BLOG

Managing A Business With Very Different Revenue Streams

It’s hard to manage a business that provides consulting services, but even more so if consulting is not your only income stream.
A lot of businesses offer specialised consulting services on top of their normal income streams, particularly if they offer bundled services.
For your clients that don’t fit a package you can offer bespoke services. And you should be offering bundled services if you can.
Product businesses, for example SaaS businesses, have their own peculiarities and associated financial metrics. It’s not uncommon for them to run at a loss for a while and need investment rounds to keep them going. But like a big flywheel; only once they get rolling can the recurring revenue cover the costs.
Consulting firms, on the other hand, should always make money from day one, and shouldn’t need to borrow money to grow (organically).
So what should you do if your product business also does some consulting? The answer is my usual answer: first you need to make sure you measure the right things.
The top five metrics for SaaS businesses are: monthly recurring revenue, average revenue per customer, churn, cost of customer acquisition, and lifetime customer value.
For consulting firms it is: the ratio of direct staff costs to fees by person, team, project and client, as well as utilisation and average rate. Like SaaS you should also measure cost of customer acquisition, and lifetime customer value.
Then you have to allocate overheads to each income stream.
That’s a lot of stuff to measure.
Anyone who has ever put together these types of reports knows they can take a lot of time, but you can do it if you are willing to do set your systems up the right way. The cost of not doing it is unknown.

 

 

Photo by Raoul Droog on Unsplash

Recent Posts