The pundits tell us the year ahead is going to be tough. I have no reason to think otherwise, but that doesn’t mean lie down and wait for the steamroller of discounting and other nasties to flatten your firm.
My BRW post Six growth metrics that really matter for professional services firms evinced big interest because it struck a cord. Many who contacted me talked of having a light bulb moment. 'For as long as I can remember we’ve been focused on simple P&L and asset management metrics; we’ve assumed if these look OK, everything is OK and I now realise what we’ve been missing was a typical comment.That's right! The six most relevant metrics to which I refer are client retention, share of the client’s spend, the proportion of new income is derived from word-of-mouth, size of the firm’s addressable market, margin and the rate of organic growth. The reason these six measure are so crucial is they relate directly or indirectly to clients, client buying behaviour and client satisfaction with your firm.
Now the million dollar question: How does your firm measure these things? If you're relying on what feedback you get from your biggest clients, you're misled. If you rely on what your biggest rainmakers say, you're being misled. If you rely on what you're told when you lose a pitch, you're being misled.
Why? Your biggest clients are important, but not representative. Your heavy-hitters are important, but often not the best at client service. And the reasons given for losing a pitch are almost always incomplete and the easiest – 'On the day you were very good, but your price was not competitive'.
Translated, tough measurement means hearing the truth. And there's no greater truth than that of your client base. By all means, weight the feedback you get by the value to the firm of each client. But even if you do this, how do you know if 8 out of 10 is good, very good – or average? You don't unless you have a relevant benchmark.
You can benchmark against yourself, i.e. track year-on-year performance. That's good, but insufficient. If your close competitors are improving faster than you are, then you are going backwards in the market while recording increasing scores. It's the same fallacy as saying 'Look our revenue – or profit – is up'. That's only good if your share of revenue or profit is up.
So, for the 100 or so professional services firms measured by Beaton Benchmarks in Australia, now the time to take advantage of tough measurement. For 2014 we have a record number of respondents. Which means we have deeper and more insightful reports for more firms. Yesterday's post on Research. Reveal. by Jarek Dobrjanski shares the detail on the our 2014 Annual Business Professions Study.
Don't be soft on yourself or your firm. All firms need tough measurement.
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