Question: if you are running a consulting company, where does most of your work come from?
- new client business; or
- growth of existing relationships and existing project assignments (known as organic growth)
The answer is of course, organic growth.
Consulting businesses signing new clients, and/or winning major new engagements, is a relatively rare event, repeat business is far more common. This is because consulting is about trust. You are selling expertise and knowledge, not goods. You build up trust through delivery, and knowledge of the client’s way of working breeds confidence and comfort. So, repeat business pays the bills.
Even new customers are likely to start small, gain confidence and then grow their use of your services.
Similarly, while some projects may actually end as initially envisaged, the majority of projects are to some degree or other a venture into the unknown. Developing a project from a financial standpoint is a key skill you should look for in your project managers, they are your best sales resource.
Taking a project and increasing its scope, through managing the customer’s changing requirements, or even leading the customer into new ways of thinking, is one of the key tasks the project manager has. Being able to do this while keeping the customer on side is a special skill your best PMs should excel at.
If you look forward to a new year, more than 50% of your work is likely to come from account and project growth management. Forward hiring plans will depend on how well you can manage this key aspect of your business.
But, from a system perspective, acknowledging this point presents you with two key challenges:
- Actually tracking change orders on your projects; and
- Modelling expected project growth in your forecasting.
Traditional project PSA tools enter the problem by creating a project. They have no way of modelling orders, or of course, change orders. So a change in scope, or acceptance that the work is harder and more extensive that originally envisaged, has no place to be modelled.
Project PSA systems are bad at budget change. If a project budget cannot be changed once created, it needs to be done with a new project. This of course makes project tracking hopeless unless the new work is a clear new phase, not simple scope creep.
Building a forecast for project growth is also tough as most consulting firms will have a traditional forecast model build around two data sets:
- The forecast taken from the planned work by person on active projects; and
- A forecast report (sometimes probability weighted) run from the CRM system
This model misses growth on existing projects altogether. Also, depending on how customer relationships are managed, it also significantly understates new assignment possibilities from existing customers unless they are large enough to attract the sales team’s attention.
The separation of CRM from project delivery, with a gap in the middle dealing with actual orders, is a poor architecture to achieve accurate forecasts and managed budgets correctly. This problem needs to be solved by joining these processes up with a structured order management process and forecasting of expected change orders.
If you are considering how to improve both operational control and accuracy of forecasting (two of the most common goals we see stated in enquiries), make sure you consider carefully how your proposed solution is going to help these datasets align.
Read More
The difficulties of forecasting professional services revenue
Why integrated order processing is key
