Professional Services Ops

In a professional services firm the person who sells is the person who delivers, so business development is a residual rather than a budget. The arithmetic of that residual explains a revenue cycle most firms blame on the market.

A third-party researcher phoned and emailed 500 firms posing as a prospective client. The findings are not about capacity or about rudeness. They describe the one part of a firm that nobody owns.

Delivery improved by nearly two points and firm profitability moved by one tenth of one point. Subtracting the two published margins shows where it went, and the number is larger than most partners would guess.

Utilization across law firms averages 37 percent against a 70 percent benchmark for an effective firm. It climbs with headcount, which tells you exactly what the constraint is.

Accounting enrollment rose 8.9 percent to 205,180, a third straight increase. Graduates fell 6.6 percent and new CPA exam candidates dropped from 42,626 to 28,082 over the same stretch.

Across 509 professional services organizations, billable utilization fell to 66.4 percent, the lowest on record, while revenue growth improved and generative AI reached 27.1 percent of projects.

Total revenue growth at the top 100 accounting firms rose from 10.4 to 12.8 percent. Organic growth fell from 7.8 to 7.0. The entire acceleration was bought, and the benchmark moved with it.

Services business activity jumped to 59.1 in July while the services employment index fell to 47.4. Demand keeps expanding and the payroll that delivers it keeps contracting.