1. What you will learn
This lesson gives you the outcome map for the programme and a diagnostic showing where your firm stands. You will learn the eight areas assessed here, how to score each with evidence, how to identify the constraint that is actually limiting your profit, and how to convert low scores into actions completable within a week.
2. The idea explained
An outcome map states what you should be able to produce at the end. Here the outcomes are an hours log, effective rate per client, fully loaded cost per available hour, a reviewed scope document in use, one measured loop, and a ninety-day plan.
The diagnostic scores eight areas: client mix and concentration, pricing and rate structure, scope control, utilisation, delivery method and documentation, selling rhythm, cash and collections, and measurement.
Two features keep it honest. Evidence: each score rests on a number, a document or a specific engagement. Forced distribution: at least two areas must score two or below.
Then the question that matters: which area is limiting your profit. In a service firm this can usually be computed. Profit per billed hour is roughly effective rate minus cost per billed hour, and cost per billed hour is fully loaded cost divided by utilisation. So there are exactly three levers: raise effective rate, raise utilisation, or reduce cost per available hour. Every improvement in this programme works through one of them, and naming which one your constraint sits on prevents a great deal of wasted effort.
There is one ordering rule. If measurement scores one or two, fix it first, because effective rate and utilisation cannot be computed without an hours log, and every other score is an opinion until they can.
There is also a caution about concentration. A firm where one client is thirty per cent or more of revenue has a risk that no amount of operational improvement addresses. Score it honestly, and treat it as a separate item from profitability.
Apply it
3. How to apply it in your own business
Score each area from one to five with one line of evidence. Where you have none, score one.
Apply the forced distribution; the usual hiding places are scope control and measurement.
Compute the three levers: effective rate per client, utilisation, and cost per available hour. Then compute cost per billed hour and compare it with each client's effective rate.
Name which lever your constraint sits on, and write one corrective action per low score, completable within a week.
If measurement is weak, fix it first, because nothing else can be computed until it is.
Worked example
4. Worked example
Shweta runs a seven-person brand and packaging design studio, and scores herself.
Client mix and concentration, two: her largest client is thirty-four per cent of revenue. Pricing and rate structure, three. Scope control, two: revisions are unlimited in practice. Utilisation, two: she has never measured it. Delivery method and documentation, three. Selling rhythm, two: she sells only when delivery is quiet. Cash and collections, three. Measurement, two.
Five areas at two, so the distribution passes easily.
She fixes measurement first, running an hours log for five weeks.
The numbers. Her seven people are available about one thousand one hundred and ninety hours a month. Billable hours logged: six hundred and eighty-nine. Utilisation is about fifty-eight per cent.
Costs: salaries and statutory costs five hundred and eighty thousand rupees, plus rent, software and equipment one hundred and fifty-five thousand, so seven hundred and thirty-five thousand rupees across one thousand one hundred and ninety available hours, which is about six hundred and eighteen rupees per available hour. At fifty-eight per cent utilisation, cost per billed hour is six hundred and eighteen divided by zero point five eight, which is about one thousand and sixty-six rupees.
Effective rates by client: her largest, at one million six hundred and thirty thousand rupees a year and about two thousand and forty hours, is about seven hundred and ninety-nine rupees an hour. Two others are above one thousand eight hundred. Three sit between one thousand one hundred and one thousand four hundred.
So her largest client, at seven hundred and ninety-nine rupees an hour against a cost per billed hour of one thousand and sixty-six, is delivered at a loss of about two hundred and sixty-seven rupees an hour, which across two thousand and forty hours is about five hundred and forty-five thousand rupees a year.
Now the lever question. Her problem is not utilisation alone and not cost alone. It is effective rate on one account, driven by unlimited revisions. Her constraint sits on the effective rate lever, and its cause is scope control.
Her actions: a revision limit written into all new work within one week, and a scope conversation with the largest client scheduled with the arithmetic prepared. She also notes the concentration risk separately: at thirty-four per cent, losing that client would be serious whatever its margin, so any conversation must be handled carefully.
5. Common mistakes and how to fix them
The first mistake is scoring from impression. Fix it by computing the three levers.
The second is leaving measurement weak and working elsewhere. Fix it by running an hours log first.
The third is comparing effective rate with cost per available hour. Fix it by dividing by utilisation to get cost per billed hour.
The fourth is treating concentration as a profitability question. Fix it by scoring it separately, since it is a risk no operational improvement removes.
The fifth is writing corrective actions that are projects. Fix it by requiring completion within a week.
Key takeaways
6. Board summary
The outcomes are an hours log, effective rate per client, fully loaded cost per available hour, a reviewed scope document in use, one measured loop, and a ninety-day plan. The diagnostic scores eight areas with evidence and requires at least two scores of two or below. There are exactly three levers: raise effective rate, raise utilisation, or reduce cost per available hour; naming which one your constraint sits on prevents wasted effort. Compare effective rate with cost per billed hour, which is fully loaded cost divided by utilisation. Score client concentration separately, because a client at thirty per cent or more of revenue is a risk no operational improvement addresses.
Check your understanding
7. Practice and self-check
One. Name the eight areas. Answer: client mix and concentration, pricing and rate structure, scope control, utilisation, delivery method and documentation, selling rhythm, cash and collections, and measurement.
Two. What are the three levers? Answer: raise effective rate, raise utilisation, or reduce cost per available hour.
Three. Shweta logged six hundred and eighty-nine billable hours of one thousand one hundred and ninety. What is utilisation? Answer: about fifty-eight per cent.
Four. Her costs are seven hundred and thirty-five thousand rupees across one thousand one hundred and ninety hours. What is cost per available hour? Answer: about six hundred and eighteen rupees.
Five. What is cost per billed hour? Answer: about one thousand and sixty-six rupees.
Six. Her largest client yields seven hundred and ninety-nine rupees an hour. What is the loss per hour and per year? Answer: about two hundred and sixty-seven rupees an hour, or about five hundred and forty-five thousand rupees a year.
Seven. Which lever does her constraint sit on, and what causes it? Answer: effective rate, caused by unlimited revisions, which is a scope control failure.
Eight. Why must concentration be scored separately? Answer: because a client at thirty-four per cent of revenue is a risk that no improvement in margin removes.