Lagerquist Accounting Blog
Read the latest blog articles from Lagerquist Accounting and Advisory.
Subscribe for Blog Updates
Recent Blog Articles
The first article in our original series explores the advantages of hiring an external CPA firm for the accounting needs of your small business.Read more
Finding an optimized pricing strategy for your small business becomes much easier when you use an outsourced CFO that can offer a fresh, informed perspective.Read more
5 Essential Growth Strategies for Small Professional Services Firms
Posted by Sylvia Lagerquist, CPA
Managing and growing a professional services firm today requires fortitude and commitment on every level. In addition, it’s particularly challenging to sustain growth in this sector because the resource requirements are not linear, as they are with manufactured products (i.e. quantity of production is not consistently aligned with capacity to build). Instead, firms have to constantly add additional personnel to scale up and support new accounts.
With that in mind, it’s essential that progressive professional services firms plan carefully to drive effective and sustainable growth that can be supported over the long term. Here are five well-defined and effectively proven strategies to consider in growing your professional services firm:
1. Deepen Your Presence
The first strategy that is well-established and also relatively easy to scale over time is to deepen your presence in existing markets and client accounts. This allows you to focus on what you do best, with people who either already know you or are close in the market to those who do. The key with this strategy is to first understand that, chances are, your incumbent accounts don’t realize all that you can do for them.
Statistically, more than 85% of all clients in professional services typically are not aware of all of the services that their existing providers can offer to them. So the key here is to assess and communicate to your clients about the services you offer which each of them could potentially take advantage of in addition to the solutions they are already receiving.
2. Expand to Adjacent Markets
The next strategy to consider is expanding your footprint into adjacent markets. Let’s suppose you’ve provided solutions to the healthcare space for many years. What is a similar and adjacent market that you could easily extend into, and where you could leverage your existing credentials and capabilities? It might be education, or perhaps the penal system — both institutional markets that have a lot in common with healthcare. Ask existing accounts for referrals into these adjacent spaces so you can start warm, and make sure to coordinate with your team so that your expansion brings you into markets that your personnel can effectively support.
3. Create New Synergies
Partnerships create another powerful opportunity for growth. The great thing about partnerships is that they enable you to enter new markets or service areas without demanding a hefty up-front investment in talent on your part. The key is that partnerships require enormous commitments of time and energy to training, business development, marketing and product development in order to come to fruition. For example, if your firm provides environmental engineering services, you could partner with an energy auditing firm or a facilities management consultancy to expand your footprint. Again, the key here is making a long-term commitment, rather than expecting instant results.
4. Deliver New Offerings
Once you’ve strengthened your existing market penetration, expanded to some adjacent markets and partnered to widen your offerings, it’s time to examine and invest in developing new offerings. This requires significant time and investment, but offers strong potential for generating very positive margins if you plan carefully and with a focus on offerings that can set you apart from the competition.
This model will likely require building a team first, beginning with a few new hires who bring skills that your existing team may not have. This could create friction and typically, incumbent personnel are reluctant to pursue opportunities in a new service area until they themselves are convinced that the new capabilities are solid and backed by a capable team. Therefore, plan accordingly so that the new hires are able to build an initial book of business without expecting the entire existing organization to back them up. That will come, but only in time.
5. Acquire New Clients and Capabilities
The last of the five growth strategies is often the most common one pursued, and that is to acquire another firm, team or book of business. There’s nothing wrong with this approach but in the rush to add revenue, acquirers often underestimate the percentage of accounts who might defect after a merger or acquisition, not to mention the financial impact of the purchase on the firm’s overall cash flow.
Of course, M&A is often a truly outstanding option for driving growth, especially in professional services where clients and a capable team are often acquired as a unit. However, the best way to prepare for successful M&A is to build success in the other four strategies first, which has the advantage of setting the stage for much stronger results in M&A once that strategy is pursued.
What all of these strategies have in common is that they build effectively upon one another, leverage resources and capabilities efficiently, and help you keep an eye on operating costs and profit margins while also strengthening revenue. Taken collectively, these strategies can serve as a highly effective blueprint for building and sustaining long-term growth in your small professional services firm, today and for the future.
Lagerquist Accounting Blog
Welcome to the Lagerquist Accounting & Advisory Blog.