Why do consulting firms with capable leaders get stuck?

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In our report “What stops consulting firms from smashing the growth Glass Ceilings?” we highlighted how few firms manage to continue to grow and scale successfully. There is only a 12% chance of breaching the $5m barrier, a mere 4% will smash through $10m and only 1% will grow bigger than $20m.

The conundrum is that consulting firm owners are by nature extremely bright and capable people. They have no trouble intellectually knowing and understanding the challenges and issues holding their firms back. But they still get stuck! Working daily with consultancy owners to grow their businesses for sale, we understand the different change requirements that come with each stage of growth. But we also have insight into the different mindsets that can hold growth back, whether through a conscious or unconscious resistance to change. As a rule there are three different mindsets which lead to consultancies failing to scale as they should.

1. The vicious circle scenario

When sales are increasing and the firm is busy, scaling up is not top of mind. People are working hard, everything is going well and it’s assumed that this momentum will continue.

Conversely, when times get tough the priority is selling more, not scaling. People become so focused on securing a deal that they fail to see the bigger picture and how other activities, such as marketing, could help the company.

In both scenarios, whether a business is busy trying to service work or busy trying to sell work, owners become focused on solving the pressing problems before worrying about future plans or the overall strategy for the business. In fact taking a step back from the vicious cycle and having a holistic view could help them immediately.

2. The Johari window scenario

You may be familiar with the Johari window which is used to help people better understand themselves and others. Consultancy owners can fall into the trap of not knowing what they don’t know – the upper right quadrant. As experts in their fields, they believe they know how to grow a consultancy practice, when in fact growing a consultancy comes with unique challenges at each stage. Many would extol the virtues of hiring in specialist skills, yet when it comes to their own businesses, may overlook the benefits this brings.

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3. The misalignment scenario

The third situation is where the ingredients may be there, but the dish does not turn out as we would like. For example, the team may know what they need to do but have different opinions on what takes priority, leading to endless discussions and paralysis. Or we do the right things in the wrong order, meaning we don’t get the results we were aiming for.

These problems can be resolved by having confidence as to the likely outcomes resulting from changes made. Understanding the cause and effect of suggested changes on value growth, and the dependencies those changes have on each other, will enable owners to make decisions and execute them with confidence. For example, investing in marketing when the market proposition and unique value proposition have not been properly developed may lead to a wasted investment that did not deliver the anticipated results. It would result in a mismatch in the message to the market, or get lost as a ‘me too’ amongst the messaging of competitors. If you’d like to find out more about the best sequence of events and priorities in a consulting firm, our 8 levers of equity value show how to ratchet up growth.

Growing a consultancy is not easy; there is a reason only 1% ever break the $20m barrier. Each stage of growth in a consultancy brings with it a particular set of challenges, but the mindset of the owner is something that can remain the same – to the consultancy’s benefit or detriment – throughout.

The first step to overcoming problems caused by a particular mindset is recognizing that it’s there in the first place. It’s then possible to shine a light on issues that it may be causing, address them and move on to growing the business.

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