Here’s the story of the collapse of a 25-person boutique consultancy that was biting off more than it could chew (a true story, anonymised to maintain confidentiality).
In early 2022, I was engaged to assist a boutique consultancy in enhancing its consulting proposition and overall performance.
While I won't delve into every nuance, their primary challenge stemmed from offering a wide array of services (five distinct service offerings), even though they all fell under a single domain expertise 'umbrella'.
My perspective? With a lean team of just 25 individuals, making five distinct, pretty much unrelated services stand out in a competitive marketplace is an uphill battle. Why is this the case?
That's the intriguing subject I'll explore in this article.
At the onset of our collaboration, I thoroughly examined their service offerings, along with the consultancy's performance data. My findings were revealing.
Of the five services they offered, they aimed to cater to four distinct buyer profiles, each characterised by unique needs, contexts, pain points, and budget considerations.
Alarmingly, four of these services hadn't achieved market fit. In essence, they hadn't been sufficiently tested across multiple projects to ensure they met the specific needs and challenges of their target audience.
While these services were conceptualised on paper (and with the help of a few initial small projects) and led by five dedicated service leaders (a significant portion of their team and overhead cost), tangible evidence of market fit (and deep buyer understanding) was glaringly absent.
This disconnect resulted in limited market traction and revenue growth.
Lacking a compelling value proposition that connected with their target audience, these services found it difficult to build a strong presence, leading to wasted resources (not interchangeable between the services due to different areas of expertise), missed opportunities, and lower ROI.
In a fiercely competitive environment, neglecting to align offerings with the unique needs of each buyer segment can be the difference between thriving and fading into irrelevance.
Many of our intense discussions, where I pointed out the pitfalls of a small team covering a wide range of services, often returned to their firm (and naive - sorry to say) belief: “A broad service range is essential to stay competitive in the market.”
My answer: “You can never achieve market fit and decent consultancy performance (revenue, project margins, overall profit, expertise reputation) with five immature services and a lean team of 20 persons.”
Recommended reading: Evaluating and Improving Performance of the Founder-Led Boutique Consultancy
What? Two years? Kidding me, Luk?
That’s how people often react when discussing maturing a new consultancy service.
A new consulting service targeting a different or new buyer profile, focusing on specific needs or pain points (as in this article's consultancy), typically takes around two years to mature. It can go slightly faster if targeting the same buyer profile with an adjacent service.
Not everybody agrees with my vision of maturing a new consultancy service.
But here's the thing: introducing a new service goes much further than just conceptualisation and launching. It's a complex journey that starts with understanding the intricacies of the target market and customer.
1. Understanding the Target Buyer
This includes both macro and microelements. It’s essential to define the profile of the target buyer and to clearly identify the pain points and challenges they encounter, along with the specific circumstances that intensify these issues.
Recognising what triggers a potential buyer to actively seek consulting support—such as organisational change, declining performance, market disruption, regulatory shifts, or internal skill gaps (to name a few)—is vital.
Budget also plays a crucial role, as prospective clients will have varying expectations and constraints regarding how much they are willing or able to invest in consulting services. Understanding the budget landscape—not just what clients can pay, but how spending decisions are made internally—is indispensable for shaping viable offerings and setting realistic expectations.
Importantly, achieving this depth of insight into buyers’ needs, triggers, and budget realities is not something that happens overnight. It is a process that demands repeated interaction, careful listening, and ongoing refinement, often taking substantial time, contributing to the typical two-year period needed for the service to truly mature and achieve market fit.
All these insights together lay the groundwork for developing a compelling and relevant consulting value proposition.
2. Project Repetition and Pattern Recognition
As the service is repeatedly delivered, the team begins to recognise patterns. This repetition enables the fine-tuning of methodologies and approaches, ensuring that common challenges are addressed more efficiently with each subsequent project. Over time, this pattern recognition becomes a valuable asset, enabling quicker problem-solving and more effective service delivery.
Just as a researcher discerns patterns in data, a medical specialist diagnoses conditions based on symptomatic patterns, or a scientist makes discoveries through repeated experimentation, a consultancy derives a differentiating consulting proposition by undertaking similar projects repeatedly.
3. Data Gathering, Benchmarking, and Continuous Improvement
With every project undertaken, there’s an invaluable opportunity not only to gather data and establish benchmarks, but also to leverage project repetition as a source of continuous improvement.
Delivering similar types of projects repeatedly enables the team to identify patterns, refine processes, and build robust methodologies, all of which contribute to becoming more effective and efficient with each engagement.
The principle is straightforward: the more projects executed, the larger the pool of data and lessons learned, and the better the consultancy can project and manage future outcomes.
Over time, the accumulation of project data and repeated delivery significantly reduces the variability of results, enabling more predictable and evidence-based success.
This ongoing cycle of repetition and data gathering not only demonstrates the effectiveness of the service but also positions the consultancy as a credible thought leader that can offer clients tangible and increasingly reliable metrics on success, further strengthening its value proposition.
4. Client Wins and Reputation Building
Maturing a new service is a gradual, demanding process that requires a lot of work and patience. Each client win is not just an achievement, but a critical building block for the service’s development. Every engagement helps refine the methodology, improve consistency, and deepen understanding of what works (and what doesn’t) across different client situations.
It’s through this hands-on effort and real-world learning that the service truly evolves. Lessons from each project—both successes and setbacks—feed into strengthening the offer and building its reputation for reliability and impact. Over time, these cumulative experiences move the service from being “new and unproven” to genuinely mature and trusted by clients.
5. Financial Performance and Profitability
A true marker of a service's maturity is its financial performance. For me, achieving a margin of at least 40% is essential. As the service is refined and its reputation builds, there is potential for this margin to grow. A well-established, in-demand service should aim for a margin over 50%, ensuring the consultancy's long-term profitability and sustainability.
Reflecting on the story of my former client, their ambitious attempt to juggle five services with a modest team of 25 underscores the challenges.
From my experience, it takes at least two years of dedicated effort—repeated delivery, ongoing learning, and constant refinement—for even a single service to reach genuine maturity and success.
The boutique consultancy’s struggle demonstrates just how much sustained work is involved. Only after this foundational period, when a service has been thoroughly tested, improved, and proven its value in the market, would I recommend even considering the cautious launch of another (adjacent) service.
Rushing this process or skipping key steps only leads to diluted focus and the same pitfalls seen in this case study.
Unlike large consulting firms, boutique consultancies do not have the resources and the manpower to diversify their service offering heavily.
It’s one thing if a Deloitte or KPMG-type international consultancy with offices worldwide and thousands of consultants decides to offer a new service. These large companies always have excess capacity to make the new service practice stand on its feet.
Boutique consultancies don’t. And they don’t need to. We (iNostix - acquired by Deloitte) were able to beat the MBBs (McK, BCG, Bain,...) and Big 4 consultancies in pitches multiple times, driven by our deep expertise and market reputation.
A consultancy of 20-25 people will never be able to compete against the industry giants on the variety of services it offers. Or even medium-sized firms of 100-200 people. That’s a losing battle from the start.
There are many reasons why boutique consultancies struggle to compete effectively in the market when they try to do too much for too many.
I want these consultancies to realise that they don’t need to. Their greatest strength isn't in the number of services they offer, but in how knowledgeable and impactful they are with just one.
It has been nearly three years since I was engaged to audit the consultancy in this case study and advise them on the best course of action. I am saddened to learn that this boutique consultancy is in serious trouble as I write this article.
They have lost several service-offering leaders due to low morale. Four out of five service offerings are severely underperforming.
Unfortunately, I was unable to persuade the consultancy owners to abandon their diversification plans and instead concentrate solely on developing a single service offering into a high-profit product that garners strong market recognition before contemplating adding related services.
Is it too late? It might be, but not necessarily. That’s why I urge boutique consultancies to reconsider their business models and stop their endless pursuit of variety in work and clients. Specificity and focus – that’s what enables small consultancies to attain extraordinary levels of success.
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