Every business has challenges, but many B2B companies struggle with similar issues due to the nature of their work. Professional services firms in particular routinely come up against cash flow constraints, hiring difficulties, and schedule setbacks. And with business lagging due to COVID-19, many of the obstacles these companies face loom even larger right now. Fortunately, there are helpful solutions.
If you run a professional services company, here are the five most common challenges you might be facing—and what you can do to overcome them.
1. Maximizing billable hours
In a professional services firm, maximizing the number of billable hours per employee is critical to maintaining cash flow and increasing profits. “Time is the inventory of service-run businesses, and it’s a perishable resource that goes bad by the second,” said Nick Bideshi, the CEO of Blue Meta, a digital marketing agency.
“Our biggest challenge is missing out on billable hours because of the fast-paced working environment we have,” said Michael Hammelburger, the CEO of The Bottom Line Group, a company that helps business owners reduce their business expenses.
“The time spent on calls and online messaging with clients outside of work,” he said, “or the time spent traveling for consultations are just some of the hours that get neglected when consultants forget to log them.”
Neglecting to log billable hours can cost your company thousands of dollars in revenue, but it’s only part of the issue. The larger concern is making sure employees have enough billable work each week.
Maximizing your employees’ billable hours comes down to better organization and project management. Start by reviewing your record-keeping methods. “We have a dedicated team that administers a software tool that captures billable hours according to our billing guidelines,” Hammelburger said. “We’ve improved compliance and accuracy by 90% and avoided writing off billable hours just to fast-track payments from clients.”
Next, consider your project management techniques. How do you typically assign projects? Are some employees overworked while others sit idle? You may need to change your teams or distribution style to ensure everyone has enough billable work throughout the week.
2. Hiring and training
Hiring in a professional services firm can be a catch-22. You likely need to hire to help offset your project load, but hiring also creates more work for you and your team in the short-term.
“We have to constantly balance hiring employees and onboarding clients,” said Bideshi. Not only do you have to find, vet, and interview candidates, you also have to train them, which requires a significant amount of non-billable time and resources. Plus, depending on your new hire’s experience level, it can take weeks or months for that person to become billable and start generating revenue for the company.
To prevent lost revenue and job opportunities, it can be helpful to try to shorten your company’s time frame for hiring and training, while simultaneously increasing the checks and balances in the processes. Consider clarifying the scope of work in your job description, casting a wider net for candidates, or conducting more thorough interviews. These steps can help you find more experienced candidates.
When it comes to training, the right tools can help speed up the process. “We’ve automated 90% of our onboard training for non-management employees by using software solutions to hold courses meant for internal purposes,” Bideshi said.
3. Acquiring new clients
Maintaining your existing clientele while searching for new clients is a perpetual challenge. Even if you have ongoing client relationships, it’s still important to incorporate new clients to stay current, boost your revenue, and keep your team agile, said Sarah M. Williams, the founder and director of 816 New York, a brand strategy and communications agency.
“Plus, you don’t want to be too reliant—especially now during COVID-19—on only a few relationships, since things are so much in flux.”
But getting new clients doesn’t just happen with time and patience—it also requires resources. You may have to budget for new marketing initiatives, spend money on advertising campaigns, and carve out time for consultations and proposals.
Work on revamping your marketing plan. “We have content marketing campaigns that run from our website that are meant to acquire leads, specifically those with communications strategy needs,” Williams said. Content marketing efforts, as well as online ads and email nurture campaigns can help bring more potential clients to you.
Advertising any free services you offer is also a good idea. “We do a free 30-minute consultation,” Williams said, “which often turns into a proposal process if the lead seems strong enough.”
You may also want to source potential clients from your network. Look into virtual conferences or discussion panels, or consider implementing a referral program to incentivize past and current clients to spread your name around.
4. Planning for ongoing demand
Running a professional services firm means balancing your time between working on current projects and planning for future work.
“A client’s budget can end, scale up, or start abruptly for various reasons,” said Bideshi. “In a post-COVID-19 world, these ups and downs seem more violent than they did prior.”
If you don’t plan for periods of downtime or increased demand, certain areas of your business can suffer. In a marketing agency, for example, “Demand for the design team could exceed its capacity, meanwhile the strategy or writing team doesn’t have enough work,” Bideshi said. This can throw off your project timelines and billable hours, both of which ultimately affect your profits.
“Demand issues arise from not having consistency in the sales funnel,” said Bideshi. “This can be due to overspecialization in the types of firms a company works with, or improper business development processes.”
One of the best ways to draw consistent leads and generate steady demand is to improve your sales funnel, Bideshi said. “A key factor to consider is the monthly or yearly client churn based on revenue, not number of accounts.”
From there, try using data to determine the strongest and weakest points in your sales funnel. If, for example, you know most of your clients leave your website after visiting the landing page, work on brainstorming ways to increase engagement at that stage. That might involve adding a video to the page, tightening the copy, or directing potential clients to a free consultation or discount on their first service.
5. Waiting for client payments
“The biggest challenge I’ve always faced as a self-employed SEO and website designer is the amount of time it takes some companies to pay for the service they’ve requested,” said Jase Rodley, the founder and CEO of Dialed Labs, a website design and SEO agency.
Many professional services firms end up waiting 30, 60, or 90 days for their client payments. The coronavirus pandemic has only exacerbated the issue. According to a recent report, late payments affect 43% of the total value of B2B invoices issued in North America this year. What’s more, the total value of payments overdue by more than 90 days has doubled to 13%.
Cash flow thins out quickly when you’re waiting for receivables, making it tricky to cover operating expenses, let alone budget for growth initiatives like hiring or investing in new technology.
There are a handful of strategies you can use to keep cash flow steady. One option, Rodley said, is to charge a non-refundable deposit on your services. “It gives you some wiggle room for your bills without needing to be paid fully.”
Another option is to set up a payment plan. “We auto-bill our ongoing clients and put our project work on an installment plan that’s also auto-billed, so we always get paid,” Williams said.
You can also negotiate with your suppliers or vendors to extend the deadlines for your payables, Hammelburger suggested. Just make sure you have a good relationship with those vendors; otherwise, you might risk burning a bridge.
If you’re having a difficult time trying to speed up your receivables or delay your payables, consider turning to an online lender. At Fundbox, we offer business lines of credit.
Overcoming your firm’s challenges comes down to implementing more efficient systems—for everything from sales to hiring. If you’re struggling with an area of your business, take some to regroup and strategize for your success. And if you need help with cash flow, consider applying for a business line of credit.
Disclaimer: Fundbox does not provide financial, legal or accounting advice. This content has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for financial, legal or accounting advice. You should consult your own financial, legal or accounting advisors before engaging in any transaction.
This post was originally published on 5 Challenges Professional Services Firms Are Facing—And How to Overcome Them on Fundbox.- Fundbox – Fundbox Forward