The Top 10 KPIs Consulting Firms Should Track

Updated Number 2024

If you’ve ever felt like your consulting firm is flying blind, you’re not alone. Without a way to measure your progress or understand your client's needs, it's hard to make informed decisions and deliver real value. That's where the magic of KPIs for architecture, engineering, and consulting firms comes in.  

KPIs, or Key Performance Indicators, are the metrics that matter most to professional service firms. They help you measure your performance, identify areas for improvement, and stay focused on your goals. But if you don’t know the KPIs your firm should track, reaching your goals isn’t going to be easy.   

In this article, we're going to explore the top KPIs for professional service firms that should be tracked regularly to achieve success. I’ll explain what each KPI measures, why it's important, and how you can track and improve it. BQE has also published a benchmarking report for architecture and engineering firms so you can compare your KPIs against industry best practices. 

If you're ready to take your firm to the next level, let's dive in and explore the world of KPIs!

What are KPIs for Consulting Firms and Why are They Important? 

KPIs are like a GPS for consulting firms, helping them stay on track and reach their destination. Unlike traditional metrics that simply track performance, KPIs are designed to help businesses focus on the most important factors that drive success. These are the metrics that correlate to higher performance and profitability for a company. 

KPIs for consulting firms are essential for measuring performance, identifying areas for improvement, and making data-driven decisions. By tracking KPIs, your firm can get a better understanding of how well you’re meeting client needs, how efficiently you’re using resources, and where you need to make changes to improve performance.   

KPIs can also help you stay competitive by providing insights into industry trends and best practices. So, in short, KPIs are the secret weapon that your consulting firm needs to stay ahead of the game.  

To monitor KPIs your firm is going to need software, like BQE CORE, that makes gathering the information easy and has the ability to convert the data into real-time metrics through helpful visualizations. Manually monitoring KPIs, or using outdated or even the wrong software, isn’t going to cut it. You’ll never get the full value as you will be looking at data that is out of date or potentially riddled with errors.  

In addition, sophisticated software provides the business intelligence that helps you make the best decisions quickly.  

The Top KPIs Architecture, Engineering, and Consulting Firms Should Track 

It's time for us to dive deeper into the top KPIs for consulting firms you should be tracking. Think of KPIs as your superheroes of metrics - each one has a specific power that helps you achieve your goals so they’re very valuable to get to know and have on your side.  

Let's take a closer look at my top 10 list:  
 

1. UTILIZATION RATE 

This KPI measures the percentage of time that your team spends on billable work compared to their total hours worked. It's like a time-tracking app on steroids.  Utilization rate is expressed as a percentage. 

The Formula:
Billable Hours Logged / Total Hours Logged * 100

Utilization rate is important because it helps you understand how efficiently you’re using your resources.

A good target for Utilization Rate on a firm-wide basis is about 60-65%. This takes into consideration both your billable employees as well as overhead staff like marketing or administrative roles. 

To track and improve this KPI, you can use time-tracking software, set realistic utilization targets for each person, and analyze your data to identify areas for improvement. Discuss UR targets in your management meetings, and use resource planning tools to make sure people know what to spend their time on. 

2. EFFECTIVE BILL RATE 

This is an impressive piece of business intelligence that calculates the actual revenue generated by every billable hour worked by an employee. This metric is expressed in dollars per hour. 

The Formula:
Total Revenue Generated from Billable Work / Total Billable Hours Worked

This metric can be used to identify opportunities to increase profitability but is more interesting when evaluating the performance of each employee and comparing them to their peers. It can be looked at on a project level as well as over a set period of time across projects.

3. NET REVENUE PER FULL-TIME EMPLOYEE 

This is your firm's equivalent to miles-per-gallon in your car. It offers insights into efficiency, profitability, benchmarking, resource allocation, growth strategy, and employee engagement and retention.  

The Formula:
Net Revenue / FTE (Full Time Equivalent Employees)

Some firms are mistaken that they should only be considering the revenue earned by each billable employee when making this calculation. While this is important when thinking about compensation (salary and bonus), it can’t gauge the overall efficiency and profitability of your firm.  

Nearly every firm has overhead employees. How effective are they in contributing to your firm's revenue? Are you top-heavy? Do you have too many administrative workers and not enough earners? This KPI tells that story. You should use all employees at the firm, both billable and non-billable staff, and prorate any part time workers to get the full picture of your revenue per person. 

4. CLIENT SATISFACTION SCORE 

Also known as the Net Promoter Score, this KPI allows you to measure how satisfied clients are with your consulting firm's services.  

Client satisfaction is important because it's a key driver of client retention and referrals. To track and improve this KPI, consulting firms can use surveys or interviews to gather feedback, set clear expectations with clients, and implement improvements based on their feedback.  

High client satisfaction is an indicator of quality service and effective project management. 

There is no set formula to calculate this, but instead you need to send satisfaction surveys to your clients on a regular basis asking them to rate the level of satisfaction they have with your services and if they would refer you to others. 

5. CLIENT RETENTION RATE 

This is an important KPI because it measures how many clients renew their contracts with your consulting firm or return for new business.  

The Formula:
(Clients at the end of a period - New Clients)  /  Clients at the start of the period * 100

Think of it as a measure of their loyalty and trust. What percentage of client stuck with you throughout the lifespan of the project? It also can reveal whether you are growing, staying consistent, or shrinking the number of clients you are working with - a signal of momentum for the business. 

For consulting firms, the client retention rate is important because it helps you understand how well you’re meeting client needs and how likely clients are to renew. To track and improve this KPI, your firm can analyze its contract renewal data, implement improvements based on client feedback, and provide exceptional customer service.  

6. SALES CONVERSION RATE 

This KPI measures how many leads turn into clients. The sales conversion rate is essential because it helps you understand how well your marketing and sales efforts are performing. 

The Formula:
Number of Contracts Signed / Number of Leads * 100

To track and improve this KPI, you can analyze your sales data, identify areas for improvement in your marketing and sales processes, and implement improvements based on your data. Look for trends in the types of projects that have a higher conversion rate. 

Also look at individual performance of the people in your firm who are engaged with business development. You should start learning which partners are closers, and which types of engagements are easiest for you to win. 

7. REVENUE GROWTH 

Tracking revenue growth allows firms to measure the financial success of their projects and overall business.  

The Formula:
(Current Period Revenue - Previous Period Revenue) / Previous Period Revenue * 100

You are looking at this metric over a set timeframe. For example you might be looking at it as month over month revenue growth, quarter over quarter revenue growth, or year over year revenue growth.

Observing changes in revenue can help identify trends, spot potential issues, and measure the effectiveness of various strategies and practices. 

8. PROFIT MARGIN 

This is the percentage of revenue that remains as profit after accounting for all expenses. 

The Formula:
Net Profit / Net Revenue * 100 

This not only indicates your firm's overall profitability and efficiency in managing costs but enables firms to make informed decisions about pricing and cost management. 

It is important to be honest about the actual firm expenses and make adjustments to ensure it is an accurate, market rate adjusted expense calculation to get true profit. Meaning, if your firm pays owner or partner salaries that are under market rate levels for tax purposes, and instead pay the owners through profit distributions, when you calculate firm profitability you should adjust your salary expenses to reflect market rate salaries for the partners to get a true picture of that actual profits of the business and thus the profit margin. 

9. AGED ACCOUNTS RECEIVABLE 

This KPI is vital for managing cash flow, assessing client risk, and forecasting revenue, while optimizing your billing and collections processes. In addition, you can use this KPI to nurture positive client relationships. 

There isn't a commonly used formula for this metric as it is often shown in a table or auto generated report created by your firm management and financial software.

10. PROJECT or ENGAGEMENT PROFIT 

Most firms have business accounting software that will tell them their overall profit margin as a company. Architecture, Engineering and Consulting firms also need Project Accounting software. Understanding the Profit Margin for each individual project or engagement enables you to elevate a project manager into the more desirable role of business manager as they can now become accountable for that project's financial performance.

Basically your project managers become the CEO of their own little company - the project they are leading with their assigned team and client. In addition, you learn about which managers and project types are most effective for your firm. 

Best Practices for Tracking KPIs 

Now that we've identified the top 10 KPIs for your architecture, engineering, or consulting firm, it's important to talk about best practices for tracking KPIs. After all, I wouldn’t just tell you what these KPIs are and then leave you on your own to figure out how to manage them.

These following best practices are like the secret sauce that makes KPI tracking effective and meaningful.

Choosing the Right KPIs 

Seems simple, but if you don’t choose the right KPIs, you’re not getting the full picture. It's important to choose KPIs that are relevant to your consulting firm's goals and objectives.  

When choosing KPIs, consider what you want to achieve, what metrics are most important to your clients, and what data you have available to track.  

The 10 metrics we discuss are a great start of course, but don't limit yourself to these. Find the metrics that help you and your team make better decisions and increase performance. 

You can find more KPIs you should be tracking at your firm in the BQE Benchmarking Reports for Architects and Engineers:

Download the 2024 Architecture Benchmarking Report

Download  the 2024 Engineering Benchmarking Report

Defining KPI Targets and Benchmarks 

It's important to set realistic KPI targets and benchmarks that are achievable and meaningful. It's like setting a fitness goal for yourself. You know what you want to achieve and what you need to do to get there.  

When setting KPI targets and benchmarks, consider your historical data, industry standards, and what is achievable with your current resources.  

Ensuring Data Accuracy and Consistency 

You want your KPI data to be accurate and consistent across all platforms. Think of it like making sure your compass or GPS has the right coordinates.  

When ensuring data accuracy and consistency, consider using data validation tools, setting up regular data audits, and using a centralized data repository. Have your firm management software auto generate reports using live data sources so you know you are seeing the most up to date numbers. 

Regularly Reviewing and Analyzing KPI Data 

You want to regularly review and analyze your KPI data to identify trends, patterns, and areas for improvement. This is why I recommend having your leadership team meet monthly or quarterly to review KPIs over time. 

When reviewing and analyzing KPI data, consider using data visualization tools, setting up regular data review meetings, and involving key stakeholders in the analysis. Also look for opportunities to share this information with your full team so everyone knows they are part of improving performance. 

Adjusting KPI Targets and Strategies as Needed 

A final best practice I recommend is to adjust your KPI targets and strategies as needed based on your analysis and feedback from stakeholders.  

Don’t just set your targets once and think that’s it. As you start measuring and analyzing performance, you’ll learn that your targets and strategies may need to change.  

When adjusting KPI targets and strategies, consider using agile project management methodologies, involving key stakeholders in the decision-making process, and communicating changes clearly to your team.  

If you start by following these best practices for tracking KPIs, your consulting firm can ensure that your KPI tracking efforts are effective, meaningful, and actionable.  

Tools for Tracking KPIs 

Now that we've discussed the top KPIs for consulting firms and best practices for tracking KPIs, it's time to talk about the tools and software that your firm can use to track and analyze data.  

Don’t think you have to handle this all manually. 

The tools I’m going to talk about are like the Swiss Army knife of KPI tracking - they help consulting firms gather, analyze, and visualize their KPI data for maximum impact.   

Let's look at some of the tools and software that consulting firms can use: 

Excel Spreadsheets 

Spreadsheets provide a simple and familiar way to track and analyze KPI data.  

Your firm can use spreadsheets to create tables, charts, and graphs that allow you to visualize and understand data.  

Spreadsheets are a good tool to get you started. They’re easy to access and perfect for some quick data and tables.  

However, there are some serious downsides to using spreadsheets. I don’t recommend using spreadsheets for the long haul as they’re prone to misinformation due to human error. They also require a lot of copy and pasting data from different sources, wasting a lot of time. However, they’re a good quick-starting tool, especially for smaller firms or startups.   

Still, early on it is worth transitioning from spreadsheets to an integrated firm management platform like BQE CORE.

Business Intelligence Software 

Business intelligence software is like the power tool of the KPI tracking toolkit. It’s what you really want to use over spreadsheets. It will save you time and headaches when managing data. 

Software like BQE CORE provides advanced features for data analysis, visualization, and reporting. Your consulting firm can use this software to create dashboards, custom reports, and automated alerts based on KPI data.  

It’s the tool you want now that you’re getting serious about taking control of your firm’s performance.   

Performance Management Dashboards 

Performance management dashboards are like the dashboard of a car - they provide a real-time view of your KPIs and metrics.  

You can use performance management dashboards like BQE CORE to monitor your KPIs and metrics in real-time, identify trends, and take action based on their data.  

By using these tools and software to track and analyze your KPI data, you can get the insights you need to make data-driven decisions, improve performance, and achieve your goals.   

So go ahead and experiment with different tools and software to find the ones that work best for your consulting firm's KPI tracking needs.  

Conclusion 

Tracking KPIs for consulting firms is essential if you want to stay competitive and achieve your goals.  

By tracking and analyzing KPI data, your firm can identify opportunities for improvement, make data-driven decisions, and deliver value to your clients.  

So, if you haven't started tracking KPIs in your consulting firm, it's time to get started!  

Visit BQE University to learn more about tracking KPIs and improving your firm’s profitability through our expert driven webinars, blogs, eBooks, and more.