The Negative Impact of Obsessive Revenue Focus in Consulting
Revenue, revenue, revenue.
Every business review or workshop I conduct starts with an ideation board of some kind – it helps me understand the priorities, struggles, and goals of the consulting firm I’m working with.
And 90% of the time, the ideation board is covered with “revenue” written on sticky notes – “revenue growth”, “20% revenue increase”, “new revenue channels”, etc.
Every decision – no matter how small – is made through the revenue mindset in these firms. And I won’t sit on my high horse and claim that revenue is not essential. Of course, it is. Consulting is a business.
However, I believe that the single-minded obsession with revenue is unhealthy. It can be detrimental to the long-term success of a consultancy.
This is what I’d like to discuss in this article.
How the obsession with revenue can undermine other aspects of a consulting business
Revenue has always been my #1 focus. I had aggressive growth targets, especially after my boutique consultancy got acquired by Deloitte.
And that’s fine. I love the consulting frontline. Business development and new opportunities are essential, consultancy owners can’t just sit there and wait. Nothing will happen.
However, step-by-step, in working with and talking to many consulting firms in the past years, I also learned the downsides of an extreme revenue focus.
- It stimulates unhealthy short-term thinking. Consulting leaders are less motivated to invest in resources, staff needs, and other assets without immediate ROI. Consultants, too, feel pressured to deliver on short-term revenue goals, sacrificing long-term opportunities. For example, it can be rushing to finish a project to ensure the client is invoiced and paid this quarter.
- It causes greedy sales behaviors. The extreme focus on revenue makes consulting leaders and owners push harder to sell, which risks undermining the foundation of consulting client relationships – trust.
- It leads to accepting work outside of the narrow focus. This, in turn, dilutes the consultancy's reputation in the market. The firm also can’t charge the same fees or provide the same level of value as it usually does within the narrow expertise area.
- It suppresses the development of educational content. Every minute of every day is dedicated to trying to close new clients and complete projects for existing clients. If something doesn’t bring almost immediate revenue results, it’s not considered worth investing time in.
- It causes a toxic incentive mindset. A short-term revenue obsession is often fueled by incentivizing consultants and consulting leaders with hefty commissions for closing new clients. Those who are not natural salespeople end up feeling resentful. More sales-driven people often start employing aggressive sales tactics to get that commission. The culture within the consultancy gradually deteriorates.
- It dilutes a strong positioning in the market. All of the negative consequences I’ve already listed result in the consultancy losing itself – it's positioning, the value it delivers to clients, the social proof the firm generates from focusing on a particular type of work, and so on. The erosion of positioning leads to the devaluation of market reputation – something that can take a long time to repair.
- It beams the consultancy into commodity projects in the pricing rat race. Offering more services, offering discounts, and catering to every client request no matter how outside of the initially agreed-upon project parameters the request is.
- It’s just terribly tiring. Every tiny dip in the revenue graph becomes a point of frustration. Every campaign that doesn’t yield projected ROIs makes consulting leaders and consultancy owners anxious. It’s an exhausting way to run a consulting business!
The road to become a high-performing consultancy is a constant upward climb, with new roadblocks arising and new processes to embrace. Consultancy owners must always be striving to improve and never allow themselves to become complacent, as the ultimate goal is TO FIND JOY IN THE PROCESS. Failure to find joy in the process will impede progress and hinder the ability to achieve the desired outcomes.
What I learned from a recent due diligence
In one of my articles – 4 Lessons Learned From A Consultancy Due Diligence – I share the four additional dimensions that an investment firm wanted to get a clear assessment of when considering purchasing a consultancy.
I strongly suggest reading the article in full. Here, I’ll summarize these ‘investor dimensions’:
- A unique ‘reputation check’ (that’s why they reached out to me in the first place)
- The co-owners’ alignment on the growth strategy of the consultancy
- The consultancy’s business infrastructure
- The firm’s performance against consulting-specific KPIs
I want to highlight the first two dimensions. In my experience, high-performance consultancies pay just as much attention to growing their reputational footprint and building internal alignment on the growth strategy as they do on revenue.
Dimension #1: Growing the reputational footprint through target audience education
I avidly believe in freely and generously sharing knowledge as a consultancy leader/owner. That’s hardly news to any of my regular readers.
However – and I can’t emphasize that enough – audience education is not just a feel-good activity. It’s a proven business development and growth strategy in consulting.
Recommended reading: Why You Should Share Your Expertise To Grow Your Consulting Business
Audience education is the foundation of building a reputational footprint as a consultancy. It establishes TRUST between the target audience and the consultancy.
Consulting leaders and consultancy owners should dedicate time every week to enriching the knowledge hub of their firms – creating authoritative content that addresses the most pressing pain points of the narrowly defined target audience.
Content of high educational value gets shared and re-shared within networks, growing the firm's visibility.
That’s what high-performance consultancies do. Instead of selling their services, they showcase their expertise instead. They build trust at scale with their audience and then convert that to new consultancy opportunities.
Recommended reading: Without Thought Leadership, Consultancies Will Fail
While this strategy will not deliver results overnight – it takes time to build up the library of thought leadership content and put systems in place to track and measure the results – once it starts delivering results, it never stops.
The market reputation of consultancy owners/leaders is a critical factor that significantly impacts the success and growth of their consulting firm.
A strong reputation in the market can establish the leaders as credible experts in their field, differentiate their firm from competitors, build brand recognition, attract potential clients seeking their expertise, and attract top talent in recruitment efforts.
Dimension #2: Ensuring internal alignment with the growth strategy of the consultancy amongst the owners
The single-minded obsession with revenue leads to short-term strategies: how to close this lead within the next two weeks, how to wrap up the project within this quarter, etc. It leaves little room for long-term planning.
Long-term growth planning is essential to long-term success. A consultancy should have a clear idea of where it wants to get and create a roadmap to get there.
And for any growth strategy to succeed, it needs internal alignment. Every person within a consultancy – from top leadership to entry-level consultants and marketers – should clearly understand the long-term goal and the roadmap to achieving it. It’s up to consultancy owners and consulting leaders to get the buy-in from every team member.
When a cart is pulled in different directions, it doesn’t go far. When 1-2 people only pull it, progress is slow. However, when an entire team comes together and pulls it forward, things speed up much faster.
Internal alignment can’t be achieved when the focus is solely on revenue. Again, it goes back to making decisions for the short-term benefit of the firm as opposed to building up the foundation and creating campaigns that contribute to the long-term goals.
What I learned from my consultancy business reviews
One of my biggest takeaways from the business reviews I’ve conducted for struggling firms and high-performance consultancies is that revenue growth should be built upon a mix of short-term goals and a long-term vision.
As part of this rounded approach to revenue growth, I recommend that consultancies take a close look at how they go about the following two processes:
- Clearly defining expertise (with the target audience) and service offering. This will serve two purposes: (1) It will help focus resources on a smaller audience pool instead of scattering them across too broad an audience, leading to disappointing ROIs. (2) It will provide consultancy owners and leaders with clear parameters for the type of work/clients to take one or pitch to. Anything outside of these parameters becomes an automatic ‘No’.
- Establishing a balance between retaining or expanding work with existing clients and recruiting new ones. I refer to these processes as ‘farming’ and ‘hunting’ and discuss the benefits and downsides of both in my article on how to find the balance. The most successful firms I’ve enjoyed working with and observing derive most of their revenue from existing clients (70%). Client acquisition is used to grow the pipeline of work and keep the pipeline healthy (30%). This balance between existing and new clients eliminates the stress of ensuring short-term revenue, gives consultancies room to be strategic to target new clients, and sets a firm up for continuous, reliable growth. And I’m not talking only about revenue growth. I’m also referring to increasing profit margins.
There is a fine line between confidence and arrogance, between learning-driven and ego-driven decisiveness, and between being a focused consulting leader and a know-it-all. One contributes to success in consulting. The other one slowly but surely undermines and weakens a consulting business.
Revenue is essential and foundational for the long-term health of a consultancy.
Consulting leaders and owners should pay close attention to it, use all revenue-related data to adjust tactics and strategies, set new goals, etc.
However, consulting firms must balance generating revenue and delivering high-quality work while taking care of the team, building long-term relationships with clients, and becoming a master at educating the target audience.
These would be the four dimensions I would focus on (instead of a single-minded revenue growth focus):
- Consultancy owner alignment on the growth strategy
- Audience education
- Expertise and service offering clarity
- A healthy balance between developing existing clients and acquiring new clients
Short-term revenue growth does not always indicate that a consultancy is on the path to long-term success. That’s why consultancy owners should be mindful of the risk of developing tunnel vision and try to avoid it by building a revenue growth strategy based on foundational elements that will sustain long-term growth.
Experts don’t sell. They get invited. Revenue follows.
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Hello, I’m Luk Smeyers, and I’m helping mid-sized consultancies become high-performing consulting firms. I have been in the consulting businesses for more than 20 years, in very different roles: as European CHRO in a global consultancy, as a founder of a mid-sized analytics consultancy, and as a leader in a 'Big 4' consultancy, post-acquisition of my consultancy. I had the privilege of achieving global visibility as a consulting leader, and I never had to sell, persuade, or negotiate as a result. I have now bundled all those experiences, expertise, know-how, research, reading, successes, struggles, and failures from managing and advising consultancies in the past years.