Fast growing consulting firms invest more in marketing

Consultancy firms that invest more in business development and marketing perform commercially better than their peers. These front-runners are more effective in generating leads and more mature in several aspects of the acquisition cycle. As a result, they are more effective in converting market opportunities to top line growth, with leaders able to achieve up to three times more revenue growth.

The results come from a study conducted by Consultancy.org in collaboration with ProSpex, a B2B marketing specialist, among over 100 professional services groups based in the Netherlands. The researchers found that for many consulting firms in the marketplace, rapid growth is among others a direct consequence of a more effective sales & marketing function. 

The acquisition cycle at consultancy firms leans towards a hybrid model. Both fee-earners, such as partners, managers and consultants, as well as staff departments (sales, marketing, business development) can contribute to bringing in turnover. Consultants are according to the researchers the most used sales channel – 75% of the respondents said that their advisory firm follows this approach. However, partners have been pinpointed as the group most effective in generating turnover: when partners do the job, they on average achieve half of sales, compared with a share of one third for consultants. Meanwhile, only half of the consulting firms use dedicated sales people, yet, those that do enjoy a higher sales effectiveness – sales accounts for 44% of the turnover realised.Roy Beek, a business development expert at ProSpex, said that the result outcome demonstrates how consultancy firms continue to focus on the personal network of their consultants. “Informal sales is common within the world of consulting. Consultancies commonly receive new assignments through their references and through active networking. However, a consulting firm’s edge lies largely in its specific knowledge and expertise. The personal and network approach is in practice difficult to scale up. By taking a more concerted approach to business development, including sharing knowledge in a structural and targeted way with their target group, consulting firms can significantly improve the success of their acquisition efforts.” 

Another factor that plays a role is potential overdependence on partners and consultants as sales channels, “this can prove an operational risk for the longer term,” commented Larry Zeenny, owner of Consultancy.org and involved with the research in the Netherlands. Fee earners tend to carry out their sales activities in parallel to their consultancy work for clients, and in the event that time pressures arise, follow-up of sales activities can be at risk. “As sales processes in consulting typically take months of advanced planning and efforts, such volatility jeopardises their effectiveness. This then can go at expense of chargeability and profitability.”

The data found that consulting firms that pay more attention to steering their sales & marketing processes in the right direction are less affected by what is known as the ‘rollercoaster effect’, added Beek. “These companies spend more on marketing and perform better in the acquisition cycle.” 

Spending on sales & marketing

The survey further concluded that 40% of consultancies spend a maximum of 1% of their total turnover on marketing, with a group of 22% spending between 1% and 2%. “This on average amounts to a marketing spend of less than €1,500 per €100,000 turnover, which is a low amount, especially considering that online marketing spend in consumer markets is to the tune of 7.5% of total turnover,” remarked Beek. He pointed out that, by smartly allocating more resourcing and funds to marketing, consulting firms can be well positioned to earn back their initial investment. As an example, the expert highlighted that 43% of all interviewed leaders consider the effectiveness of their lead generation as inadequate, while nearly all respondents acknowledged that they are struggling with converting suspects to leads.

Fast growing consulting firms – defined in the study as those firms that outperformed the market average growth rate of 5.5% – score higher on all aspects of the acquisition process. Beek: “That starts with targeted lead generation, take for example a good converting website, an online newsletter, and the ability to create and distribute blogs, whitepapers and customer references.” Moreover, top performers have better insight in the expected next steps of a lead and in the costs of the acquisition process, as well as are better equipped with marketing technology. “Across the board, leaders in business development and marketing are more adept in generating direct revenue, while providing fee earners with qualitatively better leads so that the acquisition process can run faster and more successful.”

Asked about the most important business development priorities for the next two years, consultancy firms highlighted the website and CMS (59%) as the top pick, followed by social media and marketing (43%), and content creation (36%). Fast growing consulting firms stand out by investing more in business intelligence and social media marketing.

Related: Europe's fastest growing consulting firms and businesses.