If you’re nudging past £500k and eyeing the £1m mark, “looking busy” can hide profit leaks. Projects run long, invoices slip, and hiring decisions get made on gut feel. The fix isn’t more spreadsheets — it’s a short list of service business KPIs that give you forward-looking visibility, so you can price with confidence, plan capacity, and protect cash before year-end. And with late payments still biting UK SMEs, the right KPIs help you stay resilient and decisive. Below are the seven service business KPIs we coach clients to track monthly. Keep them simple, automate where you can, and review them in a management accounts meeting every month.

1) Utilisation rate (are we spending time on billable work?)

What it is: The percentage of available time spent on billable work. 

How to calculate: Billable hours ÷ Available hours × 100. 

Why it matters: Low utilisation hints at pricing, scoping or scheduling issues. Too high for too long (>85% for knowledge work) can signal burnout and quality risks. 

Action: Set a team-level target (e.g., 70–80%). Track per person and per service line to spot bottlenecks early.

2) Average billable rate (are we earning enough per hour?)

What it is: Revenue earned per billable hour. 

How to calculate: Revenue from billable work ÷ Billable hours. 

Why it matters: If your utilisation is fine but profit isn’t, your average billable rate is often too low. Tiny increases compound quickly when you have multiple consultants delivering every day. 

Action: Re-price low-margin services first. Package outcomes (not hours) and review rates quarterly against market and inflation.

3) Gross margin by service line (which work actually pays?)

What it is: Revenue minus direct costs (delivery time, contractors, software tied to delivery), shown as a percentage. 

Why it matters: Blended margins mask under-performing services. In a sluggish productivity environment, clarity on where you genuinely create margin is non-negotiable. 

Action: Report gross margin by service line monthly. If something sits <50–55% consistently, re-scope, re-price or retire it.

4) WIP (work in progress) days (are projects stuck on our desk?)

What it is: The average number of days work sits between “started” and “ready to invoice”. 

Why it matters: WIP bloat ties up team time and cash. Long WIP cycles usually mean unclear scopes, approvals, or handoffs. It’s a classic invisible drain for agencies and consultancies. 

Action: Put every live project on a Kanban board with a weekly “what’s blocking this?” review. Agree a WIP days threshold (e.g., 14–21 days) and escalate anything over.

5) Debtor days (DSO) (are we turning invoices into cash?)

What it is: The average number of days customers take to pay. 

How to calculate: (Trade receivables ÷ credit sales) × number of days in period. 

Why it matters: Cash is oxygen. With late payment still widespread, many otherwise healthy firms struggle to fund growth. 

Action: Shorten terms to 14 days on smaller engagements; take deposits on larger ones. Offer Direct Debit or instant pay links to remove friction. Automate reminders at 3, 7 and 14 days overdue. Escalate: stop work on persistently late payers.

6) Client concentration (are we over-reliant on a few customers?)

What it is: The share of revenue from your top 3–5 clients. 

Why it matters: If your top three account for >50% of revenue, your pipeline isn’t diversified enough. This risk intensifies when payment practices worsen; one delayed remittance can capsize your plans. 

Action: Cap any single client at 20–25% of total revenue. Build a quarterly pipeline target to rebalance exposure.

7) Customer lifetime value (CLV) to CAC (do our relationships compound?)

What it is: CLV estimates total gross profit from a client over the relationship; CAC is cost to acquire them. 

Why it matters: High-churn, low-margin services keep you stuck at the £600–£800k plateau. A healthy CLV:CAC ratio (aim for 3:1 or better) tells you your marketing and account management are compounding, not just replacing churn. Action: Increase retention with quarterly value reviews, success plans, and add-on services; lower CAC by tightening your ideal client profile and prioritising referrals and partnerships.

How to set up these service business KPIs in one afternoon

1.      Define formulas and sources. Keep a single page with the definition and data source for each KPI (time tracking, accounting, CRM).

2.      2) Automate the data. Bank feeds, invoice reminders, and simple reports in your cloud bookkeeping app cut manual work.

3.      3) Build a one-page dashboard. Seven tiles: current value, target, and arrow up/down vs last month. Red/amber/green makes it actionable.

4.      4) Hold a monthly management accounts meeting. 30 minutes: What moved? What’s off target? What action are we taking this month? (Tip: track actions on the dashboard so nothing slips.)

5.      5) Link KPIs to cash commitments. VAT quarters and payroll dates are fixed; stress-test cash using debtor days and WIP.

What “good” looks like at £500k–£1m

Utilisation: 70–80% sustained, with room for R&D and training.

Average billable rate: Growing at least in line with inflation and seniority.

Gross margin by service: 55–70% on core services, higher on advisory.

WIP days: <21 days on standard projects.

Debtor days: 20–35 days with strong collections discipline.

Client concentration: No single client >25% of revenue.

CLV:CAC: 3:1+, trending up. If you’re outside these ranges, don’t panic, prioritise two KPIs that will move profit fastest (usually gross margin by service and debtor days), set 90-day targets, and review monthly.

Make year-end predictable, not dramatic

The most successful founders we work with don’t track dozens of metrics — they nail service business KPIs that connect effort to cash. Start simple, automate the data, and turn your monthly review into a decision-making rhythm. If you’d like help building a one-page KPI dashboard and a monthly management accounts routine tailored to your services, Give up a call and let’s get you scaling.

01865 965394