Business Growth Strategies for Professional Services Firms
We’ve all been to this strategic planning retreat. There’s the conference room, the flip chart, the SWOT analysis, a spate of brainstorming, and a working lunch. Sound familiar? At the end of the day, the group has negotiated a growth strategy that keeps everyone happy. Sure, it’s more of a feel-good strategy than an effective one. But everyone wins. Except the firm.
Fortunately, there’s a better way to plan for future growth. It’s called a growth strategy and any firm that wants to improve its fortunes over time needs one. If you’ve never developed a strategy for growing your firm, that’s okay. In this post, I explain the basic concepts and give you the building blocks to produce a growth strategy of your own.
Managing any business so that it can operate efficiently and grow reliably is no walk in the park. It takes courage, skill, determination and a rock-solid business plan that includes a viable growth strategy. But what exactly is a growth strategy?
Business Growth Strategy Defined
A Business Growth Strategy is a roadmap for growing your firm. It describes the industries you will serve, the types of clients you will target, the services you will offer and how you will position and develop your brand.
But it can’t be all unicorns and rainbows—it has to consider potential pitfalls, too. Any strategy worth its salt will explore potential risks in the marketplace and balance them against the expected upside.
Get the growth strategy right and everything else is easier. A good growth strategy will replace random and opportunistic business development with a reliable and systematic approach to growth. Get it wrong or incomplete and your firm may flounder.
5 Proven Growth Strategies
There are five time-tested strategies for growing a company. These aren’t new. In fact, they frequently come up in professional services marketing and strategic planning discussions—but these strategies are often poorly understood. Depending on your situation, the strategy that’s best for your firm may require more or less risk. If you work at the heart of a highly competitive market, for instance, you may need to pivot to an underserved area. But if you have a strong reputation or a viable niche practice, you may be able to achieve new growth with less dramatic changes to your approach.
Below, I describe each of these strategies, starting with the least risky:
- Increase Market Penetration
In the consumer products world, this strategy involves selling more product to the same consumer group. A good (but fattening) example from the retail food industry is super-sizing. The conventional wisdom is that if a dozen French fries are good, several dozen are even better. “May I supersize that for you?” is a relatively easy way to get more business from an already captive target market.
In the (much less fattening) professional services world we think of this approach as offering more services to the same client. It’s a relatively easy, low-risk strategy that doesn’t require introducing anything new.
That’s not to say it’s completely without risk. If you serve a relatively small number of clients, losing just one of them could put your firm in dire straits. There is also the challenge of getting a client to understand the full range of services your firm offers. Research we conducted for our book, Inside the Buyer’s Brain, shows that most clients are not aware of the full range of services a provider offers. This means that cross-selling your other services may not be a straightforward task. Many firms watch in dismay as their clients select other providers to carry out services their own firm could have handled with ease. Clients have a tendency to place their service providers in narrow mental buckets. So while there’s plenty of room for services providers to increase business—and revenue—from their existing client bases, they have to figure out how to educate their clients about their full range of capabilities.
- Develop New Markets
This strategy involves offering your existing services to a new market. Let’s say that today you offer regulatory compliance consulting services to commercial food packaging companies. Offering these same services to the consumer food industry—or even an unrelated industry, such as government services—is an example of this strategy in action.
This is one of the most common growth strategies used in the professional services. In fact, many firms take it to the extreme and roll out their services to any and every type of client. After all, more potential buyers means more sales, right?
In fact, this strategy comes with significant dangers. For one thing, it costs money and resources to educate and nurture a new audience. And the peril of underinvesting in markets is very real. Sub-threshold investments may be wasted and produce few results. Then there is the very real risk of diluting your brand. If you are strongly associated with a particular market and you expand to include other markets, any advantage you have as a specialist could dissolve.
- Develop Alternative Distribution Channels
Traditional consumer products companies sometimes use alternative distribution channels to promote products in saturated markets. For instance, if its competitors are distributing through retail channels, a company may decide to market their products directly to end consumers using direct response. Affinity marketing and multilevel sales organizations are other common examples of alternative channels.
In the professional services, alternative distribution channels are less common—though they do exist. For example, firms can partner with a trade association or business group to get in front of their membership. Or a firm could partner with complementary but non-competitive service firms to widen their reach. Think law firms teaming up with accounting firms. And some firms even use independent “distributors” to offer their product on a “white label” basis.
Since this strategy doesn’t involve developing new services, its risks are primarily related to marketing and business development costs: will the time and expense it takes to develop the channel pay off in the end? Another potential risk is damage to your brand if the alternative distribution channel you choose is not credible.
- Develop New Services
This strategy involves developing a completely new service that you do not currently offer. On one level, professional services firms do this every day. No two clients have identical needs, so services naturally proliferate.
However, there are circumstances in which a firm may want to branch out and offer more than a variation on its current services. For example an accounting firm may want to offer internet security services or financial planning to complement its traditional tax practice.
A growth strategy that includes new services involves a number of risks. Developing a new service takes time—lots of it. That could distract you from other important activities, such as billable work or business development. There may also be regulatory obstacles to overcome in industries such as law, accounting and financial services.
Perhaps most dangerous of all is the risk of watering down your brand. Remember the old saying, “jack-of-all-trades, master of none”? In the pursuit of broad market recognition, you could become known for nothing at all. The broader your service line, the less focus you have on a core expertise. You may end up throwing away what people associated with your business—the one thing that made you memorable in the first place.
You must also consider if your market will accept your firm as a provider of that service. Will it appear to be a conflict of interest? Will it alienate established referral sources? Does it fit with your brand? Regardless of your ability to deliver that new service, will it fit naturally into your current portfolio of services? Or will it be an incongruous appendage, raising uncomfortable questions in the minds of prospective clients?
- New Services to New Markets
Offering new services to new markets is perhaps the riskiest growth strategy. It combines the challenges of developing and launching new services with the uncertainty and costs of cultivating a new market. Yikes.
The potential opportunity must be substantial enough to justify the associated risk. For example, you may have realized (or been told) that your existing expertise offers a unique, high-value solution to a problem in another industry.
Here’s a case in point: One of our clients in the consumer market research field developed a new software platform to better serve their diverse client base. In the course of creating the platform, they learned that it could also address a specific problem faced by medical researchers. To take advantage of this new opportunity and avoid muddying their brand, they created a new firm to pursue that new-product/new-market opportunity.
Reducing the Risk of Your Growth Strategy
Determining your firm’s growth strategy can be a risky proposition. Each option presents a unique risk profile. And every firm has it own set of realities. For example, is the risk of expanding your geographic presence (new market) a bigger risk for your firm than adding a new service within your existing geographic footprint?
The key point is that all risk vs. opportunity assessments must be based on the specifics of your situation. In the example above, does the new market already know about your firm? Is there an underserved market in that geographic area? Is it a service that your existing clients need? Does the service fit your firm’s existing brand? Could it harm your reputation?
Once you’ve raised the tough questions and answered them, you’ll find it easier to make decisions about your growth strategy.
But how do you get this information? The answer is research. By doing systematic professional research on your strategic options you are able to answer questions like these and uncover insights you hadn’t thought about. In short, research reduces risk.
While a full discussion of the research process is outside the scope of this article, you can explore it further in this post about applying research to guide decision making in professional services firms and this one that will help you select which type of research to do.
There is another major decision to be made before you lock down your strategy. How will you implement it?
Organic Growth vs. Acquisitions
Once you’ve settled on a growth strategy there are two paths you can take to implement it.
The first is organic growth. This means adding business from new or existing clients by using resources you already have at hand, such as skills, knowledge, experience, relationships and tools. While slower and more evolutionary than the alternative—growth by acquisition—it is also typically healthier, more reliable and more valuable in the long run. Organic growth is inherently a reflection of the expertise and value associated with your firm.
If you’re going to chart an organic growth course, you’ll need to accomplish five key tasks:
- Research your target clients to align your services with their interests and needs
- Focus on a well-defined market niche
- Develop strong, easy-to-understand differentiators that set you apart from the competition
- Balance traditional and digital marketing so that you reach your audience everywhere they are
- Make your expertise visible to the marketplace
To learn more, check out my blog post on organic growth or watch the video blog below.
The second way to achieve growth is through mergers and acquisitions (M&As). M&As have several key advantages and some notable limitations. In essence, you are buying growth. That’s not necessarily a bad thing. In fact, M&As are highly popular today, especially in the professional services sector, because they allow firms to add new expertise and capabilities in very little time—a powerful tool in a fast-changing economy. M&As can help professional services organizations quickly gain credibility in new markets or change the balance of power in an existing one.
Here are just a few situations in which M&As can generate growth:
- Fill critical gaps in service offerings or client lists
- Acquire top talent and intellectual property
- Bring in new revenue streams and efficiencies
- Add a new business model
- Save time and long learning curves
However, there’s a downside to M&As, too. If they aren’t fully vetted, M&As can produce counter-productive culture clashes, expensive distractions, brand dilution and marketplace confusion. It’s crucial to think carefully before you pursue a merger or acquisition.
You can read more about M&As as part of a growth strategy in my M&A blog post.
Whether you choose an organic growth strategy or focus on mergers and acquisitions, you will still need to decide how you will take your services to the marketplace.
In most traditional planning situations this is referred to as your go-to-market (GTM) strategy. This should not be confused with your business plan—a broader document that defines strategic business goals and discusses general business considerations. A GTM strategy focuses specifically on delivering a product or service to an end customer.
In my go-to-market strategy blog post I discuss how to create a successful GTM strategy, and I outline these five key steps:
- Define your target markets so that you know exactly who you will need to address
- Profile your target client to better understand their challenges and determine what expertise you provide to overcome them
- Position your brand in the marketplace as the best option for your target audience. Ask yourself what unique attribute or expertise you will compete on. Will your firm represent innovation? Low-cost service? Rapid response? Is your claim credible and provable?
- Define your service offerings in terms that address the unique needs of the niche market in which you’ve chosen to focus
- Develop an appropriate marketing strategy that speaks the language of your target market and client, specifically addressing the key challenges they face
The Expert’s Advantage
There is one more important consideration for your firm’s growth strategy. Professional services solve clients’ problems through expertise. And firms that specialize in a particular expertise (or expertise applied to a specialized area) have a real advantage. In fact, the fastest growing firms are 3X more likely to be highly specialized.
There are several different kinds of specialization you can consider:
- Industry specialization gives you a comprehensive understanding of the competitive landscape in which your clients compete. As a result, you are more likely to know what works and what doesn’t in your chosen industry—allowing you to deliver the right solution, in less time, than a generalist.
- Service specialization allows you to delve deeper into the complexities of a service than most non-specialists. As a result, you can implement that service more quickly and tackle unexpected challenges with confidence and better options.
- Geographical specialization gives you the advantage of a local or regional reputation. Many companies prefer to be able to meet their service providers face to face. And if there are local regulations that affect your field, you’ll know them cold.
- Role specialization enables you to focus on a given role or roles within an organization, such as C-level management consulting. Because you have an intimate familiarity with the common challenges your clients face—and because you have solved similar problems before for others—they will trust your expertise and instincts.
- Problem specialization gives you exceptional insight into specific events, crises or issues facing clients, such as product recalls or crisis management. Because many of these situations are urgent, clients usually seek out a specialist who can address the problem in a hurry, even if it costs more.
The ultimate proof of specialization is to have one or more Visible Experts® on your team. These are individuals who are widely recognized as experts in their field. These individuals are often able to attract the best clients and bill the highest rates. They help firms significantly improve brand visibility and can spark substantial business growth.
It’s up to every professional services firm to figure out how to grow. While most firms start with a handful of existing relationships and referral sources, they eventually outgrow these early resources. Without a formal business growth strategy, most of these firms grow fitfully, if at all. Firms that systematically plan for growth, however, know exactly where to look for new business opportunities.
Growth strategies that are based on systematic analysis and research are more likely to be successful than the feel-good exercise I mentioned at the beginning of this post. Real growth driven by proven techniques using a reliable strategy. Now, wouldn’t that make you feel good?
- Learn how individual experts in your firm can grow from relative obscurity to eminence. Download our free book, The Visible Expert®, and start turning your best people into high-value industry stars.
- Discover how research can deliver the insights your firm needs to grow. Download the Professional Services Guide to Research
- Where can you get the marketing training you need to implement a powerful growth strategy? Hinge University is built exclusively to give busy service professionals and marketers the edge they need. Check it out and start learning now.
How Hinge Can Help
Hinge specializes in helping professional services firms grow. From developing and implementing your growth strategy to facilitating your planning retreat to conducting market research on your firm, Hinge can take your business to a higher plane of growth and profitability with the Visible Firm Program.
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