How to remain profitable while scaling your consultancy

When scaling your business, things can go from 0-100 fast and—occasionally— cause considerable damage.

How do you recruit, retain and motivate talent during a phase of significant growth? How do you maintain an effective talent strategy … and remain profitable?

In our latest webinar, Simon England [Partner, Garwood Solutions] joined us to share tips and tricks for keeping the wheels turning as you scale, and shared helpful benchmarks for forecasting.

Stay ahead of your operating model

For Simon, there’s one golden rule: “Stay one step ahead of your operating model.” As your firm grows, from 5 to 25, 50 to 100, 100 to 500, the maturity level of your operating model has to grow and mature with your firm.

Your operating model will directly affect your talent strategy, whether you realise it or now, as it helps to answer the key questions it encapsulates: How do you resource and schedule effectively? How do you recruit people effectively? And how do you access the data that underpins it all? Systems and processes need to be in place to support this.

Simon also offers a wise word of warning: “Don’t outgrow your operating model—grow into it.” By staying one step ahead you’re also staying ahead of everything it affects—processes, policies, organization, and, chiefly, technology.

An effective professional services automation (PSA) system should, therefore, be at the heart of your operating model: “If you haven’t got a good answer to that [systems], you’ll constrain your ability to grow.” Despite the fact you can “survive” on spreadsheets, past a certain level it’s more of an impediment than an aid.

Forecasting & utilization

The importance of having a single source of truth—consistent, centralized data to run your business—seems obvious. But in Simon’s experience, many consultancies don’t have visibility of the fundamentals: billable utilization, productive utilization, forward forecasting.

“It’s shocking—I’d bet fewer than 30% of consultancies with less than a thousand FTEs have effective forward forecasting.” Limited forecasting can hinder your ability to make talent decisions, leaving you on the back foot.  

Having too low a utilization figure affects your bottom line. But on the flipside, you can also have too high a utilization figure.

Simon finds that anything above 80% might be great in terms of profitability, but not so much for other aspects: “You’ll be running your people and your business into the ground.” If the ratio starts to go much higher, you risk there not being enough capacity to spend on advancing your business strategically.

It's also vital to manage attrition. Although it can be difficult in a time where your consultancy is growing, you also need to have some sort of “perform or go” culture to ensure your low-performing talent isn’t staying put.

To watch the full discussion, click here.