I pondered the title of this post for a while. I was concerned that it might come across as though I had all the answers. In fact, I know building a successful professional services firm can be devilishly difficult. But I do believe we have uncovered some of the answers — and each year we learn a little more.
Yesterday, we released our brand new research study on high performance professional services firms. This is the fourth in a series of studies designed to shed light on how to grow and manage a successful professional services firm. Our latest study provides a number of pointed and practical insights that should be of interest to any service firm executive.
Two Paths to Growth
We have learned that it's indeed possible to spend your way to growth. The research clearly shows a direct relationship between spending on business development (marketing and sales combined) and rate of growth. The more you spend, the faster you grow. This is true even in the midst of a raging recession. (Now, how many of you cut your marketing budgets over the past two years to save money? How did that work out?)
But there is another compelling path to growth. We isolated a group of high growth companies that grew an average of 9 times faster then their peers. They were also 50% more profitable. But here is the real kicker: High growth firms accomplished all of this while spending slightly less than average on business development. In other words, they found a way around the “more you spend, the faster you grow” rule.
Characteristics of High Growth Firms
What did these firms do differently that gave them such an advantage? Industry was not a huge factor. Government contractors indexed better, but only a little. We even found high growth performers in the battered AEC industry. What about size? High growth firms tended to be a bit smaller then their average growth peers. But they were adding absolute top line revenue about two and a half times faster then their fatter friends — an amazing statistic.
Most important, these high growth firms outperformed their average growth peers by employing counterintuitive strategies, differentiating themselves and spending marketing dollars in less conventional areas. I'll have to save those details, however, for future posts.
In the meantime, feel free to download the study on high growth firms, and stay tuned for more analysis.