Addressing Professional Services Revenue Leakage
Updated: Aug 1, 2022
Revenue leakage is a real thing and can quickly mount up the opportunity costs if not mitigated properly. Are you prepared to detect (and address) revenue leakage in your organization? Here are some tips for finding and plugging those revenue holes to maximize your company’s revenue streams.
Sharpen Up Timesheets
Missing timesheets is both a devastating and easy culprit in the world of revenue leakage. Not ensuring that your team is maximizing billable hours for their work can make your bottom line take a real hit very quickly. The good news is that this is very easily correctable. Timesheet controls are readily available in almost every major PSA solution and even if not, manual controls are easy to put into place as well. Starting with ensuring full accounting of timesheets every week, managers can also assess the balance of billable vs. non-billable hours being entered to ensure that it either reflects the situation appropriately or that it can be corrected to ensure that maximized billings are taking place.
Services in Sales
One of the biggest sources of revenue leakage that I’ve seen in my experience is the disconnect between the Sales and Services teams. I love the Sales teams (they bring us delivery guys work!) but there are times when there are opportunities left on the table by not having a Services voice at the table to identify gaps and opportunities that can be cost saving if not lucrative. Getting Services teams in pre-contract can help avoid the pitfalls of giving away free work because it was scoped but not properly priced. Or also by detecting other revenue opportunities during the contracting process that can not only increase the bottom line but give your customer the comfort of knowing they are in the hands of a team who is looking out for their business needs.
Know When to Walk Away
Walking away from a deal seems counter-intuitive to what we do in the professional services industry but sometimes it’s a must in order to maintain a healthy bottom line (and possibly more). But inevitably there are going to be those times when a deal just is not worth it. Assessing what gains you have to make from a project need to be part of the decision-making process. For example, say your organization is faced with the decision to implement a customer at a discounted rate with the promise of higher maintenance fees down the road. Sounds possibly appealing, right? Well, what if the demands of the customer for your fixed price fee will push down your effective rate to a point where you are paying your customer to implement your software (i.e. a negative margin)? Will the increased maintenance revenue that you are getting from this customer offset those costs you are incurring to implement the software? Walking away from a deal is never a great alternative but the odd time it may beat the other option of sticking with it and seeing major PS revenue leakage.