Using Associates to Grow Your Consultancy

Key Takeaways

1. Quality and Risk: Associates provide diverse skills and flexibility, aiding growth but often at higher costs and with potential risks like client/IP theft and inconsistency.
2. Strategic Use: Best used for short-term expertise, flexible resourcing, and high creativity tasks, especially during startup phases or when recruitment gaps exist.
3. Hiring and Integration: Ensure quality recruitment, IP protection, and robust integration to align associates with company values and methods, maintaining consistent client experiences.
4. Client Perception and Growth: Manage client perceptions carefully; use associates primarily for delivery, not business development, while building a larger pool of full-time staff for sustainable growth.
5. Negotiation Leverage: Associates can help negotiate higher client fees and volume discounts, enhancing profitability.

One of the biggest issues faced when trying to grow a consultancy business is maintaining the quality of delivery as delivery is shifted away from the founders. Yet, finding these skills and managing the risk of employees is not straightforward, which prompts many growing firms to use associates.

Here, we look at the pros and cons of using associates to grow your consulting firm, and detail what buyers of consulting firms look for when considering the balance of employees vs. associates.

The Power of Associates

In days gone by, client firms would disguise independent contractors as employees as a cost saving exercise. You would get all of the benefits and expertise of this person, without the expenditure of hiring another full time employee.

However, new laws have seen this trend reverse as companies have begun to ban the use of contractors/associates entirely, regardless of whether or not they would fall foul of this legislation.

As these companies turn their back on associates and the benefits they can offer, it leaves a large number of contractors as free agents looking for work – presenting a unique opportunity for consultancy firms hoping to scale.

Finding the right talent to bring into your business can help you to take on projects, deliver more for both new and existing clients, and in turn, grow your consultancy business.

However, before you start to contact every associate you can find, it is worth noting that associates are generally a more expensive option than full time employees in the long term. Although the hiring process is less time consuming and there are less obligations (insurance, pensions etc), there are certain risks involved.

The pros and cons of hiring associates are as follows:

When to Hire Associates

So, with all these considerations, is recruiting associates an effective strategy for consulting growth?

The answer is absolutely yes, if, done so correctly. When weighing up the pros and cons, you need to understand when and how associates should be used.

The legal issues aside (mentioned above), associates are generally a more expensive option than employees so they should only be used in five situations:

1. You are just starting out and don’t have the cash needed to hire full-time staff.

2. You need short-term occasional expert resources for projects that do not justify bringing on a permanent employee. As the firm grows the increasing frequency of this need will create economies of scale which justify an employee rather than an associate.

3. Despite your best efforts, you cannot recruit sufficient employees who possess the skill-sets needed for a project.

4. You need more flexible resourcing for unexpected peaks and troughs.

5. You need high levels of creativity and innovation that you struggle to maintain internally.

As firms start out, and continue to grow, they can be tempted to simply bring on a large number of associates to meet demand. Hiring associates offers a speedy solution for scale – you can bring talent in quickly and efficiently to enhance delivery, but this may come at the cost of the perception of your firm. So how can you strike the correct balance?

By making strategic choices of the timing of associate hires. They should generally be viewed as a short term solution, rather than a long term pattern. The latter is an easy trap to fall into that can have long term consequences – especially when you may be considering a sale of your consultancy.

This is why the five situations mentioned above are so crucial when it comes to your use of associates.

Almost all consultancies have a minimum 20% associate contingency for unexpected demand fluctuations – however this can vary slightly depending on your sector. Buyers are much more accepting of associates than they have been in the past, but they will see red flags if the percentage of associates gets significantly higher than their own practices.

How to Hire Associates

If you have chosen the associate route to grow your consultancy, these key principles should be at the core of your associate hiring practice:

• Recruiting quality associates using similar methods to that of employees.
• Ensuring that IP is protected both contractually and in the practices of sharing.
• Having quality assurance processes firmly in place and managed.
• Integrating associates well with existing teams and processes (see below).
• Keeping great associates by integrating them into your culture, making them feel they ‘belong’.

By following these principles, you can ensure you are bringing in the right talent who could one day become a full time employee of your business. However, in the interim between building your pool of associates and full time employees, there will always be the matter of telling your clients.

When clients come to you, they will be under the impression that they are being serviced by your best and brightest. A full time employee comes with a certain perception that you trust this person and their expertise enough to have brought them on full time.

Whereas the temporary nature of an associate doesn’t quite send the same message. As client satisfaction and delivery should be your ultimate goal, this can leave some firms on the fence about whether to disclose their use of associates to clients.

Whether you choose to do so or not should be reviewed on a case by case basis, but the priority remains the same – the client experience.

Another risk with associates is that they may not have the same investment in your firm as an internal hire, which can lead to inconsistencies when dealing with clients. To help minimise this risk, employ the following strategies:

• Recruiting associates that share your values (especially those you trust!).
• Training associates in the firm’s methods, processes, tools and values.
• Working closely with new associates until they can mirror your practices and values.
• Internal audits of their work.
• Providing firm email and document templates.
• Inviting associates to company events and key meetings.
• Maintaining great communications, even when they’re not on assignment.
• Bringing associates in at the start of a project to meld with the team and approach.

This approach will create a sense of ‘buy in’ from the associate, which will inspire and empower them to work in line with your practice and create a consistent experience for your clients. This is in turn, will lead to more work from existing clients and open doors with new clients.

How to Use Associates to Grow Consultancies

In terms of using associates, it is generally good advice not to use them for anything other than delivery. Seeing as the goal is growth, you should divert them as resource to areas where the associates can have the most benefit.

Using associates for business development, account management, practice management, leadership or creating IP is creating an unnecessary risk.

Always be strategic in their placement. Your internal employees should be prioritesed, and therefore, should be used for higher level clients and work. However, this doesn’t mean they shouldn’t be treated well.

Good associates may often choose between different firms, so to attract the best talent you need need to ensure they feel part of the culture and the family.

Associates can also be helpful in the negotiation phase with clients. As a rough guide, associates are usually paid 50% or less of the rate the client is charged (this can higher for better associates) which if made explicit, can prompt associates to help drive up client fee rates.

In turn, they can also be used to negotiate volume discounts based on associated work as opposed to that performed by full time staff. As an example this could be a 10% reduction for a weeks work or 20% for a month.

Final Thoughts

As discussed above, associates can be a powerful tool that can be used to access talent quickly to enhance the delivery of your consultancy business. However, this should generally be viewed as a short term solution rather than a long term practice.

The goal for a founder that wants to sell should generally be to build a larger pool of full time staff in order to better service new and existing clients. Associates, if used in the right way, can provide an excellent platform to help facilitate this growth.