The Way a Consultancy Manages Its Pipeline Is the Way It Manages the Consultancy

For a service business of any type, the pipeline of work is the single most important indicator of business health.

And consultancies are no exception. The pipeline represents potential revenue, growth opportunities, resource demands, and recruitment needs. 

However, managing a consulting pipeline effectively is no easy feat. It requires consulting leaders to have a deep understanding of their market, clients, service offering design, and internal capabilities. 

In my experience, there is a strong connection between how consultancies manage their pipelines and how they manage their business internally. 

If one is managed poorly, odds are, internal processes (be it new business development, project and scope management, internal task allocation, hiring and knowledge management, etc.) are managed just as poorly.

Pipeline management and how it can be used as an indicator of consultancy management is the topic I’d like to dive into in this post.

Pipeline management and forecasting in the consulting business

Pipeline forecasting and management – while two very different processes – are both challenging. Both require a disciplined and reliable approach to make sense of an inherently unpredictable business that is consulting due to such constantly changing factors as client needs, market conditions, and unexpected challenges.

10 reasons why consultancies find it difficult to forecast and manage their pipelines

This list is not exhaustive by any measure. However, it does include some of the most common reasons and complexities of pipeline forecasting and management.

1. Uncertainty in project timelines: Consultancy projects often depend on external factors  – e.g., client availability, regulatory approvals, third-party resource availability – that can be difficult to predict, making it challenging to estimate project timelines with a high degree of accuracy.
   
   
2. Inconsistent demand and ever-increasing competition: Many consulting leaders note the unpredictability of client demand for consultancy services, coupled with competition increasing every day, leading to fluctuations in the pipeline and making it difficult to forecast revenue.
   
   
3. Limited resources: Most consultancies have limited resources, be it their staff, third-party solutions utilized during projects, and/or budget considerations. This requires pipeline management to be a balancing act of competing demands for time, attention, and other resources.
   
   
4. Complex sales cycles: Sales cycles for consultancy projects can be long and involve various layers of engagement across multiple stakeholders and decision-makers, making it difficult to manage and predict the pipeline.
   
   
5. Changing market dynamics: Market trends and customer needs can shift quickly, making it challenging to stay ahead of the curve and deliver services that meet evolving demands.
   
   
6. Staffing challenges: Consultancy projects often require specialized expertise, and finding the right talent with the necessary skills and experience can be difficult, particularly in a competitive market.
   
   
7. Client retention: Building long-term relationships with clients is essential for the success of a consultancy, but retaining clients can be challenging, particularly if they are dissatisfied with the quality of service or value proposition.
   
   
8. Financial management: Consultancies often have complex financial arrangements, including fee structures, billing schedules, and payment terms that require careful management to maintain cash flow and profitability.
   
   
9. Balancing quality and efficiency: Consultancies need to balance the need for high-quality services with the need to deliver projects efficiently and cost-effectively, which can be a delicate balancing act that requires careful planning and execution.
   
   
10. Ensuring internal alignment: Any pipeline management involves the ability to prioritize – prioritize resources, client projects, etc. This proves challenging when a consulting business lacks the ability/willingness to effectively communicate and justify priorities.

Recommended reading: 4 Lessons Learned From A Consultancy Due Diligence

Pipeline management and forecasting are exponentially harder for unfocused consultancies

As complex the processes of managing and forecasting pipelines are, they become infinitely more difficult for businesses that do not have a clear focus in their work – the ones that offer a buffet of services to a giant pool of prospects. 

• Lack of clarity on target clients: If a consultancy does not have a clear understanding of its target audience and their needs, it will struggle to generate consistent demand and build a reliable pipeline.
  
  
• Pursuing too many opportunities: If a consulting firm pursues too many opportunities simultaneously (none of which deliver high profitability margins), it will most certainly spread itself too thin and struggle to devote sufficient resources to any one project, leading to delays and missed deadlines.

"What consultants need is the confidence that "the void" that is created by saying no, becomes an opportunity to do things that bring them further and closer to what they want to do. And with that comes the confidence that something else will come along, because they're worth it". (David Ducheyne, founder of Otolith Consulting)

• Failure to prioritize tasks: If a consultancy does not have a clear focus, which means the ability to say no to non-ideal clients, it will struggle to prioritize incoming requests and, subsequently, tasks effectively.
  
  
• Ineffective communication and weak internal alignment: Unfocused consultancies will always struggle to communicate a crystal-clear value-proposition-driven message to both their clients and internal stakeholders. This will inevitably result in the consultancy struggling to build trust and maintain reliable relationships, and overworked/dissatisfied employees.
  
  
• Lack of strategic planning: Consulting firms that try to cater to too wide an audience with a long list of services will fail to have a clear strategic plan that outlines its goals and priorities. It will not have the foundation upon which decision-making is done when determining which opportunities to pursue, making pipeline forecasting all the more difficult.

Recommended reading: Furiously Successful Consultancies Put All Their Eggs in One Basket.

The link between pipeline management and high-quality consultancy management

Having conducted dozens of assessments of consulting firms’ pipeline management and forecasting processes, I have yet to come across a firm that does a poor job of managing and predicting their pipelines yet doesn’t have the same issues in consultancy management. 

These processes are strongly and inherently tied together.

Here are a few dimensions of high-quality pipeline management and forecasting and how they instantly translate to consultancy management.

Pipeline management success dimensions

Let’s look at the sales process.

A clear and consistent sales process with standard stages that helps ensure that all deals are accurately tracked and managed.

Firms that fail to set up and standardize the system will be unable to effectively track and optimize the work of their sales, marketing, and business development executives. It will make it difficult to track and evaluate the performance of employees in these departments, provide actionable feedback, and determine whether there are inefficiencies or skill gaps.

Accurate and up-to-date data about each deal, including deal size, probability of closure, and expected close date.

Similarly, firms that fail to accurately measure their sales pipeline inevitably struggle to determine how to efficiently allocate resources internally, which, of course, includes the projected time commitments of employees – the consultants.

Regular pipeline reviews (weekly, monthly, and quarterly) to ensure that all deals are moving forward and any issues or bottlenecks can be identified and addressed promptly.

Call me crazy, but firms that do not bother to regularly review their sales pipelines and identify and address problem areas most likely take the same “hands-off” approach to managing employees. 

The reviews of employees’ performance tend not to be a priority. Regular assessments of skill gaps – not really. Listening to the feedback of employees and determining how to address the issues that are brought up – only when things reach a boiling point.

Collaboration and communication among sales team members, as well as with other teams such as marketing and delivery, helps ensure that everyone is working towards the same goals.

Collaboration and communication are crucial for a well-aligned firm – when employees understand what the goal is as well as WHY that’s the goal and put all their efforts towards this unified goal. If it’s missing when it comes to pipeline management, there is already a serious issue in team alignment, which becomes obvious in every other aspect of the firm’s operations.

Pipeline forecasting success dimensions

Let’s look at the sales forecasting process and some of its success dimensions.

A consistent methodology for evaluating and forecasting deals in a standardized way.

Consulting firms that are unable to standardize the evaluation and forecasting method are typically the ones that offer a buffet of services. They tend to cater to too wide an audience, chase prospects with never-ending follow-ups, and offer discounts as a way to compete. 

This type of business development strategy typically leads to quite a bit of stress and unpredictability, which, in turn, impacts consulting leaders’ ability to effectively manage their teams.

A data-driven approach based on historical data and current trends.

Data is king but only when data collection strategies have been standardized and aggregated over time. Unfortunately, firms that do not have a clear – and narrow – expertise focus often end up with meaningless data. It’s spread out across a very wide audience pool and too many chased opportunities to show reliable trends and patterns. This leaves consulting leaders with nothing more than a gut feeling to make forecasting calls. 

It comes as no surprise that this leads to utterly inefficient budgeting of resources. Consultants end up overworked for periods of time and underutilized for others. Same goes for whatever software solutions the firm uses, support staff, and everything else.

Disciplined adjustment for probability and risk to provide a more accurate view of revenue potential.

An accurate projection of revenue enables consulting leaders to make well-planned decisions. Is there a 20% growth expected towards the end of the year? Perhaps it’s a good idea to recruit new employees 3 months in advance to make sure they are up to speed and hit the ground running when the time comes. Without accurate revenue projections, teams go through turbulent times, utilization of resources is not optimized, and client deliverables end up getting delayed.

Involvement of multiple stakeholders, including sales, finance, and consulting leaders (of course).

This brings me back to the issue of internal alignment. Consulting leaders that manage their teams effectively understand the value of such alignment and strive for it in every aspect of business. Forecasting is a big one.

These success dimensions can be used by consultancies to assess their performance. That’s how I do it when I do my consultancy performance audits. It can tell a lot about the way a consultancy is managed.

If a consultancy can’t manage and forecast a consulting pipeline in a disciplined and reliable way, it might be a good idea to look under the hood of the business.

Recommended reading: Your Consultancy’s Slowdown Isn't the Economy's Fault

Setting the right habits from the start

It’s never too early to set the right habits when it comes to pipeline forecasting and management. 

If I had known 15 years ago (when I started my first consultancy) what I know today, I would have started with pipeline management and forecasting from Day 1. 

Why? 

Well, quite easy: to avoid sleepless nights when you have to run the payroll at the end of the month. Once the consultancy has a few people on the team, cash flow predictability becomes extremely important. And that's where pipeline management comes into play. 

Pipeline management is an essential aspect of running a successful consultancy, it forced me in the past to think about strategy, target audience, service offering, sales capacity, etc. 

It's a core component when determining how to ensure a steady flow of work and revenue. By tracking and forecasting the pipeline, a consultancy can better plan for staffing needs, and make more informed business decisions.

In the early stages of a consultancy, pipeline management may be less complex, with fewer clients and projects to track. However, it is still important to establish processes and systems for managing the pipeline for future success. 

At a later stage, I would always invest in software or infrastructure to ensure that the pipeline is effectively tracked and forecasted.

I also strongly encourage consultancies to start tracking an opportunity as soon as it enters the sales process. 

For me, this means that the opportunity has been identified as a potential project or engagement, and there is a clear path forward for moving it through the sales process and into the pipeline.

In consulting, most opportunities are generated by the business people (the consultants), so it's helpful to agree on a transparent process internally on how to activate it and by whom. 

What-when-how-who, that's what needs to be agreed on. And that's easy but requires discipline and follow-up, given the financial implications.

In conclusion

Over the years, I’ve worked with consultancies large and small, those that just set up shop and the ones that have been in the game for a while now. 

I can’t think of a single example where a consultancy that was well managed had substandard pipeline forecasting and management systems. 

Every successful business I audited, had robust systems in place for pretty much every aspect of running their business. 

They had data at the tip of their fingers that they could seamlessly turn into insights. They could accurately predict revenue for the following 6 months and sometimes even 12 months. They planned and hired in advance, not in a reactive manner. They communicated to their teams what is expected, why, and the best way to achieve it. 

And last but not least, you guessed it, these successful consulting businesses had in common – they had a strong focus and did not get distracted from it in an attempt to chase irrelevant or non-ideal opportunities. 

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