Contents
- The quality of your income
- How to calculate recovery rate and lockup
- People and clients
- Use each KPI to make a decision
- From numbers to decisions
- Questions
The numbers worth tracking are the ones that change what you do next. They are also the numbers a buyer will scrutinise if you ever sell. Each KPI in the table has a sensible target to aim at, and two of them, recovery rate and lockup, need a formula to calculate.
| KPI | What it tells you | A sensible aim |
|---|
| GRF growth | Whether your recurring base is growing | Positive, ahead of inflation |
| Recurring % | How predictable your income is | The higher the better; 80%+ is strong |
| Top-10 concentration | Client dependency risk | No single client dominating; watch above ~10% |
| Recovery rate | Billed value vs value of work done | 90%+ on compliance |
| Lockup (WIP + debtor days) | How long cash is tied up in the workflow | Lower is better; trend it down |
| Utilisation | Productive time across the team | Sustainable for the team (watch for burnout) |
| Revenue per head | Productivity and pricing | Rising over time |
| Client retention | How much of your fee base stays each year | 95%+ of fees retained |
Targets are rules of thumb — set your own against your firm's mix and market.
The quality of your income
GRF growth, recurring percentage and client concentration together describe the quality of your income — how much there is, how predictable it is, and how safe. These are the numbers a buyer cares about most, because they determine the value of the firm. A firm whose fees are growing, highly recurring and well spread is healthier and more valuable than one whose fees are flat, project-heavy and concentrated.
How to calculate recovery rate and lockup
Recovery rate = fees billed ÷ the value of the time and work done, as a percentage. Consistently below ~90% on compliance means you're either under-pricing or over-servicing. Both can be fixed. Lockup = (WIP + debtors) ÷ annual fees × 365, giving the number of days' fees tied up before you're paid. High lockup means cash is held in work in progress and unpaid invoices until you bill and collect it, and it is often a warning sign of billing or delivery problems.
People and clients
Revenue per head is a simple measure of productivity and pricing. If it's flat while costs rise, pricing or productivity needs attention. Utilisation matters, but pushing it too high burns out good people, and then they leave. Client retention drives the rest of the numbers. A firm that keeps 95%+ of its fees each year grows on top of that base, while a firm that keeps losing clients has to win new work just to stay the same size.
Use each KPI to make a decision
Pick five or six of these KPIs, review them monthly, and use them to make decisions: re-price where recovery is weak, chase where lockup is high, diversify where concentration is rising, and invest where growth is stalling. If a number never leads to a decision, stop tracking it.
From numbers to decisions
Turning figures into decisions on pricing, capacity and growth is the job of a finance director, and it is what a good FD does for a firm owner. Better numbers also mean a more valuable firm if you ever sell, and they're the evidence base for pricing your advisory and lifting value.
