Five Strategies For Midsize Service Firms To Break Through Revenue Plateaus
Originally published on Forbes.com. Over the years of working with midsize professional service firms, I’ve encountered the same issue several times. I call it the plateau. This often occurs after a firm has been in business for a few years. At some point, the firm hits a ceiling in terms of revenue growth that they can’t seem to break through, no matter what they do.
This is perplexing to leadership. From what we've seen, organizations that hit a plateau usually have between 20-100 staff and several million dollars in revenue. They’ve been in business for five years or longer and have grown every year -- until they hit the ceiling.
If this sounds like your organization, I’d like to offer you five key questions that I think can help you build a strategic plan to break through that plateau:
- What specific revenue targets do you want to achieve?
- Where will the revenue come from?
- Who will be hunters and farmers on your team?
- What is your equation?
- How will you measure progress?
What Revenue Targets Do You Want To Achieve?
When I talk to leaders of these firms, they often tell me they want to grow, but they don’t give me specific numbers. That’s a mistake. A service firm can grow for a while simply based on the reputation of the leaders and based on low-hanging fruit identified by senior people in the firm. But after that, growth takes hard work.
So the first question to focus on is: How much do you want to grow? I recommend that you set specific revenue targets for the short-term but also year-over-year targets. For example, if your revenues today are $10 million, you might set a short-term goal to hit $11 million within 12 months. You might also set a goal of achieving 15% revenue growth every year for the next 10 years.
Goals help you focus your efforts and allow you to track progress against specific metrics. It is not enough to want to grow; you have to plan to grow, and this requires specific and measurable goals.
Where Will The Revenue Come From?
In my view, there are only two sources for revenue growth: sell an existing service to new clients or sell a new service to existing clients. Most of the clients I’ve served who have broken through their plateaus have done both.
But the trick here is to be clear in your own mind about how the mixture will break down. Let’s assume you want to grow from 10 to 11 million. The question to ask yourself is: How much of the 1 million in new revenue will be from new clients versus existing clients? Is it 50-50, 30-70, 20-80 or some other mixture?
As I’m sure you know, it’s much harder to acquire new clients than it is to work with existing clients. That being said, existing clients may not want or need the new services you are considering. I recommend that you project your revenue mixture in concert with the people who will be out there selling the services.
Who Will Be A Hunter And Who Will Be A Farmer?
Once you’ve made a revenue mixture projection, the next question to ask yourself is: Who on our team will be hunters versus farmers? What’s the difference? A hunter’s primary job is finding new clients. A farmer's primary job is growing revenues with existing clients.
Both of these skillsets are essential to break through revenue plateaus. But the personality and the mindset of these two types of professionals are probably very different. A farmer is usually good at building relationships and getting introductions to new people in an account. They’re steady-as-she-goes kind of people.
A hunter, on the other hand, has to be very good at doing research, prospecting, following a process, discovering who they should be talking to in an account, describing the value of what you do and then building winning proposals. Good hunters are worth their weight in gold. These people also have to be very patient, methodical in followup and willing to put up with a fair amount of rejection. Every great hunter I’ve known is a deeply competitive person. They love to win and hate to lose.
What Is Your Equation?
The equation relates to new client acquisition. It asks these questions:
- Who is our ideal client?
- How many ideal clients are we serving today?
- How many ideal clients are out there that we could be serving?
- What is our strategy to go and get those new clients?
Of course, you want hunters focused intently on the equation. But it’s also very important for your marketing team to focus on the equation too. This greatly increases the odds that hunters will succeed faster. The big challenge, when it comes to hunting, is keeping an active and realistic pipeline of deals.
For example, if you know you want 30% of your new revenue next year to come from new clients, then you have to ask yourself:
- How many proposals do we need to win to grow our revenues by 30%?
- What is our win-rate for the proposals we’ll write? 10%? 50%? 90%?
- How many opportunities do we need to have so we can write a proposal?
- How many prospects do we need to be in dialogue with to discover opportunities?
How Will You Measure Progress?
The ultimate success indicator is new revenue. But revenue is the end result of a chain of events. It’s easy to delude yourself into believing that good things are happening when, in fact, they might not be. So how can you monitor progress?
I believe it’s wise to use these metrics:
- Number of prospective clients in dialogue
- Number of discovery conversations
- Number of proposals written
- Number of days to signed deal
- Number of proposals won versus lost
The five questions I’ve outlined here can help you build a logical and effective strategy to break through your revenue plateau.