Scaling a business requires achieving the economy of scale while selling the products or services to a large number of customers. To achieve economy of scale, the per unit cost of output must go down as the production increases. The output of consulting firms is intangible services that vary with each project. Thus, they can’t produce standard services at a large scale. The service production and the delivery are limited by the availability of time and the skilled manpower.
Thus, the revenue of a consulting firm is a function of time, competencies and number of its employees.
Revenue of a consulting business -> f(Time) + f(Expertise)
To scale the operation and grow revenue, a service company must follow these three rules:
Rule No. 1 – Provide one Niche Service
Master a skill set and provide one service that is significantly better than the competition. It serves three purposes:
Firstly, for exceptional services, most of the clients pay a premium price. With time, the average ticket size and the margin go up which results into increase in revenue and profits.
Secondly, big brands like to work with the best in the industry. If your services are better than that of the competition, you may get an opportunity to work with the big brands. An addition of one big brand in the portfolio can increase the revenue manifold.
Finally, managing the business growth becomes simple with one service. Hiring even one or two experts in the field can provide enough bandwidth to service many more clients. Whereas with multiple services, you need to hire many professionals to service just one customer.
Rule No 2 – Track Time Spent on each activity
“You can’t manage what you can’t measure” – Peter Drucker
The revenue of consulting firms is directly linked to the number of Manhours they put to deliver a project.
Tracking time helps in pricing the services, deciding the compensation of team members, making the right commitment to the clients, and preparing a roadmap for the future of the company.
Moreover, for a five members team, even 1% improvement in productivity per person per day is a huge gain without any pain at the end of the month.
Thus, tracking time and improving efficiency goes a long way in scaling the business operations of consulting firms and increasing their top and bottom lines.
Rule No 3 – Develop three Processes – Service Delivery, Client Acquisition, and Talent Development
Processes are the bedrock of growth of any service business. Irrespective of the number of team members, an ambitious firm must develop processes and adhere to them to conduct business activities. Over time, the processes can be innovated and improved to accommodate emerging scenarios and circumstances.
Develop following three set of processes:
- Operational Processes to deliver exceptional services
- Business Development and Marketing Processes to acquire bigger and better customers
- Talent Development Processes to hire, train, manage and retain employees and partners
Once developed, all team members must adhere to the processes irrespective of the size of projects or urgency of deadlines.
Explore the options to automate or outsource a part of the processes and increase your focus on core competency and business growth. It makes business growth a simple and pleasant experience.
Businesses which sell products take advantage of all three rules by default for scaling their operations. The service providers, on the other hand, lose focus by adding multiple services in their offerings and then struggle to maintain and improve the quality of the services. They can accelerate their revenue growth by concentrating on their core competencies and innovating in the way they deliver services.