How to measure sales and pipeline performance in your consulting firm

Research shows that adopting a PSA (Professional Services Automation) tool is one of the best ways to boost performance and growth within your consulting firm.

A 2024 independent study by The Consultancy BenchPress found that consulting firms using a PSA had 19% higher gross margins than those using spreadsheets, as well as a 40% higher operating profit.

These firms also grow revenues faster, can expect a much higher revenue portfolio under the wing of each of its partners, and are more tuned into measuring KPIs regularly.

The benefits of having an integrated (eco)system are significant both in terms of operational efficiency and time & cost saving, as well as key insights into the performance of a consulting business, automating core processes, and supporting faster and better decision making that is crucial to be successful in a highly competitive market.  

Interested readers can find more detail on the benefits of a PSA and an overview of our 5-point performance measurement framework here.

Adopting a measurement framework appropriate for your needs can really help you see the areas of your business that are working well and those that might need some attention if you want to stay on track and hit your performance goals.  

We think of a PSA as an operations platform that supports the core consulting processes across the areas of sales and pipeline, revenue and margin, project financial performance, invoicing and WIP, and people and resourcing – plugging that “operations black hole” between your CRM and your finance system.

So, let’s dig into what measures we should be looking at across our sales and pipeline processes.

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Sales and pipeline

Proposals sent per month

A simple metric to track, and when compared to number of deals won, it’ll allow you to measure your deal conversion rate.  

You may also consider tracking deal value conversion rate (the value of deals won compared to value proposed) and seeking a customer satisfaction rating in terms of quality and clarity of your proposals and alignment to their requirements.

Proposal conversion rates

This measure compares the number of projects won to the total number of opportunities identified, and while this can vary significantly from business to business, anything >50% would be a good benchmark.  

It’s worthwhile differentiating between new clients and existing clients as this may vary considerably as a result of established vs fledgling relationships.  You may also consider tracking the percentage of opportunities that progress from one sales pipeline stage to the next, so that you can understand deal progression and conversion rates throughout the deal cycle.

Deal cycle times

This is the time it takes for an opportunity to progress through the pipeline to win (this could be from lead or a specific stage in the sales pipeline, e.g. when the opportunity is qualified – whatever is most meaningful for your business).

This will help you identify where opportunities are getting stuck and where you need to focus efforts to keep them moving forward.

Average deal size

This metric looks at the average value of projects that have been won over a period of time, e.g. 12 months.  Tracking average deal size is an important metric, particularly when you factor in the time/cost of winning the deal in the first place, as this can often be as much for smaller deals as it is for larger deals.

% of new business vs existing clients

This measures the proportion of new business that originates from new clients vs existing clients.  The proportion of business that comes from new clients is typically in the 30-40% mark.  

This is important due to the significantly more time/cost spent to win when compared to clients where you have existing relationships, agreed contractual terms, and are set up on relevant systems etc.

Number of customer referrals

This measures the number of new referrals that come from your existing customers. Customer referrals is a fantastic (and largely free!) channel to market and comes with a level of immediate credibility which helps facilitate the sales process.

Deals won/lost by reason

 A breakdown of the deals that you have won and lost by reason type, which provides essential insight as to what is working and what isn’t in your sales formula.

For example, if you are consistently losing on price, this could be because your comparative pricing model is too high, or the way that you articulate the value that you will deliver to the client isn’t clear or understood.

% time / cost spent on sales activities (won or lost)

This metric looks at the proportion of time and relative cost the team are spending on winning new projects. This is important to understand the effort and cost of sale of winning new business, particularly relative to the average deal size and margins that you’re achieving.

Pipeline health

 Measuring your pipeline health is all about understanding the number and total value (weighted and unweighted) of the opportunities that you have at each stage of your sales pipeline, compared the number and value that you likely need based on analysis of your historical deal size, deal cycles and deal conversion data.  

This might sound a little complicated (and to be fair, there is more to consider here than some of the other measures), but it can give you some really powerful insight into where you should focus your business development activities.  

Your target data is derived from your historical pipeline performance as follows:

• Deal size: the average size of projects you have won over the past 12 months

• Pipeline conversion %: the total number of opportunities that move from one pipeline stage to the next and ultimately convert into deals won

Tracking this data over time will provide you with a baseline against which you can compare.  

Alternatively, if you don’t have this data readily available to you, you can estimate it to begin with and refine your assumptions over time.

Now all you need to do is track your actual opportunities and compare how they’re performing to your targets, so that you can easily identify where you have variance in either volume or value, which will focus your attention and guide your actions.  

A visualized example is of how this might look is represented below:

The values on the left-hand side of the sales pipeline represent the targets at each stage of the sales process, with the values on the right-hand side representing the number and value of opportunities in the pipeline at a given point in time.  

The RAG (red/amber/green) indicates if the actuals are above, below or within a tolerance level of the targets.

If we analyze the situation below, we can see that we have plenty of opportunities at the top of the funnel, both in terms of volume and value (green), some challenges evolving in the middle of funnel with volume of opportunities and probability weighted value (amber), and some issues at the bottom of the funnel with near to close opportunities, both in terms of volume and value as (red) which will likely impact our revenue expectations in the near to mid-term.

In conclusion

Remember, it would likely be too onerous for you to be measuring all of these, so choose the ones that make most sense for you and your business.

In my next blog, we'll be stepping through Revenue & Margin measures in more detail to explain how and why these measures help you understand your income, and how profitably you are able to deliver it.

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