Current Client? Log in to client portal
  Search

Professional Services Sector: how can professional services firms drive their profitability?

Throughout our working relationship I felt the Hoyman Dobson team cared about me, as an individual as well as a business owner. This feeling gives me a great peace of mind that I am in good hands. So instead of worrying about my financial matters, I can focus on continuing to help my patients and giving back to the community.

Silas Charles

Cancer Care Centers of Brevard, Inc
 

We can help you with:

 

 Professional services firms such as consulting firms, architectural and engineering firms, advertising agencies, law offices, insurance companies, dentists and medical offices share some common characteristics:

  • They are knowledge intensive
  • When services are rendered, extensive client contact takes place
  • Generally, the practice is driven by owners who hold special certifications in their field
  • Service providers employ a high degree of individual judgment
  • Service providers are governed by strict professional standards of conduct

Aside from adopting a more proactive approach to marketing along with a renewed focus on client satisfaction and retention, professional services firms can concentrate on the following strategies to drive their profitability.

  • Implementing performance measures

A typical accounting system will outline the financial position of a professional services firm. However, it can also help the firm use its resources profitably by capturing good predictors of long-term profitability, such as market share and growth, employee skills, and productivity.

Professional services firms need systems to evaluate the profitability of their training investments: for example, in-house training programs versus bringing outside consultants.

For the professional services firms, capacity planning is a function of staff count and how well the firm leverages its staff resources. Projects that have the highest payoff will get priority over the easy, interesting, or personally rewarding ones.

  • Developing cost control systems

Diversification of services in professional services firms will result in additional:

  • Membership and certification costs
  • Continuing education costs
  • Time investment

Before expanding their services, professional services firms should weigh the benefits of diversifying their service offerings, evaluate economies of scale and potential synergies against the cost of diversity, especially if firms plan to expand their services internationally. The basic question should be asked: will the gained competitive advantage be worth the additional costs?

Cost controlling strategies can be applied to human capital and potential new services. In the professional services sector, firms should analyze what services will be needed and then implement a hiring strategy, training programs, and continuing education classes. Training programs can reduce staff size and decrease staffing costs. Improved hiring practices will result in the need to train fewer employees, decrease in staff turnover, an improvement in professional effectiveness, and a decrease in the risk of litigation.

  • Focusing on quality of the services

In addition to implementing a performance management system and controlling its costs, professional services firms must commit to a high level of quality. Quality is a firm’s reputation, the most important competitive advantage.

When firms are going through rapid growth, they may experience a decline in the quality of their services. Those firms that cannot streamline their operations will suffer the most.

In the market, sellers will compete on both price and quality. Besides offering a competitive advantage, quality can also cut costs. Quality is also a defense against litigation.

To help drive profitability, professional service providers should have adequate systems to document that quality. The systems should incorporate the firm’s significant success factors. For a law firm, this might mean lost appeals or number of cases that went to court. Professional services firms, for example, could track canceled meetings and lack of repeat business.

Professional services firms have established themselves as influential contributors to the business world. Their accounting principles, such as cost accounting, performance measurement, and quality controls may be more difficult to implement. Nonetheless, their implementation is doable and will help the firms in their quest for long-term success.

» Review some general Professional Services tips that may enhance your business.

Resources:

 
HOME | SERVICES | INDUSTRIES | ABOUT US | CAREERS | NEWS | SITEMAP | CONTACT US
215 Baytree Drive • Melbourne, FL 32940 • 321.255.0088
4767 New Broad Street • Orlando, FL 32814 • 407.422.1681

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under Internal Revenue Service Code. The technical information here is necessarily brief. No final conclusion on these topics should be drawn without further review and consultation. For additional information, please contact our firm at info@hoyman.com or 321-255-0088.