In times of difficulty, companies often become desperate, which explains why professional service firms (PSFs) have been vigorously pursuing various business opportunities to stay afloat amidst the coronavirus pandemic and the accompanying economic crisis. Determining and enhancing growth in any business involves numerous priorities, and one of them is ensuring clarity regarding the key features of your service.
Occupations in the service sector that necessitate specialized training in arts or sciences are referred to as professional services. Unlike organizations selling tangible products, professional service firms offer and market their knowledge and expertise.
Among others, the types of firms included are marketing and advertising agencies, accounting and law firms, technology and management consulting firms, coaching services, architecture and engineering firms, as well as construction companies.
Keys To Boost Growth
1. Cultivate Existing Client Relationship
In order to grow a professional services firm, it is crucial to prioritize the retention of current clients, which may be even more significant than obtaining new clients. Ultimately, satisfied clients will recommend your services to other potential clients, which is undoubtedly the most effective way to expand.
Acknowledging your target audience as individuals is the key to achieving this. Although your relationship with your client is professional, showing that you value them beyond their financial contribution can have a significant impact. The degree of personal connection will differ depending on the circumstances.
If your client lacks understanding in your area of expertise, it is important to share knowledge with them. This will help them avoid feeling ignorant about the process and ensure they feel engaged in the development of the project.
You are required to assist him/her in comprehending how your assistance will foster trust and confidence.
Make sure to prioritize exceptional communication at all times. Giving priority to timely and efficient communication shows that you value your client’s project and satisfaction. Being accessible serves as evidence of your dedication.
Establishing open and honest communication in a timely and comprehensive manner reinforces a solid client relationship, ensuring that your client feels at ease expressing themselves.
Maintaining open and transparent communication with your clients is essential, as they need to trust and rely on your expertise. Therefore, confidently expressing your opinions and consistently implementing a policy of openness is crucial for the success of this project.
It is crucial to consistently hold a positive outlook, regardless of feeling stressed or overwhelmed, especially when dealing with clients.
2. Understanding the Services That are Most Profitable to the Company
While all the services in a company aim to enhance its growth, certain services necessitate being given utmost priority.
Adequate attention and essential skills are required to ensure quality productivity for the units that generate income for the company, as these services form the backbone of the company’s revenue.
Knowing which services are generating higher profitability and which are not will enable you to make informed choices in driving the profitability of your business.
In order to grow your business, it is crucial to track the number of hours your team invests in specific services compared to the project budget, as this enables you to determine if it is worthwhile to continue offering those services.
3. Build a Predictable Process for Winning More Clients
Implementing this entire process aligns with the objective of nurturing a solid customer relationship management (CRM) strategy. CRM involves the management of a company or any other entity’s communications with existing and potential customers/clients through the utilization of data analysis.
The CRM software keeps track of customer interactions, including contact details, emails, and social media accounts. Additionally, it has the ability to gather recent news updates related to the company’s activities and store information about the client’s communication preferences.
You can comprehend the evolution of your connection over time by utilizing CRM systems, as they categorize this data to provide you with a comprehensive account of individuals and companies.
By generating a comprehensive understanding of the customer, the software enhances customer relationship management. It effectively collects their interactions with the company, and provides the necessary information to improve communication with customers.
4. Invests in Target Market Research and Analysis
Understanding the behavioral patterns of your target customers in the market is essential in order to offer a valuable service to the consumer.
High growth companies dedicate their time and resources to thoroughly study the target market throughout the year in order to provide analysis that will enhance their productivity at various times.
Most organizations underestimate the significance of this crucial component in gaining market control.
In order to determine when your customers transition into active buyers and assess the value of the service at that specific moment, it may be beneficial to incorporate this approach into your marketing strategies.
5. Assign Value to Their Products and Services
High growth firms understand that selling is not just about making sales, but rather about effectively communicating the value of their products or services to their target customers. They recognize that by instilling the value of their offerings in the minds of their employees, they will be able to effectively meet the needs of their customers.
The service of a customer-centric team is tailored to address a specific group of customers, as the value of their service is dependent on resolving a specific problem within a precise timeframe.
Over time, your customer base will eventually take on the responsibility of acquiring more customers through referrals, ultimately benefitting your business.
6. Invest in Employees Competency
The productivity of the workforce is the only factor that determines the profitability of any organization. Professional firms experiencing high growth acknowledge the necessity of providing sufficient training to their employees in order to ensure effective delivery.
Productivity can be improved when an employee is fully engaged and working within a positive environment.
To ensure the mental well-being of their employees, certain corporations implement stress management programs within their premises.
Employees who lack a peaceful working environment often experience work-related stress, which indicates a need for psychological intervention programs to prevent the situation from worsening.
In summary, make sure to prioritize the satisfaction of your employees with their job and establish a working environment that promotes maximum productivity.
7. Diversify Marketing Strategies
With its dynamic trajectory, the market for any business has significantly expanded, ensuring that there is no domination of services.
By keeping this knowledge in mind, one can develop a series of marketing strategies that align with the direction of market trends.
Even during challenging circumstances, most large organizations have managed to stay in business by adopting new marketing strategies.
Investing in ideas that can adapt to future marketing platforms is a strategy employed by these companies. The presence of various business options fosters trust with the company’s target customers.
Customer retention relies heavily on reliability due to the fact that many customers tend to stick with their previous service provider if the service was exceptional.
8. Have a Strong Project Management Software
Having traceability in the operation of a company is essential in order to make accurate decisions.
By utilizing a Project Management Software, one can achieve visibility of the resources utilized in every project and effectively allocate them to ensure timely completion and work quality.
It is crucial to accurately track hours in order to comprehend the amount of time and cost dedicated to each project.
Professional services firms can prevent profitability leakage by utilizing accurate data to enhance delivery projections and budgets for new businesses, thereby avoiding losses resulting from incorrect estimations.
9. The Practice Spectrum
PSF practices, as defined by colleague Jack Gabarro and influenced by former HBS professor David Maister, can be categorized on a scale of sophistication that ranges from the basic “commodity” level to the more advanced levels of “procedure,” “gray hair,” and finally “rocket science.”
Clear about their position on this spectrum are the practices that have achieved success.
Clients who have uncomplicated and repetitive issues are assisted by a commodity practice, which offers cost-effective, efficient, and flawlessly executed service.
These Indian outsourcing giants, Wipro, TCS, and Infosys, have achieved significant growth and reputation by operating at this particular level.
A procedure practice provides a methodical strategy for addressing extensive and complex issues that may not be at the forefront of innovation, but nonetheless demand careful consideration of numerous factors.
Accenture’s Technology Consulting practice has been an exemplary demonstration of this for a considerable period of time.
Seasoned Counsel Based on Experience is Offered by a Practice With Gray Hair
For example, consulting firms like McKinsey frequently promote their strategy development expertise by emphasizing their experience in guiding other corporations through strategy exercises.
Rocket science practice deals with unique and high-stakes problems that demand extensive knowledge and innovative problem-solving.
Wachtell Lipton, a boutique law firm renowned for its cutting-edge expertise in assisting businesses in combatting hostile takeover bids, exemplifies the practice of mergers and acquisitions.
We have observed that practices that have a sharp focus tend to perform the best, even though their profile can extend across more than one type.
Clients are aware of the services that such practices provide, practice leaders understand which levers of performance to utilize, and recruits are aware of the type of work they will be involved in. Having a vague profile weakens a practice’s identity and prevents it from excelling in any specific area.
10. Recruitment and Development
Brilliant and creative professionals who provide innovative solutions are the strategic assets of a rocket science practice.
Is it necessary for their leaders to care if their recruits’ intellect is accompanied by social grace? Not necessarily.
The approach to hiring at a rocket science legal practice was described by its leader as not seeking individuals who appear well-rounded and sophisticated, but rather a specific type of talent.
We are searching for individuals with exceptional abilities in the areas that are important to us, whom we refer to as ‘splendid spikes’, for our hiring process.
Where can one find professionals who possess wisdom gained from experience and offer wise counsel through their sound judgment and tailored advice in gray-hair practices?
Rarely do firms hire employees from other companies because they might introduce methods and mindsets that are incompatible with the culture of the practice.
One strategy consulting firm director told us that these practices usually seek out individuals who have a talent for aging rapidly. For example, McKinsey often recruits top graduates from prestigious professional schools.
One’s capability to absorb and analyze information, view it from various angles, and express their opinions clearly is showcased through academic achievement.
It suggests that individuals can rapidly acquire knowledge from working alongside experienced partners and clients, enabling them to enhance their decision-making skills for future consulting projects.
Recruits are trained not only in the technical aspects of consulting work but also imbued with the firm’s values, especially in terms of client service. The objective is for consultants to appear as knowledgeable advisors, both in the substance of their guidance and how they convey it.
11. Strategic Capabilities
For commodity practices, efficient delivery is not just nice to have, but a crucial requirement.
Having state-of-the-art expertise is vital when it comes to rocket science practices. Knowledge management plays a pivotal role in both procedure and experienced practices, albeit with differing characteristics.
Procedure practices’ systems are designed to capture and codify project teams’ experiences in order to provide accessibility for other teams.
When professionals conduct an external audit for a major client, they will adhere to and enhance an established methodology. In this scenario, knowledge management entails the creation and enhancement of an efficient process.
12. Drivers of Profitability
Profit per partner, which is a determinant of profitability in a professional service partnership, is influenced by four factors, as stated in the given equation.
The equation for calculating Profit/Partner can be expressed as Profit/Partner = (Profit/Revenue) x (Revenue/Time billed) x (Time billed/No. of professionals) x (No. of professionals/No. of partners).
Profitability can be calculated by multiplying Margin, Rate, Utilization, and Leverage.
The profitability of publicly owned professional service companies depends on four primary drivers, accompanied by two additional drivers: financial leverage, also known as the debt to equity ratio, and capital intensity, which refers to the capital employed per senior professional.
Profitability is Driven by Four Factors
Rocket science practices typically have margins of 50% or higher, gray-hair practices have margins ranging from 35% to 50%, procedure practices have margins ranging from 20% to 35%, and commodity practices often have margins in the single digits.
Rocket science practices have the highest rate as well, as their services are extremely valuable to clients, thus enabling them to charge substantial fees.
On the opposite end, there are commodity practices that win contracts by offering lower prices than competitors, typically in response to demanding requests for proposals.
As you move towards the other end of the spectrum, utilization increases while rocket science practices have the lowest level of utilization.
In order to remain at the cutting edge of their fields, experts in the field of rocket science need to continuously update their knowledge and skills through active participation in conferences, workshops, research, and more.
Consequently, their direct involvement with clients is reduced, creating a need for high utilization rates to ensure economic success in a commodity practice where fixed costs are high and margins are slim.
Clients of rocket science and gray-hair practices have high expectations for the involvement of senior professionals in service delivery, which results in low leverage.
However, procedure and commodity practices’ clients typically anticipate that junior professionals will perform the majority of tasks while being supervised by their senior counterparts.