Consulting KPIs

Below is a list of six KPIs that consulting firms can use to measure their success and the success of their
clients:

1. Leads generated

This is the measurement of how many clients a consulting firm has brought in through methods such as
marketing, referral, publicity and social media outreach. To calculate this metric, organizations look at
the total amount of clients gained within a specific amount of time. Then, over time, trends may become
apparent in which efforts are successful and which need adjustment. For example, if a firm sends out a
mailer to potential clients but doesn't see an increase in clients generated, they might reconsider or
adapt the mailer approach for the next quarter.

Related: 11 Email Marketing KPIs and Why They're Important

2. Number of current clients

The number of clients that a consulting firm is actively serving is another crucial key performance
indicator. To calculate this, a firm looks at the total number of clients they are working with in a given
period. Knowing this information helps the firm make informed financial decisions. It's also a factor in
deciding the size of the workforce needed to accommodate different client loads. For example, this
information could be useful if the numbers show increased client activity at certain times of day. A firm
may notice this trend and decide to prioritize earlier or later business hours.

3. Rate of utilization

The rate of utilization is the measure of how much of a consulting firm's time is being used by clients. A
firm looks at how many billable hours clients used in a set time period, divided by the total number of
hours worked by the consulting firm staff. A high utilization rate means that the firm is increasing its
revenue. In the case of a low utilization rate, the firm may consider adjusting work hours to better suit
client demand.

4. Average hourly fee

This is a metric of how much a consulting firm is charging its client base. To calculate this number, a firm
divides the total sum of project fees charged by how many hours staff put into the project. That average
can determine whether a consulting firm is charging a reasonable and profitable amount for its services.

Related: 16 Examples of KPIs for the Workplace

5. Repeat business rate

The repeat business rate is the number of clients who return to the consulting firm after working
together on at least one project. Firms determine this metric by dividing the number of repeat clients by
the overall total number of clients within a given time frame. This difference can help firms assess which
business practices they might increase or decrease to maintain or improve customer retention.

6. Customer satisfaction

A consulting firm may occasionally assess how satisfied its customers are. One way to gauge this metric
is by sending out surveys to customers with questions about the quality of service, completed projects,
punctuality and attentiveness. Measuring customer satisfaction can be a good way to generate specific
and actionable ideas for improvements in the firm.

Financial metrics

There are many KPIs you can measure that are specifically related to your organization’s or
department’s finances, including:

Profit: You will need to review both gross and net profits to understand how successful your
organization has been at generating a high return.

Costs: With this KPI, you will monitor your expenses and look for ways to reduce and manage costs to
increase profitability.

Revenue versus target: This KPI compares your projected revenue to your actual revenue and analyzes
the discrepancies between the two numbers.

Sales by region: By analyzing your sales in different areas, you can obtain key insights into why some
regions may be underperforming and make strategic changes to improve sales performance in those
areas.
Expenses vs. budget: With these metrics, you can compare your actual overhead with your forecasted
budget to help create a more accurate and effective budget in the future.

Ratio of customer lifetime value to customer acquisition costs: Understanding the ratio of the lifetime
value of customers to your customer acquisition costs will help you determine if you need to make
changes in how you acquire customers. The lifetime value of your customers must be higher than the
cost to acquire customers.

Customer metrics

Customer metrics are vital for monitoring the performance and health of your organization. Some
important customer KPIs to consider are:

Customer lifetime value: This allows you to see the total value of your customers during the time they
are with your organization. Take this metric a step further and identify the lifetime value of your
customer by different channels so you understand which methods of attracting customers are most
profitable to the organization.

Customer acquisition costs: This is one of the most important metrics for a marketing team, as it allows
them to evaluate how effective their marketing campaigns are at attracting customers. This, paired with
the lifetime value of a customer, will enable you not only to identify which channels are good for
attracting customers, but also allows you to calculate the breakeven point. This refers to the point at
which there is no net loss or gain, where you have broken even. Beyond that point, the customer will be
profitable for a business.

Customer retention: You can use multiple KPIs to measure customer satisfaction and retention,
including satisfaction scores or the percentage of customers who are repeat customers.

The number of customers: This metric is similar to profit and allows you to see over time whether you
are gaining or losing customers and at what rate.

Process metrics

These KPIs are designed to help you evaluate your processes and efficiency. Some key metrics you could
consider are:

Customer support tickets: You could look at the number of new tickets you are acquiring per
day/week/month, the number being resolved and the amount of time it takes your team to resolve
them.
Percentage of defects: Monitor the number of defective products, and calculate the rate of products
that are defective during a specified period.

Efficiency: There are different ways you could measure efficiency, and it will vary by industry. If your
organization manufactures products, you could look at the number of products that were produced
each hour. If your team is expected to hit a specific quota with production, monitor how effectively they
can meet that quota or go beyond it. If you have a manufacturing plant, you could monitor the
percentage of time your plant was up and running and whether that percentage is changing over time.

People metrics

Employees are valuable company resources that you should monitor closely. Some metrics to consider
are:

Employee turnover: To calculate your employee turnover rate, take the number of employees who have
left the company in a specified period and divide it by the average number of employees. If your
turnover is higher than you would like, you should take some time to analyze your company culture,
employment packages and environment. You may want to conduct leadership training with your team
to ensure they are managing effectively.

Employee satisfaction: Research shows that happy employees are more productive and more inclined to
stay with their company longer. You can measure employee satisfaction through surveys, attendance
and other metrics that are vital to your department’s health.

Internal promotions vs. external hires: This ratio will allow you to see how many people who work
internally are considered for new opportunities at an organization as opposed to hiring externally. It can
be valuable if you are looking at organizational succession planning or indicate whether you need to add
continuing education opportunities to prepare employees for more advanced opportunities internally.

Key Performance Indicators for Consultants

Written by Octavia Conner | May 24, 2021 6:49:01 PM

A Key Performance Indicator is a measurable value that demonstrates how effective a company is at
achieving key business objectives or activities. As a consulting firm owner, you want to identify and track
3 to 5 KPIs. The goal is to focus on improving these specific numbers over time.
KPI Characteristics

When choosing your firm's KPIs, you want to ensure that their characteristic includes:

Be quantifiable – you must be able to measure the results numerically

Reflect the firm's strategy and goals – the KPIs must align with your desired direction

Propel the firm towards success and increase profitability faster and smarter – as you begin to receive
the numerical results of your chosen KPIs, they must enable you to make wise business decisions that
ultimately lead to achieving your desired level of success.

Easy to track – Your KPIs should be easy to track every week.

As a virtual CFO, I love measuring things. It is engrained in me. Therefore, I want you to understand that
ONE of the ways your firm can experience maximized growth, is by adopting the love of tracking and
measuring.

As a consulting firm owner, what you measure and track will be slightly different from most businesses.

You can break your KPIs down into three categories:

Customer KPIs

Financial KPIs

Project KPIs
Below are the five KPIs consultants should track:

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:

Price your services for profitability,

Proactively forecast the project.

Monitor your cost per project closely

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.

Project Overrun – Project Overrun is the percentage of the actual cost that is above the budgeted cost
per project. Anytime a project goes over budget in either time or costs, that cuts into your profitability.
If your projects are consistently going over budget in either time or cost, this could indicate a problem
with internal efficiency or management. Project Overrun can also result in client dissatisfaction and
potential future income.