Your earning capacity report

Your earning potential is: {{earningPotential}}

A company’s earning capacity is dependent on a range of different factors. This report gives you a clear vision of how much your company could be earning, how to achieve that figure, and how to push beyond it to maximize your potential.

Having seen the earning potential for your company, you’ll find yourself in one of two scenarios:

Scenario 1

You’re not currently hitting your earning potential. Find out how to get back on track with The 4 key hurdles between you and your earning potential

Scenario 2

You’re already hitting your earning potential. Jump straight to “How to exceed your earning potential, without hiring additional staff"

Scenario 1 – You’re not currently hitting your earning potential

The 4 key hurdles between you and your earning potential

If you’re not achieving your earning potential, you need to understand what’s causing it, and what you can do to address it. Typically, it’s one or more of 4 key hurdles.

The 4 key hurdles that could be holding you back are:

  1. Under Quoting
  2. Over Delivery
  3. Under Utilization
  4. Problem Portfolios

If everyone’s seemingly rushed off their feet and screaming for more staff, it’s likely you’re suffering from one or both of the "Evil Twins": Under Quoting and Over Delivery.

1. Under Quoting

In simple terms, you might not be charging enough for your work. There are many ways to fall into this trap, but the most common is not being clear enough in your scope.

If the scope isn’t clear, you can put your team on the backfoot and spend more time on the project than you’ve budgeted for. You often end up delivering additional requirements (for free) that the client expected but weren't included in your budget.

If this sounds familiar, you can follow this simple 2-step process to eliminate underquoting:

Step 1: Pinpoint every deliverable

  • Make sure you do a bottom-up budget, where every deliverable is estimated. When you break down the work you often find there’s more involved than first thought
  • Make sure you detail the deliverables within your quote, so your client is fully aware of what’s included and the limit of the scope
  • If client revisions will occur, include a limit to the number of rounds of amends you’ll make. Without this, the client is within their rights to take as long as it takes

Step 2: Estimate (not guesstimate) how much time you’ll need

  • Use job costing templates. Templates enable you to be consistent e.g. avoiding instances where 2 people get 2 different prices for the same project
  • Look at recent, similar projects. How long did they take to deliver? Did they go over budget?
  • Learn from your mistakes and factor the learnings into your next quote, as well as periodically updating your templates

Now that the client is clear on exactly what they’re getting, we need to make sure that our plan is executed by the delivery team. This is where the next hurdle comes in...

2. Over Delivery

In short: over delivery is spending more time on a project than was budgeted. On fixed price projects, this erodes profits.

To prevent over delivery, the question you need to embed in your staff’s minds is: "How long have I got?"

Over delivery often stems back to teams charging into delivery with no awareness of the budget. Briefs tend to focus on the outcome (e.g. “we need to create x”), rather than the outcome and the budget (e.g. “we need to create x and we have x hours to do it”).

The key to eradicating this is to make sure each person understands:

  1. exactly what they need to do; and
  2. exactly how long they’ve got to do it

Once you’re out of briefing and into delivery, use timesheet data to create regular budget vs. actual reports. CMap’s Budget vs. Actual functionality (shown below) provides a graphical summary that tells you in real-time if you’re heading over budget.

The quicker you identify over delivery, the quicker you can do something about it e.g. pushing back on the client or agreeing additional fees if the work is outside of scope.

Budget vs Actual Report: The Budget vs. Actual compares the project budget to the value of time booked, and uses the project’s percentage complete to predict the final recovery rate (<100% = over-delivery).

Once you’ve scaled under quoting and over delivery, the next hurdle likely to be getting in your way of achieving your earning potential is utilization, which is on the following page.

3. Under Utilization

In this context we’re considering utilization as the percentage of time a worker should be booking to projects, as opposed to admin. All staff should have utilization targets.

If you’re unclear on what typical utilization targets are, this table should help:

Example RoleTypical Utilization TargetReasoning
Writer80%Works full time on projects with few additional responsibilities or administration time required. Should be available for 4 out of 5 days.
Director40%Works on projects to a lesser extent, as has additional business development, line management, and general admin duties. Only available for 2 out of 5 days.
Business Development0%Non-fee earning and totally focused on new business. N.B. The same 0% utilization applies to all non-fee earning roles

Ensuring people hit their utilization targets is critical to hitting your earnings potential. If this isn’t happening, the most fundamental question is: have you got enough work to keep your people busy? If you have, too much time is being spent on non-billable admin. The key pitfalls to look out for include:

  • Too many (unnecessary) internal meetings
  • Spending too long on potential projects e.g. supporting on pitches, tenders, RFPs, etc.
  • Incurring travel time, but not billing it to clients (you can bill for this time, and if not, do you need to travel in the first place?)
  • Inefficient admin. Is there a technology that can solve this, or could admin resource be increased to free up fee-earning staff?
  • Poor timesheet adoption. If you’re using clunky timesheet software, is it easier to dump time on an admin code that skews utilization reporting?

Utilization targets are key. Make utilization a KPI that your staff understand and are motivated to hit. If there are internal issues preventing your staff from hitting their utilization KPIs, they will make sure you learn about them.

And finally, if you can’t trace your underperformance back to companywide issues across under quoting, over delivery or under utilization, deepen your search and consider whether your problem stems back to a problem portfolio.

4. Problem Portfolios

Firstly, what is a portfolio? A portfolio is a collection of projects, grouped together by a theme, such as sector or country.

If you’re struggling to cut through your data to evaluate where things are going wrong, consider using “portfolio analysis“ to shine a light on particular cohorts of projects where you’re underperforming.

Such observations might be hard to spot when analyzing your business at the company level, but are obvious when looking at specific groups of projects e.g. if your largest client (or sector, or service type, etc.) is also your most unprofitable, you have a problem.

CMap’s Portfolios functionality gives you instant insights. In the example below we’re analyzing projects by sector, and we can clearly see our recovery rate is poor in the public sector, dragging company earnings down from their true potential. Now we’ve found the culprit, we can dive in deeper to see if there are under quoting, over delivery, or under utilization issues with the public sector specifically.

To learn more about Portfolios, see here.

Next Steps to Hitting Your Earning Capacity

Achieving your earning capacity can be boiled down to overcoming the 4 hurdles of:

  1. Under Quoting
  2. Over Delivering
  3. Under Utilization
  4. Problem Portfolios

To find out how CMap can help you overcome these hurdles, book a personalized demo today.

Scenario 2 – You’re already hitting your earning potential

How to exceed your earning potential, without hiring additional staff

If you’re already achieving your earning potential, congratulations, you’re already in a strong position.

To increase your earning potential, you can always hire additional staff. But those staff come with a cost, and a requirement to keep them busy with billable work.

Rather than adding headcount, with just a few small tweaks you can push your earning potential even higher... with all of the extra revenue falling straight through to your bottom line.

A 5% increase in utilization would add {{increasedUtilization}} to your earning potential

Is there any more you can do to squeeze utilization out of your team? If you’re already hitting your earning potential, the chances are you’re well on top of this, but consider if any of the below are limiting your team’s amount of project time:

  • Too many (unnecessary) internal meetings
  • Spending too long on potential projects e.g. supporting on pitches, tenders, RFPs, etc.
  • Incurring travel time, but not billing it to clients (you can bill for this time, and if not, do you need to travel in the first place?)
  • Inefficient admin. Is there a technology that can solve this, or could admin resource be increased to free up fee-earning staff?
  • Poor timesheet adoption. If you’re using clunky timesheet software, is it easier to dump time on an admin code that skews utilization reporting?

A 5% increase in rates would add {{increasedDayRate}} to your earning potential

It’s amazing how many companies don’t increase their rates on a regular basis. It’s easy to overthink it, worrying about how certain clients might react, and forgetting how de-sensitized people now are to annual increases in services and products.

If you’re not increasing your rates you’re not standing still, you’re going backwards. As your costs rise, your rates need to rise in order to not erode profits.

What looks like an immaterial increase on the face of it (e.g. from £1,000 to 1,050 per day), has a huge impact on revenue when aggregated across all of your staff over a year. Execute the rate increase with confidence, and boost your earning capacity instantly.

A 5% increase in utilization and a 5% increase in rates would add {{increasedUtilizationAndDayRate}} to your earning potential

Pull off both the increase in utilization and rates, and you could materially exceed your current earnings. And the best part? This increase would be pure profit to your company.

To find out how CMap can help take your company to the next level:

Book a personalized demo today