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Enterprise Agile Planning, Project Portfolio Management

Service Businesses: Balancing Profit and Innovation Isn’t a Pipe Dream

Published By Team Clarizen

As a professional service business, profit is the bottom line.

With high profit margins, you can grow your business and serve new customer demands as you please.

Without profit, you’re in a constant fight to stay afloat. However, you also can’t afford to have tunnel vision. Alongside profit, you must maintain high service quality, innovation, and customer satisfaction.

In this article, we’ll look at some of the factors that prevent service businesses from balancing these factors effectively – and what you can do to turn things around.

Service Businesses

The True Cost of Inefficient Processes

For a service business, time equals money. Your ability to increase revenue is directly proportional to your ability to work more billable hours.

Time recording and invoicing – i.e., revenue recognition – are essential components of your business. So naturally, having robust processes for these components is a top priority. But here’s the thing. Robust revenue recognition will only get you so far if your other project management capabilities are weak.

Ineffective project management, often due to managing the work in disconnected silos, opens your service business up to serious risks, including:

  • Overcommitting or underutilizing key resources 
  • Inconsistent service levels
  • Wasting billable time
  • Using guesswork to drive decisions instead of data
  • Unsatisfied customers

…and other generally undesirable outcomes.

On the other hand, effective project management provides a host of benefits:

  • Helps you assign the right level of resource to each task or project
  • Ensures your team’s time is spent efficiently
  • Frees up time to focus on project and business performance
  • Saves client managers from having to argue over project scope
  • Eliminates those end of project surprises by keeping everyone on the same page

It also ensures your teams have more time to spend on things that make the client happy. What could be more logical than that?

Unfortunately, for many service businesses, one huge barrier stands in the way.

Curse of the Million+ Spreadsheets

The average service business is saddled with a mess of disparate spreadsheets, timesheets, siloed task management systems, and goodness knows what else. These processes waste precious time and resources on every customer engagement. Imagine what that adds up to over a year.

We worked with one global professional services business that discovered it was using over ONE MILLION spreadsheets to manage client projects. For perspective, that was over 1,000 spreadsheets per employee.

How do you think that affected their ability to deliver high-quality and efficient service? Or to know when they hit key milestones so they could bill clients as early as possible?

This is not an isolated incident. Your service business might not have a million-plus spreadsheets, but do your internal systems and processes serve you? Or do they slow you down and hinder your growth?

For many service businesses, it’s the latter.

It’s Not Just About Revenue Recognition

Here’s a question for you: If time is money (and let’s face it, it is), how much do inefficient processes cost your business?

It depends on the process. It could be a lot. It could be hardly anything.

If you repeat that process for every client engagement – perhaps even multiple times per engagement – that adds up to a very real financial cost to your business. If it’s a process that’s completed every day… by every person in your organization… that cost could be huge.

The obvious candidate for improvement is revenue recognition because that’s where the rubber meets the road. The better your time tracking and billing systems, the more easily you can make money.

However, it’s easy to OVER focus on these factors.

Well-constructed systems and processes can help your business boost efficiency and effectiveness at every stage of service delivery, not just revenue recognition. These systems can help you optimize resources and maximize project performance while also balancing upcoming demand with work already in progress – avoiding the danger of overcommitting key resources.

At the same time, judicious use of templates and automation can help you improve the quality and consistency of your work. This helps you maximize customer satisfaction and (hopefully) repeat business.

However, to really get the benefits – not just the promise – of these systems, you need one more thing.

How to Make Faster, Better Decisions

Among the greatest challenges posed by inefficient project management systems is the effect they have on visibility.

If your resourcing and financial data are tied up in siloed systems (or heaven forbid the data is in hundreds or thousands of spreadsheets), there’s simply no way to know how client engagements are trending until after the engagement is completed. And by that time, there’s nothing you can do about it.

There’s also no way to know where and when key resources are committed. Without this basic information, you can’t make informed resourcing decisions and feel confident about managing new client commitments.

Now, consider the alternative. How much more streamlined and effective could your business be if you knew the exact status of every client engagement at any point in time? How about if everybody from the project teams to senior leaders could calculate the financial implication of each and every project decision based on accurate, real-time data?

Real-time visibility of financial and project performance data can help your business:

  • Respond quickly to changing conditions
  • Ensure work is aligned with objectives – both your’s and the customer’s
  • See the status of all customer engagements, including budgets, progress, and potential issues
  • Ensure project work and resources are aligned with budgets and business objectives
  • Proactively plan for the future
  • Quickly and accurately answer questions, e.g., “What can we commit to next month based on existing commitments of key resources?” or “Where could we reduce our costs without negatively affecting customer outcomes?”

Technology that Helps, Not Hinders

The TL;DR of what we’ve covered so far is simple. Service businesses need to:

  1. Report on their time and bill clients accurately
  2. Optimize their entire service delivery process
  3. Emphasize real-time visibility to inform better, faster decisions

And that’s great. But how do you do that? We talked earlier about the damage caused by inefficient systems, but what’s the alternative?

The answer is simple. You need technology that facilitates the three imperatives listed above. Specifically, technology that is flexible enough to allow your teams to work the way THEY want while benefiting from automation, process improvements, and real-time visibility.

Remember that global service business we mentioned before? The one with over a million spreadsheets?

They transformed their business – and outperformed ALL industry KPIs, including profitability – by implementing technology and processes that enabled them to make data-driven decisions about every customer interaction…in real-time. In fact, they have over 40,000 users logging into Clarizen daily to make this possible.

You can do the same for your service business. With a modern Professional Services Automation (PSA) solution – one that supports the entire service delivery lifecycle – your business can delight its customers and ensure every engagement is profitable.

Increase your business agility with Clarizen’s project management software

The Secret to Profitable Service Delivery

This article has covered the basics of balancing profit with innovation as a service business. But in reality, we’ve barely scratched the surface.

For a full rundown, register for our upcoming live webinar on March 18th at 8:00 am PST to learn:

  • Why managing project costs in real-time is essential to maximize customer profitability – and how to pull it off in the real world.
  • How technology can help your business boost efficiency and effectiveness at every stage of service delivery – not just revenue recognition – by optimizing resources and maximizing project performance while balancing upcoming demand against existing work.
  • How integrating your PSA solution with your CRM, HR, finance, billing, and other systems can provide total, real-time visibility across every area of your business

Register Now!

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Written by Team Clarizen