25 Ways to Increase the Profit of a Boutique Consultancy

25 Ways to Increase the Profit of a Boutique Consultancy

Profit is the primary driver of your consultancy’s value (though one of many). For most buyers in and investors of most consulting firms, a minimum EBITDA of 20% (and ideally growing each year) is a fundamental benchmark.

But surely this will be achieve through economies of scale once you, um, scale? It’s not that simple. Once your firm gets to a certain size, increasing revenues by ‘selling more’ has diminishing returns. The reason for this is that if you have a set leverage ratio, you will need to add another partner for every X consultants you add. In addition, whilst there are efficiencies to scale, you are competing with bigger firms that already have these efficiencies.

A.????????????INCREASE REVENUE

1. Training staff to deliver greater value to support higher prices

2. Designing higher margin business model, services or contracts

3. Shifting to a more valuable niche

4. Better research on client/market needs to offer better value, faster

5. Better training and practice in pricing and negotiation

6. Economies of scale as a result of growth

7. Sharing information better internally to generate superior value (enabling higher prices)

8. Improved business development to focus on ideal projects/clients

9. Referral fees for introducing trusted partners to existing clients.

10. Identifying better clients that will pay more, offer repeat business or involve less rework

11. Superior performance management to incentivise client value and thus higher prices

B. REDUCE COSTS

1. More efficient use of resources (ie. resource management)

2. Using IP and productization

3. Increasing leverage ratios (i.e. fewer seniors; more juniors)

4. Landing bigger projects to reduce cost of sales

5. Use of productisation, software and platforms to lower costs

6. Outsourcing of back-end work to cheaper labour pools

7. Reducing costs through automation (e.g. PSA/CRM)

8. Reducing cost of sales through farming rather than hunting

9. Expanding services to enable cross-sell and thus reducing cost of sales.

10. Reducing hiring, management and salary costs by developing a superior EVP & culture

11. Early qualification of clients to avoid wasted time

12. Lowering the cost of sales through partnership agreements

13. Managing risks better so less disruption and cost is caused by 'events'. Risks include key person attrition and service/client dependencies.

14. Doing better research and getting better advice on investments