Chapter 22. The Business Services & Outsourcing Special
Professional Services, Facilities Management, BPO & Staffing
Chapter Roadmap, People-Based Economics
Business services is the ultimate capital-efficient business model. You're not selling a product, you're selling brainpower, labour, and execution. Scale a professional services firm from $10M to $100M revenue and your capital requirements are measured in millions, not billions. Compare that to manufacturing, logistics, or infrastructure. But capital efficiency comes with a diligence tax. People-based businesses are harder to understand, harder to integrate, and harder to keep from fragmenting after acquisition.
The assets literally walk out the door every evening. This chapter covers the full spectrum: White-collar: Consulting, professional services, recruitment Blue-collar: Facilities management, security, logistics staffing Process: BPO, outsourced finance & accounting, IT outsourcing Compliance: Testing, inspection & certification (TIC) Government: Welfare services, immigration, defence contracting By the end, you'll understand the economics of each, the roll-up mechanics that create value, and the diligence landmines that blow up acquisitions.
Core Metrics I, Productivity & Utilisation
Revenue per FTE The fundamental productivity metric. Typical ranges by sector: Consulting: $300k–$500k per FTE Staffing: $100k–$200k per FTE Facilities Management: $80k–$150k per FTE BPO: $120k–$250k per FTE TIC: $250k–$400k per FTE Utilisation Rate Billable hours as a percentage of available hours. This is the engine of profitability. Utilisation = Billable Hours / Available Hours (typically 1,900 to 2,100 hours/year) Target ranges by sector: Consulting: 70 to 85% (some slack for proposals, admin) Staffing: 80 to 95% (tighter control) FM: 85 to 98% (scheduled work) BPO: 85 to 95% (process-driven) Bill Rate vs.
Pay Rate Spread The fundamental unit economics. If you bill $150/hour and pay $50/hour labour cost, the spread is $100/hour. This must cover overhead, taxes, insurance, and profit. Example: A 50-person consulting firm billing $200/hour with $60/hour labour cost. At 75% utilisation and 1,900 billable hours/year per FTE: Revenue per FTE: $200 × 75% × 1,900 = $285k Labour cost per FTE: $60 × 1,900 = $114k Gross margin: ($285k, $114k) / $285k = 60%
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