you need to measure your progress and success, but not by the hour.
by jody padar
radical pricing – by the radical cpa
it may sound ridiculous, but the only people who are married to timesheets are professional services firms staffed by people who spend their professional lifetimes building their knowledge. every other company in the world has figured out how to sell and price products or services without relying on timesheets.
more: five reasons to ditch timesheets for good | productize services for consistent client value | four ways automation pushes the paradigm shift | how value pricing impacts your employees | why pricing is so disruptive | accounting disruptors are heading your way … with deep pockets | advisory work must be priced by value, not hours
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why do professional services firms believe you should sell knowledge in increments of time? ron baker, an accounting visionary and author of “firm of the future,” once asked, “when you’re a knowledge worker, should you be selling your time?” i don’t think so.
baker went on to say, “timesheets are the cancer in the firm, and the longer you hang on to that timesheet mentality, the harder it is to change and the harder it is to go through business model reinvention and adaptation.”
the more you turn to automation, the more antiquated timesheets become. it takes a firmwide commitment to change and embrace a digital transformation.
once you’ve restructured your pricing model, the hour is replaced by deliverables and client satisfaction. now, it’s time to devise other metrics for measuring progress and success.
it’s more realistic to phase out timesheets over time rather than all at once. follow a good change management strategy and start with a pilot program within your firm to identify and apply new metrics. if you’re a sole practitioner or a smaller firm, stop using timesheets immediately and adopt metrics that reflect your firm’s new goals and client-centric orientation.
these new metrics should be grounded in several areas:
- client satisfaction will drive your business growth. what do your clients think about their experience with your firm? your deliverables? your services? your staff? tapping into client experiences is important. you should survey to calculate your net-promoter score or pay attention to yelp, google and facebook reviews. people are very comfortable with rating systems and should be amenable to rating by stars and satisfaction.
- staff satisfaction is key to having a strong client-centric firm. if your staff isn’t waking up excited to come to work and deliver a strong client experience, things aren’t going to bode well for your firm. have something in place to measure staff satisfaction and ensure your staff knows their happiness is important to the firm’s health.
- gross receipts per full-time equivalent are a great metric in a fully automated firm. if you are really working automation and pricing well, your gross receipts per full-time equivalent should be large. i know this from personal experience. my own firm was grossing $650,000 annually, and we had two and a half full-time equivalents: a full-time professional, a full-time admin and a part-time tax person. and i didn’t work in my firm – i spent less than 10 percent of my time on it. we could only accomplish the $650,000 because we were significantly automated and priced well for our market. looking back, i believe we could have made it to a million dollars per full-time equivalent had we pushed for it and had access to the software solutions available today.
- clients per employee is useful as a capacity measurement. track the number of clients and service types each employee can handle continuously and reliably.
- ask your staff what they think would be effective metrics to measure. they are familiar with the clients and what it takes to work the file. don’t be shy about getting their opinion.
be aware and wary of your timesheets, as they are filled with inaccurate data. other things will make you more profitable. turn your focus to those. embrace thinking about timesheets as a limiting factor because you only have so many hours to bill.
move forward one step at a time. if you’re overwhelmed by the prospect of eliminating timesheets, just remember that it is an incremental process. begin with a pilot program and only move as fast as everyone’s confidence builds in the new model. once you start seeing greater profitability from this new pricing model, enthusiasm will grow, and timesheets will fade into the past.
you could even have a timesheet-burning party. (i’m joking, though i have been to one, and everybody got a t-shirt). kidding aside, you must consider how you will slowly sunset them out of your firm and build profitability in other ways. as you work your way through a pilot program with a handful of clients, you’ll see what works and what doesn’t. as the program expands, timesheets will organically become irrelevant, and these other metrics will become more important.
at a certain point, you’ll no longer fear the light at the end of the tunnel is an onrushing train. rather, it’s the light from a more profitable future.