KPIs – the foundation for a successful independent consulting business
While the thought of assessing key performance indicators (KPIs) is enough to make even veteran consultants nervous, the reality is that they are powerful tools that you can utilise to keep your business growth on track.
The power of KPIs
KPIs have three valuable characteristics. These are:
1. Quantitative – they represent numerical progress towards business goals.
2. Practical – they offer a clear indication of where processes or activities are failing.
3. Actionable – they identify where resources should be allocated to address a problem.
Business plan critical
Your business plan contains the goals that you have outlined for your business such as the services you will offer, client segments you will target, revenue goals and client growth objectives. A strong focus on your sales funnel can help identify key performance metrics for overall financial success.
A sales funnel is a marketing concept that outlines the path a client takes before committing to a commercial relationship with you. It’s also a powerful tool that can help you identify how to allocate resources for the best possible results from your sales activities.
Here are five steps to follow:
The awareness phase is critical as it helps you determine whether you are on track or need to enhance your marketing and lead generation efforts. This is the sharp end of your business, obtaining granular detail at this point can keep you ahead of the game. One way to create awareness is to connect through calls. Although calls may seem inefficient it is still viewed as the most important business outreach approach you can utilise.
Alternatively, a quick way to ramp up outreach is through email and social media.
A carefully crafted email campaign can yield positive results
Social media’s measurable statistics show it is also an important prospecting tool. Both of these approaches allow you to easily track results and positive responses.
After learning about your brand, a prospect will assess it based on their degree of interest and the solutions you provide. Separate the following:
- Referrals (from existing clients and former colleagues, for example)
- Cold prospects
- Warm leads
This will allow you to determine whether your solutions are appealing to particular segments and find out exactly how many conversations you need to hold to establish a commercial relationship.
Now that the prospect is aware of you and the solutions you offer, they are willing to delve deeper and consider a proposal or scoping document. In this regard important metrics are:
- Number of proposals in circulation
- Estimated value
- Number of requests for clarity regarding proposal content
It is possible to drive faster decision making during this phase via constant email communication, follow-ups and including case studies
Sometimes called the contracting phase, these discussions will predominantly revolve around terms of service and price. Important indicators at this stage are the number of contracts being negotiated and their value (relative to the original proposal price).
Your sales or client pipeline gives you a good indication of the overall health of your future cash flow, indicators on the number of projects won and anticipated revenues.
Once you have established your sales funnel, here are the top KPIs to focus on:
You constantly need to determine whether marketing methods such as referrals, public relations exercises, advertising and social media outreach are yielding results. If it’s not working, you need to quickly make changes. Obtaining granular detail at this point can keep you ahead of the game.
Your client pipeline gives you a good indication of the overall health of your future cash flow, and gives indicators on maintaining your fee structures and hitting your revenue targets.
Determined by the number of billable hours divided by the number of available hours (calculated as a percentage) this indicator is viewed as the most important measure of all as it indicates whether you are maximising the value of your available time.
This gives valuable insight into how you have met service requirements and if new approaches and technologies are affecting your market, thereby alerting you to the need to adjust your KPIs.
Leading and Lagging
Leading and lagging indicators are critical for measuring your performance. Leading indicators forecast future results. Lagging indicators are markers of previously used techniques. A mix of these two groups of KPIs gives you a comprehensive assessment of your performance.
It’s important to gather as much detail as possible, everything from the time of day a call is made, to the day of the week, can be critical determinants.
With the analysis in hand, you can adjust your strategy. You’ll know if these changes are working because it will be reflected in your KPIs.
The most important aspect of any KPI assessment is taking action. If you’re not hitting your targets your indicators will aid you in asking the right questions and making important adjustments to your strategy.