Abbreviated Earnings Pro Forma for a PS Firm

This snappy Earnings Pro-Forma for a Professional Services Firm tool quickly calculates the estimated earnings from the combination of billing rates, utilization and cost structure of your professional services firm. help you analyze these critical components of earnings. The Billing Rate Utilization Matrix adds additional insights and allows you to create a sensitivity analysis using parameters of your choice.

All you need to complete this simple earnings pro forma are the following estimates:

  • The number of Consulting (Customer Billing) Employees, the average customer billing rate/hour, their billing utilization as a % of hours paid and their total compensation/hour
  • The number of Non-Employee Consultants, their average customer billing rate/hour and their cost/hour
  • The number of Admin (No Customer Billing) Employees and average cost per hour
  • Your Fixed Annual Overhead costs

The PS P&L Proforma tab (the main input tab) includes an example to help you visualize how the table looks when completed.

On the first pass don’t worry about being perfect. Learn how the tool works. Compare your numbers to your most recent years results. Investigate areas that don’t align with your expectations. Once you have a handle on the tool, experiment to see how changes to billing rates, number of employees, number of consultants, utilization rates and overhead costs impact your results.

One of the beautiful aspects of the Abbreviated Earnings Pro Forma is it allows you to analyze many different scenarios very quickly. This makes it an excellent tool to have on hand during strategy sessions, Board meetings or monthly management meetings.

Below is a key to the terminology being used on the tool:

  • # = Number
  • FTE = Full Time Equivalents = 2080 hours/year
  • Utilization % = % of a Full Year Billed to Clients (Full Year = 2080 hours/year)
  • W-2 = Worker employed by the company
  • 1099 = Consultant doing work for the company, not an employee
  • Consultants = Revenue Generators
  • Admin = Non-Revenue Generators
  • Overhead Cost = All non-Salary Costs of the Firm

A bonus tab included with this tool is the Billing Rate-Utilization Matrix. The Matrix calculates the estimated Profitability for your firm at different Average Billing and Utilization Rates. A graph highlights the profitability for each billing rate across a spectrum of utilization rates. This allows you to quickly assess the impact of rate and utilization changes.

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If you have any questions or stumble along the way, please reach out to us at CFO.University. You wouldn’t be here if you didn’t believe professional growth was critical to your success. We wouldn’t be here if we couldn’t help you accomplish that.

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