Over dinner one night, a revenue leader at a major consulting firm had a confession.
"As a firm that sells operational excellence, we don't really operate excellently ourselves," he said.
Six months later, I can't stop hearing that pain.
In a downturn where new sales may have slipped and it's hard to grow a new customer base, plugging revenue leak becomes a vital new motion to keep and grow the bottom line.
As I recently closed out the first decade of my career, I realized the entirety of it was spent working with consulting firms. I began as an analyst, progressed through the ranks, and joined Big Tech to sell to and alongside consulting companies.
Currently, I have the honor of taking all of those lessons learned to help people at consulting firms re-imagine how they run revenue.
Here's what I see.
Why Consulting Firms Risk Huge Revenue Leak
The biggest challenge in managing a consulting firm lies in perfecting that balance of supply and demand. Lack of predictability in demand makes managing supply a guessing game.
Guess wrong, and you place the wrong team on a project, risking the client relationship and losing their trust.
Spend too much time aligning the right team with the scope of work, and you risk missing the client's go-live date.
For example, take a standard consulting business with 1,000 billable consultants and a target of billing 2,080 hours per year at $200 per hour. A deal slipping one week with a week's delay in billing means $8,000,000 less in revenue.
The second challenge impacting consulting firms is managing talent supply.
Your people are your competitive differentiator, and the hiring funnel can be as long or longer than sales cycles.
A quick analysis of LinkedIn data shows that consulting services companies employ 4.9% of all people in North America (1). Consulting companies have a purpose beyond just revenue to get talent management right. Failure to do so hurts many livelihoods and the macro global economy.
In the past couple of years, the tight labor market has been more competitive for employers than any other labor market in recent memory.
Revenue leak plays a huge part here. No business can expand and hire if they can't predict next quarter, next half, or next year. You can't decide how to invest if your business doesn't have reliable forecasting based on reliable revenue. You risk winning deals you can't adequately staff, not closing enough deals and losing staff, or the nightmare scenario of rolling into layoffs.
The more a consulting firm can get ahead of client needs and market changes, nail down next quarter predictability, and begin the role requisition process sooner, the more leaders can confidently optimize the bench alongside client needs and in-demand skill sets.
3 Ways to Solve Consultant Revenue Leak
- Talk to the field to find out where leak lies. Account leads, senior partners—whoever owns the sale— ask them what's wasting their time. At Clari, we commonly hear that low-value pipeline calls, time spent managing CRM, and a lack of cross-functional visibility are key client problems (which Clari helps solve).
- Change the sales and delivery partnership. I once heard of a company with a four-hour Monday call for pipeline and forecasting review. That's over 2,000 hours a year for their team of 10 to simply roll up reviews—2,000 hours that could have been spent selling. That's a "no" from me. Your revenue-critical employees should be on a purpose-built revenue platform, not siloed systems that require time-consuming meetings
- Baseline your predictability. What gets measured gets managed. To close revenue leak, top teams know:
- How close is your call each quarter?
- How early in your quarter can you get within 5% of your call?
- How well does each practice and business unit call their quarter?
The importance of predictability is top-of-mind for executives as they work on their business plans. World-class teams are able to get to within 5% of their quarterly number by Week 2 of their financial cycle with Clari.
- Forrester Total Economic Impact Study: Clari Can Help Teams Beat Revenue Leak
- What Is Revenue Leak, and How Can You Prevent It?
- Nobody Ever Cost-Cut Their Way to Greatness. Here's What Top Leaders Do.
1. Per LinkedIn August 2022: (1) Total profiles in North America = 226 MM. (2) Total profiles filtered to include only "Business Consulting and Services" and "IT Services and IT Consulting" = 11 MM.