Tuesday, March 05, 2024

2024-03-05 Tuesday - Professional Services Consulting - Utilization Rates

[image credit: kolyaeg on pixabay.com]

In the world of Professional Services Consulting, I learned some interesting heuristics, several decades ago, that have stood the test of time.

(these are based on long-term sustainable planning models...)

If you build the financial model for your practice around an assumption of a utilization rate of:

60%: Your firm has a good chance to survive & thrive - even in the lean times. You won't make as much money - and you won't be able to pay your personnel top rates. But you will have the advantage of long-term continuity - while others disappear.

70%: Your firm will experience wider swings in unplanned reductions-in-force. This will impact morale, training costs, client satisfaction, and retention.

80%+: You'll be able to pay your personnel higher rates, and provide a lot of nice benefits - but your firm will experience increased levels of staff turn-over, and burn-out. Decreased retention will affect morale. Increased client account churn will damage the bottom line. In the lean times, your company will be decimated by reductions-in-force.

95%+: You are on the highway to hell. You are in the "sweatshop" business (or, indentured servitude). 🤣

110%+: Your business model is fundamentally based on abuse of your personnel.


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