The rewards (and risks) of forward planning for consultants

Scaling a boutique consulting firm in today’s fast-paced market can seem like an overwhelming task—on either side of the Atlantic.  

Fortunately, we sat down with Prof. Joe O’Mahoney, Professor of Consulting for Cardiff University and Michael Zipursky, Co-Founder of Consulting Success, to hear their thoughts on the best practices growing firms can follow, and how to use forward planning to achieve sustainable growth. Watch the full webinar here.

Forecasting vs. forecast accuracy

Michael has noticed that forward planning is a significant topic of discussion right now in the current competitive market, coloured by trends of increased layoffs and attrition.

“Many firms are finding themselves doing some sort of scenario planning and ensuring they’re prepared for the worst,” he said. “I recently spoke to a firm owner who’s planning to let certain people go if the firm lose a certain client.”

On the other hand, some firms have their minds on growth and profitability. They have defined revenue goals and know what their future org chart needs to look like to achieve them, as well as the hiring decisions they’ll need to make and how they roll the process out.

However, there’s one very important question that firms should be asking, yet all too often neglect: what kind of business do you want to have?

“It’s a big question, but it’s one we spend a lot of time talking to clients about because of all the different factors that go into it,” Michael explains. “For example, what kind of clients do you want to be working with? The clients you have today might not be your dream clients of the future, so it’s important to have a clear understanding of your ideal client profile.”

Equally as important is understanding what type of work you want to be doing. For example, what’s the minimum size of project you’d be willing to take on? These are all important considerations to make, but they often get lost in the minutiae of running a business every day.

“Ultimately, the reason most of us get into running a business is because we want to be able to do work that we enjoy, is financially rewarding, and makes a great impact,” said Michael. “Once you’re clear on what you want to create and who you want to work with, you can begin to look at the more granular components and metrics of planning.”

Joe points out that these targets, be they hiring plans or revenue goals, are actually inflection points where you’ll effectively become a different type of firm. Founders will no longer have the time to keep selling, so they’ll need to develop middle management to help feed the beast.

Once there’s fifty people in your firm, you’ll need to get ahead of your HR and bring in a professional hiring manager. Beyond that, you might need a finance director. These are big costs, so you’ll have to start thinking beyond the typical forecasting metrics to fully realize the type of firm you want to become.

“I always look at things from a buyer’s perspective, and buyers don’t just look at forecasting—they look at forecast accuracy,” says Joe. “The worst thing you can have in the buying process is any surprises, so you need to stay ahead of the curve.”

Buyers love to see a risk averse, accurate, standard cadence to your forecasting, whether it’s forecasting pipeline or growth, so you need to be making reasonable assumptions that don’t raise any alarm bells during sale.

Risks vs. rewards

Although playing it safe might be the better choice when it comes to your forecasting, it’s not necessarily the right mindset to adopt when it comes to other activities as a leader.

Most of the consulting firm leaders Joe knows choose to err on the side of caution. Yet given the significant historical growth rates of boutique firms, he thinks founders don’t take as many risks as they should.

“They tend to be more risk averse than I’d encourage them to be,” he says. “Part of that is getting into the mentality of being a CEO in a bigger company. It’s okay to take risks, and it’s better to invest rather than hold onto the purse strings in case something goes wrong.”

“If you’re not bullish, and you’re not optimistic, then you’ll really struggle to be a successful entrepreneur,” agrees Michael. “During these times of uncertainty, one of the most dangerous things a leader can do is stick their head in the sand and just hope things get better.”

If you pull back too much, you risk creating a big opportunity for your competitors to zoom past you if they’re willing to take more risks or make a greater investment.

The answer, then, lies in creating a balance: be cautious, but not overly cautious to the point where you’re choosing not to make investments. Always have your foot on the pedal and make sure you’re moving forward while you weigh the risk and reward.

Michael adds: “As a business owner, it’s always important to continue making those investments into your people and your business so that you can continue to grow.”

Key takeaways

• Before getting lost in the more granular metrics, first establish what kind of business you want to run—everything else should come off the back of this
• Demonstrating accurate, risk averse forecasting is critical to securing the confidence—and investment—of buyers

• Remain optimistic and be willing to take risks so you’re not left straggling behind your competitors
• Take a balanced, considerate approach to investments and weigh the risks and rewards

Discover some of the KPIs that Joe & Michael identified as crucial to growing consulting firms here.