won’t come back. And if you don’t know they’re unhappy you’ve probably already lost them. On top of that, getting constructive feedback allows you to improve in areas where you are not yet excelling. Getting this feedback is not easy though. Online surveys will likely be ignored. Or you won’t get an honest view of what’s really happening…

Tip: Allow time to get client feedback during account management meetings. Ask open-ended questions that require a considered response. Most importantly capture this feedback in your CRM and share it with your teams so improvements can be made or positive feedback can be passed on.

People

Employee Satisfaction (ESAT)

Your employees are your greatest asset. Their satisfaction impacts productivity and retention. Regularly measure ESAT through surveys and feedback sessions. A happy team is a productive team.

Tip: Implement a weekly pulse check in a tool like Slack. Make it super simple to complete (it should take less than 30 seconds) and automate it. Track response rates and jump on any negative feedback immediately.

Operations

Utilisation Rate

This metric shows how much of your team's available time is spent on billable and value-add work. Higher utilisation leads to better efficiency and profitability. Aim to balance utilisation to avoid burnout.

Tip: Include internal projects in your utilisation calculation. This helps ensure that people on non-billable work who are adding value feel like they are contributing. Aim for a utilisation target of 80-85%. Note that north of 85% you are probably running too hot. Sick leave, bad ESAT, and resignations are likely to follow. Below 75% and you’re running too big a bench. Poor profits will result.

Realisation Rate

Realisation measures how much of the billed time is actually paid by the clients. High realisation rates indicate effective billing practices and client satisfaction with the delivered work.

Tip: You should be targeting a realisation rate >95%. Anything less than this means you’ve got problems somewhere. Your team could be doing out-of-scope work that the client isn’t obliged to pay for, there might be rework that you can’t charge for or there might be velocity issues. Regardless, you need to be on top of realisation as it will help surface any underlying issues.

Finance

Revenue

Revenue is the total income generated from your services. It’s a basic but vital metric. Track it regularly to understand your business growth and make informed decisions.

Tip: Track budgeted revenue (the monthly / quarterly number you have committed to), the planned revenue (the sold work for a period), the requested revenue (resulting from work that existing clients have requested but not yet signed) and sales revenue (which is weighted revenue based on deals in the pipeline). This allows you to build a complete picture of what is happening in a given period.

Gross Margin

This is the difference between revenue and the cost of goods sold. It shows how well your company is generating profit from sales. A healthy gross margin indicates effective cost management.

Tip: you need to get your cost of sales allocations correct. This should include all revenue-generating staff remuneration, an overhead recovery (an uplift on staff cost to allow for overheads directly attributable to fielding staff), costs associated with managing your revenue-generating staff (eg management) and the cost of your sales team. This approach will ensure you are following best practice and don’t end up with an artificially inflated gross margin.

Net Profit

Net profit is the actual profit after all expenses are deducted from revenue. It’s a clear indicator of your business’s profitability and financial health.

Tip: this can vary greatly but ideally you want this consistently in the 15-20% range. Higher is possible if you’ve got IP you can sell at high margin. At less than 10% you have some work to do.

Aged Debtors

This metric tracks outstanding invoices. Keeping an eye on aged debtors is critical for managing cash flow.

Tip: implement an automated system for prompt follow-up of overdue payments and chase down anything overdue as a priority. Escalate quickly to ensure you know if you have a client liquidity problem to deal with or if it’s just a tardy AP team. I have been burnt by this… don’t make the same mistake!

Uninvoiced Hours

These are hours worked but not yet billed. Keeping track of uninvoiced hours ensures you don't miss billing for any work done, directly impacting revenue.

Tip: your target here is 0. Watch this closely and reconcile every month.

Takeaways

You could easily drown in a sea of data - be deliberate with the metrics that you choose to measure. I recommend starting with the ones discussed above. You can add more or tweak as you go:

• Marketing: Focus on Marketing Qualified Leads (MQLs) to gauge interest and improve efforts.

• Sales: Track sales closed to understand performance and set goals and sales pipeline to understand health

• Delivery: Measure project margin for profitability and client satisfaction for retention.

• People: Regularly check employee satisfaction to maintain a productive workforce.

• Operations: Monitor utilisation and realisation rates for efficiency.

• Finance: Keep an eye on revenue, gross margin, net profit, aged debtors, and uninvoiced hours to ensure financial health.

By focusing on these key metrics, you'll have a clearer picture of your business's performance and areas for improvement. Remember, it's not about measuring everything but about measuring what truly matters.