What is the utilisation and cost model for services businesses?
The utilisation and cost model helps services businesses understand the amount of time their employees are spending on revenue generating activities, as well as the costs associated with employing those resources.
The Blox model requires just a small set of simple assumptions to generate a clear set of KPIs which can help you understand:
- how efficiently you are earning revenue compared to the costs of your services
- are the team spending too much time on admin/non-billable tasks
- how you can improve profitability and efficiency by optimising resource utilisation and cost management
What Blocks does the utilisation and cost model contain?
Services Revenue - as a Services revenue, the revenue generated for the services provided is the key form of income. The Services Revenue block models the current workforce and utilisation to forecast the expected revenue to be generated from the services provided.
Workforce Costs - Plan your headcount and workforce costs, plan for new hires and track your spend. Understand how changes in workforce size, spend and hiring timing can affect your costs and business growth.
Summary KPIs - Review some of the key performance indicators for the overall Services business, including overall costs, total revenue and profit margins.
How will you use this model?
Modelling with Blox is fast and fun! You can create a plan in 5 minutes by following the simple guided steps:
- Select your planning timescales
- Work through each block one-by-one, entering some simple input values
- View some key analysis for each individual block through an interactive insights page, and adjust your inputs to see different scenarios
- View the KPI and margin summary blocks
- Save your model and share it with others!
When should you be modelling your business?
The goal of updating your utilisation and cost model is to ensure that you have a clear understanding of your business operations, profitability and opportunities for improvement. Therefore you should update it as frequently as required to make sure you have the most up-to-date information to guide your decision making.
In general it is good practice to review and update your model on a regular basis, such as monthly or quarterly, to ensure it reflects the current state of your business and provides accurate insights.
However in some fast-paced industries with frequent changes, it may be necessary to update your model more frequently, such as weekly. Additionally if you are making significant changes to your business, such as introducing new services or expanding the team, you should update your model accordingly.
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