Consulting Profit Margin: 4 Ways To

Consulting Profit Margin: 4 Ways To Approach This Key Metric

However, there are a lot of ways to look at margin — and many nuances to look out for

This article will provide a practical guide on how you should be looking at margin in your consulting business.

Armed with this information, you’ll ensure you’re doing the right kind of work and you have a clear view of where the margin is coming from in your business.

By taking the time to analyze where you make the most margin, you are identifying where you add the most value. This enables you as a consultant to maximize your potential.

My Observations on Gross Margin Reporting

I’ve spoken to literally thousands of consultants over the past few years, and you’d be amazed at the number of consultants who can’t tell you what margin they are making on their projects.

I’ve even come across cases where people don’t want to know, deeming it to be unimportant.

And I’ve seen every elaborate way of obscuring the numbers to try and make margin look better, including…

  • carving off sales time into a separate project,
  • conflating high-margin licensing revenue with consulting services,
  • and reporting on margin before writing off a whole lot of time that couldn’t actually be billed.

After much investigation, discussion, and pontificating I’ve come to realize an important point that makes this behavior all make sense.

As a consultant, you sell your time, expertise, and ability to think and reason. You are selling yourself. There is no separation between you and your business.

And if your project is losing money, that feels like a direct reflection on you as an individual.

By taking the time to analyze where you make the most margin, you are identifying where you add the most value. This enables you as a consultant to maximize your potential.

Everyone has value to add. It’s just a matter of finding it.


Tue Oct 03rd 2023
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