A headcount list with costs and roles
The highest value upload here, because people are both the capacity and the cost. It replaces headcount, cost per head and, with role information, gives capacity per head something real to stand on.
By industry
Professional services
Forty five percent gross margin, 2.5 percent churn a month, only thirty five percent of revenue under contract and competitors who react inside two months. Capacity is people, the cost is the same people, and a decision reaches your whole client base faster here than anywhere except retail.
Every number on this page is a default. The first document you upload that contradicts one replaces it.
Your capacity and your cost base are the same forty people.
That is what makes services different. In manufacturing you can run the line harder. In software the machine serves the customer. Here, growing means hiring, and hiring means paying 8,200 dollars a month for somebody who will not be fully productive for a while, against a client book where only a third is contracted and the rest can leave at short notice.
| Starting point | Default | What it drives in a run |
|---|---|---|
| Gross margin | 45 percent | What is left after delivery cost. Sets how much a utilisation change is worth. |
| Monthly customer churn | 2.5 percent | About twenty six percent of clients in a year. Engagements end; that is normal rather than a failure. |
| Price elasticity of demand | 1.4 | A ten percent rate rise is modelled as roughly fourteen percent less volume before switching costs and relationships soften it. |
| Revenue under contract | 35 percent | The second lowest of the four. Two thirds of your book can respond to a decision almost immediately. |
| Average months left on contract | 6 | Short. A rate change is fully through the book inside two quarters. |
| Share of cost from suppliers | 18 percent | The lowest of the four. Subcontractors, software and travel. Supplier shocks rarely decide a services year. |
| How hard competitors match a move | 0.35 | The weakest match in the table. Rates are private and comparisons are hard, which gives you room. |
| Months before competitors react | 2 | But when they do, it is quick, because a lost pitch tells them your number. |
| Revenue a head can serve per month | 14,000 dollars | The tightest capacity in the table. Cross it and quality and delivery dates go first. |
| Cost to a customer of switching | 0.35 | Low. Relationships hold clients, not contracts or integrations. |
| Monthly market growth | 0.5 percent | About six percent a year. Most growth is taken from somebody else. |
| Monthly cost per head | 8,200 dollars | Fully loaded. The dominant line in almost every services scenario. |
| Regulatory exposure | 0.20 | Low, unless your own files say you work in a regulated discipline. |
The cost to win a client starts at six months of that client's revenue, the second shortest payback in the table. Every value is a replaceable default, drawn with a band on each replication: gross margin within fifteen percent, churn within thirty five, elasticity within forty, market growth within fifty.
The shape of the question
Rate, utilisation and the hire you cannot quite justify
The first shape is rates. With a 1.4 elasticity, a 0.35 competitor reaction and only thirty five percent of revenue contracted, a rate rise is a fast experiment: you find out inside two quarters, which is unusual and useful. The risk is not that it takes a year to show, it is that it shows quickly and in the accounts that were price led anyway.
The second is capacity. At 14,000 dollars of revenue a head per month and 8,200 dollars of cost, the gap between capacity and cost is narrow, so utilisation is the number that decides the year. The run carries utilisation into morale and morale into attrition, which is the loop that turns a busy quarter into a resourcing problem two quarters later.
The third is the hire ahead of the work. Cash out now, productive in a few months, with a client book that is only a third contracted. It is the decision most services firms defer longest, and it is the one the distribution helps with most, because the answer is genuinely a range.
- Short contracts mean fast feedback, which makes tripwires unusually valuable here
- Utilisation above comfortable feeds morale, then attrition, then the revenue the leavers were serving
- A low switching cost means relationship damage shows up in churn quickly
Uploads
The four documents that change a services twin most
In order of how much band they remove.
A client list with revenue and engagement dates
Replaces churn, revenue per client and both concentration figures. In firms where three clients are half the book, this converts a vague worry into a runnable scenario.
Rate cards and recent proposals
Replaces price level and, more usefully, exposes the gap between the rate card and what is actually realised after discounting.
Master agreements and statements of work
Replaces revenue under contract and average months remaining. At a default of thirty five percent and six months, this is the assumption most likely to be materially wrong for a given firm.
Honestly
Where the model is weakest for a services firm
There is no pyramid. Everybody costs 8,200 dollars a month and serves 14,000 dollars of revenue. A firm whose economics are built on leverage between partners, managers and juniors will find that its most important structural fact is not represented, and the only remedy is to set capacity and cost per head to a blended figure you believe and be aware that you have done so.
There are no projects. Work is a monthly revenue flow, not a set of engagements with start dates, fixed prices and overruns. Fixed price risk, scope creep, a project that goes badly and burns four months of a team: none of these have a place in the run. For a firm whose main risk is delivery risk, that is the gap to know about.
There is no key person modelling. Losing one partner who carries a third of the relationships is a very different event from losing three consultants, and the twin treats headcount as a quantity. Your named clients become agents; your named people do not.
Utilisation is one number for the firm rather than per person or per grade, so a twin cannot show you a bench in one practice and overload in another.
And billability is not separated from headcount. Sales, admin and delivery all sit in the same capacity calculation unless your files break them out by department.
- No pyramid, no grades, no leverage model
- No projects, no fixed price exposure, no overruns
- No key person risk: people are a quantity, not individuals
- One firm wide utilisation number, not a bench by practice
Start here
The three runs worth doing first
Raise rates
Short contracts and a weak competitor match mean you find out quickly. The run shows which segment leaves and whether the margin covers it.
Raise priceHire ahead of the work
Cash out at 8,200 dollars a head with onboarding months in front of it, against a book that is only a third contracted.
Hire a teamLose the largest client
Concentration is usually worse in a services firm than anybody says out loud. Six month contracts mean the exit is quick and the cost base is not.
Lose the largest customerStart with the headcount file
Capacity and cost are the same people, so the document that describes your people changes more of a services twin than anything else you can upload.