Key Takeaways
- Cashflow Management: Critical to growth; successful firms over-deliver, use testimonials, and prioritize sales and digital marketing.
- Sales Development: Beyond initial contacts, successful firms use diverse recruitment strategies and build strong academic partnerships.
- Employee Attraction and Retention: Compete with larger firms by leveraging professional service automation, outsourcing, and recruiting experienced consultants.
- Operational Coordination: As firms grow, managing various functions becomes complex; efficient coordination is crucial.
- Leadership and Expertise: Effective leadership is vital; firms benefit from best practice advice, previous experience, and advisory boards.
Over the last fifteen years, I’ve helped and studied over 200 founders of small consultancies that grew and then sold their firms.
Aside from the lessons around growth and selling a firm, I collected significant data on the primary challenges of starting up a small firm and simply surviving the first few years.
Understanding the Challenges of Small Consultancy Start-ups
Here, I have summarised the five main challenges to the growth of a very small firm and outlined how some of the successful firms tackled these.
The list is neither mutually exclusive nor exhaustive (the book is here if you are interested!), but it will hopefully prompt some ideas for people who are very much in the ‘start-up’ phase.
| Barrier | Description | Solutions From ‘Successful’ Firms |
|---|---|---|
| Cashflow | Growth requires consultants who are paid before consulting revenues are received (typically post-project) | • Over-deliver and communicate the value • Strategic use of testimonials & referrals • Makes sales a cultural priority for everyone, not just partners • High-quality lead magnets beat standard blogs by 5x • Make use of digital marketing: automation, PPC, webinars, etc. • Train your key people in sales conversations |
| Sales | Growing a firm once the initial ‘friends and family’ routes have been exhausted. | • Developing ‘alternative’ Employee Value Proposition • Recruiting from non-traditional pools (e.g., law) • Building strong relationships with quality MSc programs at Universities • Attract ‘change maker’ consultants, not ‘cog in a machine’ |
| Quality Employees | Attracting and keeping employees in the face of strong brands and pay from big players. | • Low-cost professional service automation software • Outsourcing tasks (e.g., marketing) to low-cost countries • Recruiting older/more experienced consultants adept at this • Prepare for the process & professionalization inflection point long before it hits you |
| Coordination | The complexity of coordinating pipeline, recruitment, project delivery, invoicing, and prospecting once the team is beyond ‘family unit’ | • Ability for a good consultant to run, grow, and lead a firm without experience/know how. |
| Leadership | Ability for a good consultant to run, grow, and lead a firm without experience/know-how. | • Source ‘best practice’ advice from experts (ahem!) • Previous experience growing firms • Use of NEDs & Advisory Board • Recruiting Partners to fill knowledge gaps |
The Evolving Support Landscape for Small Consultancy Founders
What is notable here is that compared to even ten years ago, the small consultancy founder has so much potential support.
First, this concerns expert knowledge in running and growing a firm – not just in terms of formal education (e.g., the ubiquitous MBA) but also online courses, communities, and a plethora of Non-Executive Directors and coaches who have been there and done that.
Second, there are now so many cheap(ish) systems which automate the laborious manual processes that used to take up the time of the founder: proposal management, client relationship management, digital marketing, contract management, recruitment and even training.
Moreover, much of the management of this can often be outsourced to low-cost countries via platforms such as UpWork or Fiverr.
These trends are making boutiques more successful, which is reflected in their increasing numbers (125,000 new firms every month), growth rate (three times the market growth of larger firms), and M&A activity (currently at an all-time high).
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