The profitability of your firm’s client engagements is the driver of your firm’s cash flow and revenue, making it imperative that you are able to access the data you need to truly measure it. There really is no “secret” to increasing the revenue of your firm's client engagements.
You must do one of the following:
- Add more clients and/or higher profit margin clients
- Add more profitable service lines or revenue streams
- Add more staff to deliver more of the same highly profitable services
The common denominator in all of these? Profitability must be measured client by client for each and every engagement. Otherwise, you may be growing in volume of services delivered or clients served, but your profit margin remains stagnant or, worse yet, declines due to costs that are too high given your pricing and delivery models.
To avoid this and truly move the needle for your firm, there are three key data points that every firm should track to have true visibility into the profitability of client engagements:
No. 1 — Time vs. Billable Hours
The number of hours and the cost of those hours are the cornerstone of most job costing, just as it is with client engagements. Having complete transparency and accuracy as well as attribution of these metrics in your firm is absolutely critical to understanding your current and ideal revenue model.
No. 2 — Expenses for Each Engagement
Beyond just the billable time of your staff, it is essential to understand the other inputs and fixed costs related to an engagement. For example, there are the costs of running your firm from a physical overhead (if any) plus ongoing costs such as software, and any personnel benefit costs, or special third-party services you need to use.
No. 3 — Workflow Throughput
The number of services and volume of work in each one that your client engages you for are important metrics, but even more so is the efficiency with which that work is done. Work throughput measures the speed of engagement completion. This requires tracking of an engagement from when your firm first onboards a client, through each due date in the process of finishing the deliverable. The higher the number of successfully completed engagements over the shortest period of time is the goal.
In order to effectively capture the data you need to calculate these metrics, an intuitive and easy-to-use and implement practice management solution is critical. While chasing “more” client engagements may seem like the key to growing your firm, you need to first understand what you want more of.
Only client engagements that allow you to maximize profitability will grow your firm and move your revenue needle in a positive direction.
Profitability must be measured client by client for each and every engagement.
This is where Mango Practice Management (Mango) comes in. If you still are relying on manual tracking like handwritten notes, filing cabinets and excel spreadsheets to handle time and billing, Mango can help.
With its robust time and billing tools, as well as expense tracking and firm-wide scheduling, due date management, document management and secure file sharing, Mango will ensure you have the data you need as well as the full suite of reporting tools necessary to analyze it into meaningful client engagement metrics.
The process of measuring client engagement profitability can be truly firm-changing, allowing you to make more profitable decisions about which engagements you actually want to pursue and how to deliver them with maximum efficiency.
Ready to reimagine your firm and move the revenue needle in your favor? Contact Mango today for a DEMO.
Carl Coe is CEO of Mango Practice Management. Formerly known as Mango Billing, it is a cloud-based practice management solution that is a game-changer for professional service firms to automate processes for time and expense tracking, invoicing, scheduling and payments processing.
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