Seasoned executives cast a wary eye on spending for the sake of growth. While this cautiousness can be life-saving during economic downturns, stunting business growth can cause very real long-term damage.
So, then, how to grow a professional service business responsibly? There is, in fact, a simple way to keep spending low while expanding at the same time.
Recently, we covered increasing profits and scalability by means of productization. This article is going to discuss the other side of that coin: setting your service business on a path to grow measurably and sustainably while ensuring that you’re not funneling profits straight back into growth management.
The secret is cadence.
Setting the right cadences for your teams’ activities creates a self-sustaining rhythm that becomes second-nature to everyone and empowers them to keep the business humming along, all without recruiting an upper echelon of supervisors. After all, growth doesn’t have to mean bulking up your management staff. In fact, a leaner operation is often a more agile one without added administrative layers and hoops for teams to jump through to get work done.
Here’s what you want folks in your services business to spend their time on:
- Billable work
- Selling new business
- Client growth
- Project profitability
- Cash flow
Basically, revenue and continuity. Most activities that do not fall in these categories have the potential to seriously impact your bottom line. And not in a good way.
Things that do not add to your top line should be eliminated where possible. Logical, but also scary. How do you retain control?
Why you should set cadences to manage growth
Whether you run a digital marketing agency or an IT services company, growing your business is not unlike gardening; you have to tend to your garden regularly to carefully manage the growth and cultivate the results you want.
To help with this, businesses often hire senior-level managers and professionals with titles like VP of Operations to oversee teams, processes, workflows and financial flows. While these management teams can ensure appropriate resource training, pace of work and productivity, they also substantially increase overheads, quite probably in step with any revenue increases. So the business may grow, but its net worth may not really budge.
The kicker is, if these organizations lack competent operational cadences, they’ll still struggle to stay on top of everything, which can directly impact productivity and cash flow. They must get business operations on a regular schedule to introduce structure, discipline and predictability that enables teams and project managers to successfully manage and organize items like invoices, timesheets and revenue forecasts. Only then will they have the bandwidth to maximize a service firm growth strategy like productizing services.
The rhythm of tasks, reporting and revenue-generating activities on a daily, weekly and monthly schedule creates order and ensures your teams know what to do at all times to keep the money coming in. Everything happens like clockwork.
If performed diligently, your cadences will eliminate the need to hire a team of supervisors. And your payroll doesn’t need to skyrocket as you grow.
Why some services businesses struggle to find a rhythm
Many services firms fail to establish cadences, though not for lack of ambition. Historically, the common thread has been that they have not yet adopted a high level of automation into their teams’ workflows and their business processes.
Automation makes performing much of the tedious work completely unnecessary. That means that notoriously taxing jobs like invoicing become quick, painless and easy for anyone to perform on schedule. The flip side of this is that insufficient automation due to the inadequacies of these businesses’ software solutions makes developing and sticking to many important department- and organization-wide cadences virtually impossible. However, that’s starting to change.
In a survey of 699 CEOs taken between June and July, PwC found that 76 percent of respondents believe we’re in the midst of a permanent shift toward automation. As automated processes become more prominent in workplace practices, more services businesses have the opportunity to automate certain key cadences that would otherwise present challenges to getting into a rhythm.
By doing so, they have the means to create an infrastructure that supports scalability rather than inflating payroll costs every time the business hits a growth spurt.
How to grow a services firm sustainably: Set daily, weekly and monthly cadences
As all businesses operate differently, cadences should naturally vary. However, there are certain activities that should be the staples of your business tempo.
These are activities that every services firm needs to get under control in order to keep the business healthy and growth on target.
Daily cadences
- Day planning (any tasks for the day)
- Timesheet recording (all work done on the day)
- Task checking
Your daily cadences provide the most zoomed-in view of your business rhythms. They give you the opportunity to regulate project work and guarantee that everything that needs to be in at the end of the day, is.
Day planning, timesheet recording and task checking should be done by everyone, project teams and management included. This is probably a given, but it’s good to check in and make sure that these cadences are actually happening.
It’s easy to push timesheets to the side at the end of a long workday. Still, hours must be recorded while they’re fresh in your staff’s minds so that they don’t run the risk of omitting any. Your teams should also be regularly checking for task assignment updates while project managers should be reviewing a team task list, including due dates and statuses, every day to ensure that all tasks are met on schedule.
Weekly cadences
- Resource forecasting and planning for the following week
- Timesheet submissions
- Invoicing
As projects develop and hours are consumed, changes may become necessary to keep schedule, quality and budget in balance and on target. Taking care of resource forecasting and planning on a weekly basis makes your teams more adaptable to these changes. Ideally, it should occur on Friday for the following week.
Invoicing should be done weekly and thus, so should timesheet submissions. Pick a day of the week to attend to both and do your invoicing directly after all timesheets have been collected. Our recommendation is to set a timesheet deadline around 10 a.m. on Monday morning and do your invoicing runs that day at noon.
Why weekly and not monthly invoicing? For one thing, growth depends on cash flow, so you need to be fastidious to ensure that payments are timely and regular.
Troublingly, missing billable hours on invoices is a disease every professional services organization suffers from. Dragging out the invoicing cycle leaves plenty of room for problems to be introduced.
If the project manager forgets to add hours spent on a time and material project earlier in the month, you’re never going to be able to bill that time once the invoices are out. Invoicing disputes also rise as you and your clients have different recollections and perspectives of work done over the course of the month. But if you have a weekly invoicing cadence, you’re having these conversations much more frequently, and much closer to the action when memories are clearer.
Monthly cadences
- Month-end close
- Checking for projects to be closed
- Revenue forecasting
While end-of-month closing and may be par for the course, end-of-month revenue forecasting may not. If this year’s business disruptions have taught us anything about forecasting revenue, it’s that the numbers can quickly become obsolete. Quarterly and annual revenue forecasts are a gamble that many CEOs may no longer be willing to take.
Monthly forecasting puts you at an advantage where events that may affect your business are concerned. Since your projections are regularly adjusted, you can make decisions based on up-to-date data. You’ll be more resilient and roll with market changes with greater agility. In terms of growth, you’ll need frequently updated forecasts to know how much cash flow and what growth rate you can realistically expect and counteract any unexpected setbacks.
Cadences you should automate
Not every last cadence necessarily needs to (or can be) automated. That being said, there are certain activities that would be impossible for your teams to regulate without an automated software solution due to the sheer amount of time and energy required.
These activities include:
- Invoicing
- Filling out and submitting timesheets
- Revenue forecasting
- Resource forecasting
Invoices
If invoicing is nightmarishly time-consuming, it’s going to be a serious challenge to get into a weekly groove. As it is, manual billing set to a monthly schedule can take days to complete. It will undoubtedly put undue strain on teams asked to do it every week.
Given the availability of modern tools that automate invoicing for services businesses, including professional services automation (PSA) software, there is really no reason to work this way anymore. Invoicing more frequently won’t be a burden on your organization when the whole process goes from poring through customer accounts and timesheets and totaling hours to clicking a button.
Ask yourself if your software makes it possible to create an invoice in seconds. If the answer is “No,” it’s not what you need. It should extract all project data and hours and create the invoice on its own instantly so that all that remains is getting an approval. Recently, we introduced a dynamic email feature to take this one step further and make the entire process even quicker by emailing approvals directly to service professionals’ Gmail accounts.
Done this way, invoicing can be handled by just about anyone on your teams—and it won’t get pushed back.
Timesheets
Accurate invoicing depends on accurate timesheets. But in many services firms, they’re a pain, which can compromise their proper usage and accuracy. And if your teams are working with spreadsheets, it can take days to collect the information, which will most certainly kill your weekly invoicing cadence.
You need to make it easy for your teams to log and track hours. Pre-populated timesheets will save them from having to recall and individually record every aspect of the workweek. They’ll just click to submit. And your project managers know that timesheets are accurate because the data is pulled from projects directly. Of course, this does rely on the interconnectedness of time tracking, project management and billing.
A well-rounded PSA solution should link timesheets, project activities and invoices together so that your teams’ work automatically shows up in their timesheets and ultimately lands on an automated invoice. That’s the desired flow that will keep all the wheels turning without requiring the watchful eye of upper management.
Revenue forecasts
Does the idea of forecasting revenue every month give you a headache already? There’s good news: You don’t need to lift a finger if it’s an automatic process offered by your software.
If you look in VOGSY’s dashboards, you’ll see a revenue forecast chart that shows your targets compared with last year’s actuals as well as each month’s actual revenue, planned order book, unplanned order book and pipeline revenue. All of this is updated in real time so that you know instantly how many projects Sales needs to bring in every month and whether the funds will be there to put your growth initiatives into action.
Resource forecasts
We all know why the resource forecast is important. But it seems to be a nebulous thing in so many professional services organizations.
A growing business needs to be able to work out quickly whether it should hire people with certain skills as well as whether it can afford to without eating up all fiscal gains from growth. Things like automated project budgets and margins and resource availability maps that automatically detect under- and overplanning can help greatly in these assessments.
Since opportunity projects also affect your resource forecast, it’s best if you can expect some automation of these as well. For instance, you might want to check if your software can create opportunity projects instantly or within a matter of minutes.
The more automation you can weave into forecasting, the faster and more accurate it will be.
The bottom line
There are many ways to grow a services firm. But growth from a cost-conscious perspective is imperative to control the outcomes and keep the business healthy. This is where your teams’ dedication to following operational cadences becomes a necessity, particularly if you want to keep productivity and efficiency high and overheads low.
You’ll find that keeping organizational cadences intact is a whole lot easier with software that introduces advanced automation. It empowers your teams to work at a level of autonomy that not only reduces the need for managerial layers, but also instills a greater sense of ownership that enables them to grow with the business and make it thrive.
So look at what people actually do on a daily basis; if it is not adding to your top line—question it. Do you need it? Can it be automated, sped up, have fewer people and less time involved?
Your organization is only as strong as its people. Give them tools to unlock their own potential, and you unlock the business’s as well.
