Project profitability: Why consultancy firms’ margins might be at risk and what to do about it

Are you losing margin without realizing?

Most consultancy firms don’t lose margin on delivery alone. They lose it long before the project ends. And often don’t realise until it’s too late.

If you’ve got disparate systems, unstructured handover from sales to delivery, or simply lack the insights on your projects, you might find that scope creeps. Time isn’t tracked properly. Delivery teams inherit unclear briefs. And by the time the project closes, the margin has already gone.

The problem isn’t effort. It’s visibility.

What is project profitability management?

Project profitability is the difference between what a project earns and what it costs to deliver.

It might sound simple, but it’s where many consultancy firms struggle.

You need to account for and manage:

• Billable and non-billable time
• Resource costs (senior vs junior staff)
• Project overruns
• Operational overhead

Project profitability analysis is the secret to success for consultants. But you’ll need the right tools to overcome the following challenges.

Why consultancy margins are under pressure

For consultancy firms, margins are getting squeezed in all directions:

• Scope creep: To get deals through faster, sales teams can keep score high-level. When it gets to delivery, you may find extra work that isn’t billed.
• Under-pricing: If you aren’t using historical data to price your projects, you might be going on instinct. But what feels right isn’t always the most profitable option.
• Low utilization: If you’re using spreadsheets or multiple systems to track when consultants are available, it’s easy to misallocate time.
• Fragmented systems: Most firms are using several systems across sales, delivery, and finance. This makes it hard to forecast performance, track revenue and time on projects, and can make scoping projects difficult, without insights in one place.
• Reactive resourcing: If you haven’t got data that’s consolidated and visible in one place, poor forecasting and lack of insights can lead to project planning issues. Work can be assigned on availability not suitability, leading to higher delivery costs and slower time to completion.

Individually, these challenges might seem manageable. Combined, they quietly chip away at your profitability.

What to do about it

1. Lock down and standardize scope

Are your sales and delivery teams working in silos? If information gets passed through emails, calls or informal chats, then it’s easy to lose important details on scope, pricing and client expectations. It can be tough for delivery teams to fill in the gaps and it’s easy to end up overdelivering to compensate.

If scope is left vague in the sales process or if the details live across systems or emails, you’ll benefit from a standardized scoping process. You can do this by:

• Creating templates for all consultants to use
• Capturing assumptions clearly to reduce ambiguity
• Storing all information clearly in one place
• Clearly define scope, timelines, and pricing are clearly defined

By implementing these steps, you can keep deals flexible but still have consistency. And you get more predictable margins from the get-go.

2. Track time and project costs

If you’ve got clunky or disparate systems, time tracking will feel like a lot of admin. This means consultants can delay logging time or non-billable efforts aren’t updated at all. Data will be incomplete, inaccurate or missing altogether.

CRM software with built-in project management will help you accurately track time and see the associated costs. This means you can:

• See where time is actually being spent
• See billable and non-billable time
• Spot overruns and related costs
• Understand the real effort behind delivery

The result? Clear cost visibility, better billing accuracy, and fewer hidden losses.

3. Improve your resource planning

CRM with project management doesn’t just give you clear visibility into project costs. You’ll also be able to ditch the spreadsheets you’re using for resource planning and switch them for a single, clear view of projects. Without these insights, it’s easy for your consultants to become overloaded, or you might see senior staff doing lower value work.

• Improve the speed and value of your projects by seeing who’s available and assigning the most qualified person for the job
• Review how much work there is to effectively plan next steps
• Report on how many days each task has taken so you have deeper insights for scoping projects

4. Improve pricing on future work

Relying on gut feel or assumptions to price each project? This happens when you don’t have data on where time was underestimated, which clients or project types erode margin or which projects were most profitable.

Instead, with a CRM you can see your delivery data in one place, turning guesswork into strategy. Get insights into:

• Gaps in estimated vs actual effort
• What high- and low-margin projects look like
• Patterns emerging across clients and project types

This allows you to price more accurately, avoid unprofitable work and focus on high-value opportunities.

The biggest issue for consultants: revealed

These challenges might seem separate, but they all stem from the same issue: A lack of visibility across the full lifecycle from sale to delivery to revenue.

Without that visibility:

• Scope isn’t controlled
• Pricing isn’t informed
• Resources aren’t optimised
• Insights aren’t fed back into future work

And that’s where margins are lost. CRM gives you all of the information you need to effectively take control of scope, pricing and resources. All so you can meet the ultimate goal: Driving profitability across your firm. Want to know more about how CRM can help consultants? Check out our dedicated page.