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3 Major Pitfalls for Professional-Services Firms to Navigate Increases in staffing at a growing company can pose a challenge when juggling the wide swings in client workload.

By Geoff Mcqueen

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

With the recovering economy, professional-services businesses are no longer struggling to survive; they're struggling to manage growth and workflow.
While it's a lot nicer to be hiring people rather than downsizing, growth can easily become a poisoned chalice for a professional-services business. The increased personnel costs that accompany growth present a challenge, and what would have been a trivial problem when you managed a smaller business can quickly become life threatening. The good news is there are now better ways to keep an eye on potential side effects and avert them before they become detrimental.
1. Bigger projects can be taxing. The professional-services industry is about winning and delivering projects. And as your business grows, they're probably going to become bigger and more frequent, which is great! Bigger projects tend to involve more people and run for a longer period of time.

But the longer a project runs, the more that can go wrong. The bigger the project, the bigger the consequences of a failure. According to the 2008 U.S. Census, the typical professional-services business spent two-thirds of its revenue on payroll. So if a project representing 20 percent of the quarterly revenue goes bad, it could have a serious impact on the business.

The solution is to improve the quality of the project-management oversight with the size of the project. You need to invest the time up front to create a solid plan and be prepared to adjust for the inevitable changes that occur when working for clients. You'll also get the best results if you can make project management part of your team's day-to-day activities. This way, your project team can handle problems as they arise rather than attempting to put together the pieces after it's too late.

Related: How to Survive the Peaks and Valleys of a Seasonal Business

2. Bench time can be a detriment. Variable workloads are a fact of life in professional-services organizations. While some team members might be going insane with work this month, their workload could become unusually light in the next.This creates a scenario whereby the most expensive resources are severely underutilized. Given the weight of payroll in a services company, someone having a single light week can wipe out any profit from that resource.

A steady flow of work isn't a realistic goal for many professional-services firms. It's important, however, to get a handle on how the staff is being utilized so you can reallocate personnel to other projects during slack periods. In terms of technology, look for solutions offering a granular and global view of current projects and enabling you to accurately forecast staff requirements for new and recurring work.

Related: When to Fire That, Er, Abusive or Disruptive Customer

3. Don't be afraid to release clients. As the tide changes from recession to growth and your business expands, take a closer look at your clients. Are they the types of clients that are going to help the organization grow in the future. Or are they like concrete boots that are going to keep you weighed down as the tide comes in? Are they drowning you in high-cost, low-return work? Do these clients demand a lot of attention but are not prepared to pay for it?

Given the cost of acquiring a client and the importance of reputation and word-of-mouth, be extremely careful in determining which ones should be let go versus those who might just be irritating. The saying "time is money" is never more true than within a professional-services business. Having an accurate picture of the time spent servicing a client's account and comparing that with revenue is key.

In today's economic climate, plenty of variables lie beyond your control, but the unnecessary flow of money from your business isn't one. By intelligently applying the right technologies to areas where money is being drained from your organization, you can improve your company's bottom line and ability to survive over the long term.

Related: The Bullwhip Effect and Your Supply Chain

Geoff Mcqueen

Founder and CEO of AffinityLive

San Francisco-based Geoff McQueen is the founder and CEO of AffinityLive, a company that creates cloud-based email automation, customer-relationship management, project management, service and billing software for the professional service sector. Prior to founding AffinityLive, McQueen created a digital agency in Australia.

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