How to Scale Up Your Professional Services Firm

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eammon1Scaling up any business can be challenging; professional services firms have their own unique difficulties. There are several key principles that will help any business grow revenue, profit and cash. However, the uniqueness of professional services businesses requires a more tailored approach. The very principle that makes professional services firms easy to start (i.e. low startup cost due to low overhead and billable hours) is exactly the same principle that makes them difficult to scale.

Billable hours are a business trap. Since there is a limited number hours that anyone can work in the course of a year, the income or business revenue is ultimately capped. In addition, there is always a fundamental disconnect between the customer perception of value and the professional services firm’s business model. Since the pricing is based on time, it’s disconnected from value creation or ROI for the customer. In the end, the only way a professional services business firm grows is by adding people, which expands overhead, and limits scalability.

There are better ways. Here are my recommendations on the top three ways to scale a professional services firm: 

Focus on building business systems. The key to unlocking scalability in your firm is to ensure that you are working on the business, as well as in the business. Working on the business means working on building good, repeatable, streamlined and efficient systems. Once these systems are proven, in place and operating well, then the business can scale by expanding the system, not necessarily by adding more people.

Standardize as much as possible. This is contrary to thinking in most professional services firms, since the justification for billable hours are customized work. However, the world is changing. There is an infinite amount of information available at virtually no cost, which makes the customization model a dying bred. Wherever possible, offers within your firm should be standardized in order to lower the cost and increase scalability. Compliment these offers with exceptional customer service. This will enable you to scale fast.

Simultaneously improve in small increments and big steps. Firms that scale well are exceptionally good at doing both the small daily improvements to their systems and the periodic large innovative steps to the business. For instances, an innovative step could be leveraging technology, such as mobility and cloud computing, which will enable improved efficiency and lower cost, freeing up working capital and enabling growth.

Don’t be discouraged by the challenge of scaling your professional services firm. It starts by changing your mindset and being willing to be different from your competition, and focusing on the needs of your customers, not the needs of your industry. By taking a systems approaching, standardizing where possible, and improving both incrementally and through innovation, you can break from the shackles of billable hours in order to get bigger, better and faster.

Eamonn has a B. Eng. (Electrical) from Lakehead University, MBA (Finance) from University of Toronto, and has completed Executive Education at Stanford University Graduate School of Business. He lives in Vancouver, Canada. Follow him on twitter @EamonnPercy

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