Future-Proofing Your Professional Services Profit Margins

Professional services automation software is most commonly portrayed as a tool that catalyzes intelligent growth and extends the life of essential systems as organizations expand and take on more complexity. However, PSA software is equally important when project volume is lean, and the viability of an organization depends on ensuring profitability is maximized for every project. The institutional knowledge held within PSA systems, along with their analytical capabilities, empowers service leaders to accurately measure profitability at any given time, and to make necessary service adjustments. This ensures that organizations can weather difficult market conditions while maintaining the white glove service that clients expect.

A Primer for Understanding Profitability

We write extensively about profitability within this blog, such as the artistic sensibility required to cultivate profitrevenue forecasting best practices that impact profits, as well an infographic that illustrates how firms can reach the $10 million profit milestone. These articles provide valuable strategic insight into developing an organization’s professional services footprint with sustainable growth in mind. This post will expand upon the human element required to improve project profitability, regardless of the state of the professional services marketplace.

Project Managers: The Custodians of Profitability

The Project Management Institute’s Pulse of the Profession Report has highlighted that project management responsibilities have evolved far beyond ensuring that clients receive high-quality deliverables at assigned deadlines. Project managers in today’s business environment need to identify technology trends, cultivate new skills within their team, and devise new methods for positively influencing business. The report notes that “most organizations place nearly an equal emphasis on developing leadership skills as they do technical skills” and “are undergoing a fundamental paradigm shift in which projects are no longer adjacent to operations but instead primary to how work gets done and problems get solved.”

Industry-focused PSA software is an essential tool for project managers to improve project profitability with the talent at their disposal. Staffing is a critical component of managing profit margins, and setting the correct mix of junior and senior-level staff for different project scenarios can ensure profitability while sustaining premium client service. Visibility into resource scheduling and staffing provides project managers with a comprehensive look at the personnel at their disposal, including their existing capacity, seniority, skill sets, and historical performance in various roles. This knowledge hub enables managers to quickly establish a utilization strategy that can mitigate costs, and load balance across the team without sacrificing project quality.

Balance: The Secret to Services Profitability at Scale

Key profitability KPIs for professional services firms extend beyond resource utilization as illustrated by our infographic on growing $10 million in profit. KPIs such as pricing and internal overhead can be addressed by reviewing the data present in an organization’s PSA application, and leveraging the findings to maintain profitability with the existing talent headcount when new projects are in short supply. Projector CEO Denis Whelan recommends in a recent Forbes Tech Council article that organizations should “provide trustworthy, timely and contextualized access to interdependent metrics” in order to effectively balance KPIs. He also cites Gallup research that “a key differentiator among professional services firms that successfully retain and grow business is the ability to solve interconnected business problems by leveraging holistic technology-driven business solutions.”

PSA software works to address optimizations to pricing and overhead by closely tying project delivery activities with true project accounting capabilities. Project accounting functionality designed specifically for delivery teams provides a comprehensive view of project performance and investments for both completed and ongoing projects. Service leaders can revisit older projects’ profitability metrics to identify optimization opportunities that can be incorporated into current project models, driving greater efficiencies going forward.

PSA solutions with project accounting features also enable project leaders to review the status of live projects in real time, providing ample opportunity to course-correct if the project is trending towards a loss of profit. The capability to review mid-project profitability is essential for services firms feeling pain from marketplace conditions, and plays a critical role in ensuring an organization can retain their talent during down periods.

PSA technology also surfaces information at the organizational level, spanning across a portfolio of projects. It illustrates areas of business success and stagnation, allowing service leaders the ability to confidently assess growth opportunities and areas for efficiencies. This unlocks the ability to react to changes in project volume, client demand, and market shifts in a scalable way.

Preserve Profitability and Your Premier Talent Pool

Professional services firms invest an immense amount of resources into their staff. Services teams are extensively trained in internal best practices, work hard to foster productive relationships with clients, and onboard quickly into unique operational processes and skill requirements. If personnel cuts need to be made due a business downturn, all of that investment and future productivity is lost.

During revenue downturns, best-of-breed PSA software helps service leaders anticipate the impacts on their business and chart a path to profitability. When business bounces back, the same strategies can be used to illuminate increased profitability potential. The ability to effectively model profitable staffing, and have intuitive, in-depth access to past and current project performance, ensures that your organization weathers any storm within the industry. 

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