We live in a services-driven world: just over a decade ago, product revenue dominated the technology and services sector. However, by 2023, services accounted for 66% of all revenue, making them the primary driver of value and growth, according to TSIA.
Yet, as services continue to dominate, the complexity of managing and scaling these businesses increases. In this environment, business leaders face constant pressure to grow revenue, protect margins, and reduce risks. Achieving these outcomes hinges on the ability to focus on the right key performance indicators (KPIs) that offer the clearest view into how the business is truly performing.
KPIs aren’t just numbers. They are the critical levers that drive long-term success. The ability to monitor and respond to KPIs can mean the difference between simply keeping operations afloat and building a business that truly prospers.
Let’s break down the three most important business outcomes for services firms and the KPIs that help leaders reach them.
1. Improving Revenue
At the heart of any growing business is revenue, and for services organizations, one of the most impactful levers is maximizing billable utilization.
Formula: Billable Utilization = (Billable hours / Total available hours) x 100
This KPI shows how effectively your team is deployed. A consistently low utilization rate signals that staff are either underutilized or not aligned with the most profitable work — both of which result in lost revenue.
Utilization can be significantly improved if your demand picture (current projects, backlog, pipeline) and supply picture (employee skills, experiences, availability, aspirations) are optimally aligned.
One of the best ways to achieve this is to make sure you have put the right technology and processes in place to ensure you have the right person, with the right skills, on the right job, at the right time.
Equally important is addressing revenue leakage, a persistent issue that plagues many services firms.
Formula: Revenue Leakage = Total Potential Revenue - Actual Revenue Received
The average services organization leaks 2-4% of revenue — money that could go directly to the bottom line. Quotations often fail to reflect optimized cost structures that respect margin targets.
Time to staff is prolonged due to mad scrambles to find resources upon winning business; billable hours go unbilled, and services are often given away to make up for delivery shortcomings or simply to keep customers happy. These losses might seem minor in isolation, but they can transform a break-even operation into a meaningful contributor if recaptured.
Much of this leakage stems from outdated tools or poor systems integration. For instance, many services firms still rely on finance software that isn’t designed for modern project accounting needs. These systems often lack support for crucial features like milestone or percentage-of-completion billing, leading to issues such as unbilled hours.
The result? A reliance on spreadsheets or poorly integrated systems that can’t keep up with the complexities of today’s services business leading to unbilled hours and delayed or incomplete project billing. Tracking metrics like unbilled hours or missed invoicing helps identify these gaps and ensures that all earned revenue is captured.
Another powerful revenue driver is improving the bid-to-win ratio, also known as the proposal win rate.
Formula: Proposal Win Rate =(Numbers of Bids Won / Total Number of Bids Submitted) x 100
This is achieved by optimizing the estimation process and submitting proposals that reflect optimized cost structures and team profiles while maintaining margin targets. Best-in-class solutions also allow you to continuously learn from past bids and adapt future submissions accordingly. This not only leads to more contract wins but also helps sustain revenue growth over time.
2. Optimizing Margins
Revenue growth alone won’t sustain a business. Profitability requires a sharp focus on managing costs. Tracking these in real-time allows you to spot and eliminate inefficiencies that could erode margins.
One key metric to monitor is the variance between actual and budgeted costs, which measures how closely your execution aligns with your financial plan.
Formula: Variance = Actual Costs - Budgeted Costs
This KPI ensures you’re not just meeting budgets on paper but are actually staying on track during execution. Check for a clear variance between budgeted and actual costs. These can manifest as overruns, spillages or over-serviced work and typically indicate scope creep, poor resource planning, or unexpected delays. To avoid the variance project managers must be aware of them and empowered to take immediate action to protect margins.
Another area that contributes to cost savings and avoidance is stakeholder inefficiency.
Formula: Stakeholder Inefficiency = # of hours taken for manually administrative tasks / # of available hours, in a given time period
Many organizations have grown largely via stitching together various processes and siloes that in turn, require lots of manual effort and administrative tasks. This causes a big strain on employees and has a significant impact on workforce productivity.
Manual tasks are also prone to errors, which lead to extra governance effort overall. Streamlining such processes via automation, self-service and better visibility can bring big efficiency gains to an enterprise while improving employee morale.
3. Lowering Risk
Services businesses operate with tight margins, which makes risk management essential. Resource forecasting plays a critical role in mitigating risk by ensuring that projects are adequately staffed with the right skills. Inaccurate forecasting can lead to overbooking, which strains teams and results in consultant burnout, or underbooking, which leaves valuable resources idle.
Cash flow is another area where risks can accumulate. Days of sales outstanding (DSO) measures how long it takes to collect cash after work is completed.
Formula: DSO = (Accounts Receivable / Net Credit Sales) x Number of days
A rising DSO can signal potential cash flow issues that, if left unchecked, can disrupt operations or limit your ability to invest in growth. Such issues arise due to a lack of real-time visibility to invoices that might either be aged/delayed or be at risk of non-payment putting undue pressure on your cash flows.
Lastly, employee retention is an often-overlooked risk indicator. Services businesses depend on their people. High turnover is both costly and disruptive. Monitoring employee turnover and taking steps to increase retention — whether through career development, workload management, or recognition — helps ensure stability and reduces recruitment and onboarding costs.
Interpret and act proactively
Utilization rates, project margins, and DSO among others provide a valuable window into the health of your services business. But tracking KPIs isn’t just about gathering numbers; it’s about how you interpret and act on those numbers.
In many cases, services businesses fall into the trap of reactive management—playing whack-a-mole and fixing problems as they arise. The most effective leaders monitor KPIs to anticipate challenges and make proactive adjustments before issues escalate.
Making the right decisions requires both the right technology and a customer-centric business culture. When your KPIs are integrated natively with your CRM, every piece of data — from project health to financials and resource utilization — is directly tied to the customer.
This creates a single source of truth for operational and customer data. Furthermore, it ensures that your decisions are informed not only by real-time metrics but also by a complete, unified view of the customer journey.
With all your KPIs anchored around this single source of customer truth, you can respond faster to changing needs, deliver better customer outcomes, and drive more strategic growth — all while maintaining alignment across the business.
At Certinia, our mission is to empower all organizations to deliver customer value with certainty. As the trusted partner for over 1,450 services organizations, our suite of solutions, including PS Cloud, CS Cloud, and ERP Cloud, and natively built on the Salesforce platform, powers and connects all aspects of technology and services businesses, from services estimation and delivery to customer success management and financial planning and accounting.
By orchestrating your people and projects around a central account record, Certinia ensures that your entire organization can have the right information at the right time to enable confident decision-making and intelligent delivery across the entire customer journey. Certinia delivers the business certainty you need to mitigate risk and build lasting trust with your customers.
