What Are the Top 5 Growth Obstacles for Professional Services Firms?
Professional service firms, which include medical practices, accounting and law firms, engineering and consulting practices, and financial service firms all share in common 5 key business obstacles to growth.
Over the years we’ve worked side by side with 10,000+ of business owners building their professional practices and helping them to overcome limitations to scaling larger. Whether their professional practice is medical, accounting, legal, or some type of consulting firm, the first step to growth is always the same—identifying which of these five obstacles is holding their business back from growing.
Obstacle #1: Growing beyond the personal production of the owner (partners) in the professional practice.
8 of 10 professional practices never grow beyond the personal production of the owner of the practice. This means that with the exception of a few support staff, these businesses are limited to the personal sales and production capacity of just the prime owners of the business.
Here at Maui Mastermind, we have a name for this. We call it the Self Employment Trap™.
This is where the owner of the business is so consumed by his or her day-to-day production for the business that they don’t have the time or space to step back and focus on growing their professional practice as a business. In essence they have built a self-employed job, not a business.
Is it any wonder that so many of these professionals end up 5, 10, 20 years later totally burned out—hating the very business they once loved. They feel trapped. Their practice generates the income they need to support their family and their lifestyle. But because of how they have gone about building it, they can never really leave their practice for more than a short span of time. And they can’t scale beyond their own ability to produce the main work of their practice.
Obstacle #2: Creating growth through lead generation and lead conversion.
Most professionals are very good at their core professional expertise (e.g. medicine, law, accounting, engineering, consulting, etc.) but not very good at sales and marketing.
What’s more, many of them don’t like doing these functions so they hire staff or outside companies to do it for them. They spend thousands of dollars a month on these outside services that market them just like they do all the other competing practices in their area. Is it any wonder why these business owners feel frustrated and out of control?
What’s worse, because they have no clear systems for consistently generating leads and for reliably and effectively converting these leads into paying clients, they are unsure of how to predict, let alone scale, their practice!
In many instances, these practices are extremely vulnerable to and dependent on a few key employees or outside service firms since the real know how isn’t owned by the business, but rather rests with these third party players.
This is why so many of the professional practices we work with in our Business Coaching Program decided to work with us initially – to get our help in building a proven and reliable baseline lead generation and lead conversion system to grow sales.
Usually this includes one or more formal referral systems (versus the passive word of mouth most professional practices settle for), a formal reactivation campaign (to reactivate old accounts and clients), and a clear sales/marketing score board that they can use weekly and monthly to make sure things are on track.
The real goal of all this is predictable sales volume.
One of the biggest pain points we hear from new clients is that their business is either feast or famine. Of course it is, they scramble to find business until they are full. Then they shift their energies over to doing the client work and meeting the demand of all this new business. Then they finish up on a lot of this business and realize that they don’t have any new business coming in so they scramble again to find more clients. And on and on this cycle goes.
It is incredibly difficult and risky to scale professional staff (and non-professional staff too for that matter) when you can’t count on a steady flow of business. Variability is the bane of building a professional practice. And you must find a way to systematically bring in a consistent and growing stream of new and repeat business.
Obstacle #3: Keeping high quality of your professional work if/when you take on professional level staff.
So you make the brave and bold move to hire other professionals to work for your business, now you are left with the daunting and frustrating task of making sure that the work they do meets your standards of excellence.
Few, if any, professional practices have ever really built the expert systems they need to manage and produce their core professional service offering. The real know how to provide their services is in the heads of their professional staff.
But this not only leaves your company vulnerable to the devastating loss of a key employee, but more, in the absence of a clear expert system for producing and fulfilling on your core professional service, it is almost impossible to effectively manage your professional staff!
This is why one of the first things we do when coaching a client who is building a professional practice that has market demand and systems to grow sales is to help them create a clear process driven system for producing their professional service.
Not only does this help them control quality, but done properly, we can help them increase value, reduce costs, and immediately expand capacity—from the same staffing levels they previously had!
The net result of this is better value for your clients and higher profitability for your company!
Obstacle #4: Managing your professional and non-professional staff to increase your business’s utilization rate and hence protect your cash flow!
In most cases, your number one expense of your business is staff—both professional and non-professional.
The key number to track here is your “Utilization Rate” – the percentage of a staff member’s time that is spent doing billable (or value creating) work.
First, does your firm have a clear, weekly scoreboard to see this number for all professional staff?
Have you strategically designed your workflow (including the expert level systems we already went over) to staff down (to non-professional staff and automated or templated or leveraged solutions) work?
Have you taken off all lower value work from your professional staff so that they don’t spend $250 an hour time doing $25 an hour work?
With our Business Coaching clients we often help them increase their company’s utilization rate by 30% or more within 6 months of working together. This brings with it huge increases to the company’s gross and operating profit margins.
Obstacle #5: Managing your cash flow to be able to afford your growth.
It’s time to share a hard truth—from our work with thousands of professional services firms it is overwhelmingly clear that most professional services firms do NOT have a well-run financial pillar of their company. (This includes many of our CPA clients too, at least when we first took them on as business coaching clients!)
Their collections are haphazard and slow; their billing systems fail to record and bill for a percentage of their work; their reporting is too little, too late to do much strategic and managerial good; and their financial controls leave them vulnerable to theft and employee fraud.
The good news is that these are simple fixes for us to help them with to successfully build a professional practice. Our list of financial pillar improvements includes:
- Implementing a clear collections system with solid tracking;
- Creating billing controls that have at least two redundancies to ensure that all billable work has in fact been billed for; instituting a regular weekly, monthly and quarterly routine of managerial and strategic level reviews of the numbers;
- Implementing sound financial controls to make it 100 times less tempting for fraud to take place.
- The net result of these efforts is that you will finally have a sound financial base from which to safely and successfully scale your company.