WITH CONTINUED economic uncertainty, especially in the Eurozone area, opportunities for growth in almost every industry are increasingly scarce. We are already seeing some of the larger professional services firms revising down their estimates of revenue growth, but, as is often the case in a downturn, opportunities are created for those who can adapt and provide new services that meet changing needs.
Within professional services firms, including accountancy, advisory and consultancy, we are seeing a number of niche firms delivering continued growth, between 50 to 100% per annum, who are resetting client expectations by delivering tailored and targeted expertise, without the traditional ‘pyramid’ based delivery model.
With a further recession likely, clients are facing more complicated problems than 3 years ago. Costs have already been cut, so how will CEOs identify new opportunities for growth, let alone galvanise the organisation to execute them?
In reaching out for advice, CEOs don’t want the usual rigid toolkit of options. They need advice from people who have real credibility, content and expertise. Increasingly they are turning to niche firms, who don’t start by telling them the answer but by sitting down with them and exploring the right questions.
As a result, clients are significantly more challenging in what they demand from professional services firms. They don’t want products and solutions that have been standardised and rationalised but solutions tailored to their specific needs and the capability to execute them for themselves. And they want tangible value for money.
This poses a challenge for the bigger firms and an opportunity for niche firms. As the larger firms continue to grow, practices are becoming too big to foster real innovation. By hiring people with genuine expertise who then work directly with clients, niche firms have been able to ‘invert the pyramid’, ensuring greater flexibility so that advisors can work in partnership with clients who need a credible external perspective to drive insightful synthesis.
Clients aren’t just reaching out for niche players because they are cheaper, although the reaction of many of the larger firms has been to drop their fee rates drastically, in some cases over 50%. Niche firms have been structured to enable a greater focus on output rather than input. For example, a European retail bank was recently looking for a firm to help them articulate and communicate their strategy. A well-known strategy firm quoted the client a significant seven figure fee. A niche firm instead quoted a six figure fee and won the work. Not because the fee was lower, indeed the margin for the niche firm was greater, but because the niche firm focused on the business issue and provided a smaller team for a shorter time period. Furthermore the niche firm put all their fees at risk based on unconditional client satisfaction at the end of the engagement, whereas the strategy firm was only prepared to put a conditional 20% of their fees at risk.
Clients are far more savvy than many professional services firms would like to contemplate. They understand the difference between value and price. They have problems that are tougher and more complicated to solve than ever before – and they can tell the difference between those who will help solve the problem and those who will only deliver a product.
This is an exciting time for our industry.
Jonathan Chocqueel-Mangan is managing director of leadership advisory firm Tyler Mangan
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