As a Partner in a top-tier consulting firm, I’ve built forecasts, delivered reports, and managed targets for over a decade. But lately, things have shifted.
Despite 11 years of experience, I’ve had some serious strategy headaches.
🚨 Everything is changing—weekly:
👉 New services
👉 New pricing expectations
👉 Team turnover
👉 Gross margin fluctuations
👉 Competitive pressure
👉 And the ongoing need to plan 5 steps ahead
When you’re steering a consulting business, budgeting isn’t enough. You need a tool to simulate, test, and steer—in real time.
That’s why we built a highly flexible financial model, tailored specifically for professional services firms.
🧩 The Process: How We Built It
1️⃣ Setting the Goals
We started by aligning modeling targets with strategy. Not just “grow revenue,” but:
- 📈 Revenue CAGR of 10–12%
- 💼 EBITDA margins above 16%
- 📊 Gross margin targets by service line
- 👥 Profit per fee-earner benchmarks
- 📎 Specific goals by advisory type (Finance, Tax, Accounting, Payroll)
Each target has a key result tied to real performance metrics.
2️⃣ Assumptions & Drivers
We developed scenario-based drivers for each revenue line:
- Service-by-service revenue growth (base/worst/best)
- Salary increases by department
- Marketing spend, G&A, and tech investment as % of revenue
- Payment terms: DSO, DPO, DIO
- Capital structure and dividend distribution assumptions
This gave us a modular, scenario-flexible backbone for the model.
3️⃣ Build the Schedules
We created all the necessary schedules:
- 📊 Revenue by service line
- 💸 Payroll by headcount and service
- 💼 Subcontractor costs
- 🧾 OPEX including software, rent, utilities
- 🏢 CAPEX and depreciation
- 🔁 Working capital with rolling balances
- 🧑💼 Headcount plans by department
- 💰 Debt & equity movements
Everything flows into structured, reconciled outputs.
4️⃣ 3-Statement Model
The engine connects it all:
- 📑 Income Statement
- 💵 Cash Flow Statement
- 📘 Balance Sheet
With built-in diagnostics to check cash, net income, and retained earnings across all periods.
5️⃣ Manage the Outcomes
Once the model was built—we went beyond forecasting. We used it to:
- Compare outcomes to goals
- Track gross margin by service line
- Recalculate resource allocation
- Simulate price increases, staffing scenarios, and service mix changes
- Run second iterations with leadership
This wasn’t just a model—it became our real-time decision dashboard.
📈 What We Gained
✅ Clear 5-year strategic plan
✅ Dynamic budget linked to headcount, pricing, and services
✅ Margin diagnostics and growth simulation
✅ Reliable cash flow visibility
✅ Higher-quality board and investor communication
💬 What’s your biggest challenge running or modeling a service-based business? Reply and let’s talk strategy. I’d love to hear your story.
