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How Firms Grow: How 53 Professional Services Firms Generate Leads

About This Talk

This talk is by Tom Miller and was recorded on October 2, 2020. You can learn more about Tom Miller by:

Also mentioned in this talk:

Timestamps

00:00 Intro
00:30 About Tom Miller
08:00 How Firms Grow with Lead Generation
12:33 The 5 Challenges to Firm Growth
20:03 Variables That Don’t Matter to Growth
23:25 Three Types of Firms
24:40 How Generalist Firms Grow
32:55 How Crafty Horizontal Generate Clients
41:09 How Vertical Firms Get Leads

How Firms Grow with Lead Generation

Tom started with a simple question about how professional services firms grow. Now that may seem silly because you can Google the question, and you’ll find ample attempts to answer the question, but little consistency and little data to back up the claims. Some of the articles will say you need social media, others will talk about conferences and networking or events. 

So do real firms actually grow? What’s working and what’s not working?

Tom’s finding was that “a firm’s positioning is the one factor that best determines which lead generation methods increase effectiveness and decrease risk.” 

Here are the key takeaways from Tom’s presentation:`

The 5 Challenges to Firm Growth

Every firm and independent consultant faces five challenges to growth: transparency, terminology, revenue rollercoaster, sales cycle, and the problem of selling ideas. 

The Transparency Problem

Firms don’t like to share their business development wins or struggles, so it’s really difficult to understand what’s working, and for whom. For businesses that are succeeding at lead generation, they’re reluctant to give away their secrets. For companies that are struggling, they’re hesitant to admit or talk publicly about the cause and depth of their struggles. 

The Terminology Problem

There isn’t explicit agreement on terms like “referrals” or “networking,” or even “sales,” “business development,” or “marketing.” Part of the problem is that firm principals often gloss over a combination of strategies that contribute to the results. 

For instance, they say their lead generation strategy is “to network,” but what they’re doing is maintaining a LinkedIn network, making introductions to partners in the industry, sending out a weekly email newsletter to clients and partners, and attending local events regularly. These tactics can get buried in vague or unclear terminology, making it hard to understand what’s working in the marketplace. 

The Revenue Rollercoaster

Most principals at small firms play the role of lead consultant and head of business development. Maybe you can relate. This combination of roles creates an inverse relationship between marketing and client workload: you market to get projects, but when you get projects, you stop marketing, creating a dip in marketing output and drying up your pipeline. The cycle continues indefinitely until firm owners consistently market and give up aspects of delivery to their teams. 

The Sales Cycle Problem

Sales cycles are often long and unwieldy for firms. If your sales cycle is greater than 3 months, you may find it difficult to nurture your lead pipeline because other things distract you regularly. Tom discovered that over half of firms have sales cycles that are 6 or more months and lack cash flow, so they focus disproportionately on short-term outcomes when instead they’d be better off with a stronger sales pipeline nurturing program. 

The Selling Ideas Problem

“So what is it that you’re doing to do exactly?”

Surely you’ve heard that question at some point in your career. Let’s face it: our economy is a consumer- and product-driven economy. It’s easy for us to understand tangible things rather than ideas. While Tesla’s core idea is to deliver better battery technology, they execute that idea by selling cars. For us, and our clients, buying and selling ideas can be a challenge, especially ones that are relatively abstract. 

Variables That Don’t Matter

Tom found a surprising number of variables that don’t matter. You’ll probably be surprised to learn which variables had “no meaningful impact on how firms acquire clients:”

  • Firm size
  • Client lifetime value
  • Sales cycle length
  • Lead volume

A Note About Firm Growth Strategies

There are two things to keep in mind when you think about the growth strategy you’ll adopt and execute at your firm. 

First, your strategy needs to be effective. Duh, right? But effectiveness can be defined as decreasing the cost of acquisition over time, attracting better and higher value clients, and be scalable enough to achieve your firm’s objectives. 

Second, your strategy should reduce risk. Don’t damage your firm’s reputation, avoid sequencing risk (by doing the wrong things at the wrong time), and stay diversified, so you’re not attaching the future of your firm to a single tactic or lead source. 

With that disclaimer out of the way…

Tom’s defined three distinct types of firms based on their positioning, each with implications about how their firm should grow. 

How Generalist Firms Grow

Boutique Generalists attempt to maximize opportunity. Because they do a lot of different things for many different people, it’s often hard to understand what they do and for whom. 

Leveraging results and reputation is a critical activity for most generalist firms because word of mouth is their most important marketing channel. Either you have to prove your firm’s aptitude, or someone has to do it for you through a referral. 

What works for generalists is networking and referrals, and they’re typically doing it through a pre-existing network. That’s the upside, but it’s also the downside: you shouldn’t pursue a generalist position if you don’t already have a strong network because it takes so long to build one. 

Generalist firms tend to fail at content publishing, speaking, and outreach and advertising due to their generalist position and lack of specialization. 

How Crafty Horizontals Generate Clients

Crafty horizontals specialize around a problem. You’re quite familiar with these types of firms: they’ll help you with content marketing, or your finances, or employee engagement, and they’re perfectly willing to provide to anyone who knocks on their door. Crafty Horizontals are usually stark differentiators, drawing clear lines between themselves and their competition. 

One of the core challenges of crafty horizontals is getting access to target buyers, and especially getting it at the right time. 

The top growth channels for Crafty Horizontals are leveraging results and reputation and publicly demonstrating expertise. They typically get clients through active referrals and networking, content publishing, and speaking. Content tends to work best it’s paired with private curation, but the challenge with content can be a lack of industry or market focus, making distribution quite tricky. 

Since Crafty Horizontals solve a specific problem, account expansion tends not to work as a strategy to drive lifetime value or increase revenue for the firm. 

How Vertical Firms Get Leads

The Systematic Vertical firms specialize in a specific industry and seek to focus their advice and market. In this way, their greatest strength is their greatest weakness: by focusing to such an extreme degree, they also reduce the size of their market. A vertical firm would usually include at least one subset of an industry. For example, “marketing for health care” isn’t focused enough here, but “marketing for local urgent care clinics in the South” probably is. 

Vertical firms rely primarily on public demonstrations of expertise because their ideas and advice are both focused and created for a specific type of reader. You’re likely to see vertical firms focus on content publishing, paired with speaking and networking, to accelerate market penetration. 

One of the core challenges with having a vertical specialization is that traction takes time due to visibility issues, and there are often existing industry gatekeepers who control access to the market. 

The Expert’s Acquisition Model

If you’ve made it this far, Tom would be proud! Now here are his recommendations on how to accelerate your firm’s growth: 

    1. Categorize your firm: decide on which positioning strategy you want to pursue – the generalist, horizontal, or vertical 
    2. Assess what’s working and what’s not: take stock of your lead generation efforts and document where you’ve been successful so you can do more of that, and end any activities that don’t produce results
  • Benchmark your firm’s performance: look to Tom’s book to see how your current activities stack up against successful firms in your positioning category and make a note of the differences
  • Prioritize your opportunities: make a list of all of the ways you can increase your growth, and execute those that will have the highest impact on your firm

 

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