Behind every great professional services firm is a predictable growth engine. Firms without a reliable growth engine struggle generally and exhibit erratic revenue and margin performance.

Consistently scaling a profitable consulting business is no small task. In order to grow revenue, you typically need to add delivery headcount. But, increasing headcount without stable client demand will decimate profitability.

This guide provides a framework for achieving sustainable growth for your firm. It shares practical insights and ideas to help you strengthen what you’ve already built, avoid unnecessary complexity, and move forward with more clarity and control.

The Definition of Success

Before we get into the components of a sustainable growth engine, we should define success. One firm's specific goals will certainly differ from another's. That said, most professional services organizations establish annual goals related to revenue growth and profitability. Let's look at a few common metrics that are used to evaluate these performance areas.

Services Revenue Growth

Services Revenue Growth is the percentage increase in services revenue from one year to the next. The rate at which a firm grows its services revenue is heavily dependent upon the size of the firm and the dynamics of its market.

A firm with $1M in services revenue might be able to achieve 100% year-over-year growth, while a firm at $50M may find 100% organic growth to be nearly impossible. Thus, a rational services revenue growth target must consider the firm's current base revenue. Below are services revenue growth benchmarks by firm size. You should refine these based on your professional services sector and your historical growth performance.

• Startup Stage Services Firms ($1-3M in revenue): 30-60% annual services revenue growth
• Small to Mid-Size Services Firms ($3-10M in revenue): 20-40% annual services revenue growth
• Scaling Mid-Size Services Firms ($10-100M in revenue): 15-25% annual services revenue growth
• Large Services Firms ($100M+ in revenue): 5-15% annual services revenue growth

Keep in mind that these growth rates are simply averages. Accenture grew by nearly 22% (on a $50B base!) from 2021 to 2022, fueled by COVID stimulus. But, just a couple of years later that growth rate plummeted to 1.2%. Macroeconomic conditions can present a powerful tailwind or headwind for professional services firms.

Services Gross Margin

Services Gross Margin is the firm's services gross profit divided by its services revenue. This metric is shown as a percentage. The services gross profit is the services revenue minus the cost of delivery (typically labor costs and related overhead). Firms must generate enough services gross profit to pay for the non-delivery operating functions of the business (such as sales, marketing, finance, and other back-office functions.)

Well-run professional services firms typically operate with gross margins of 45-55%. A firm that is scaling rapidly might yield somewhat lower gross margins due to consultant ramp-up costs and related inefficiency. A firm in a rapidly growing sector that leverages offshore labor and/or a fixed fee engagement structure might yield somewhat higher gross margins.

Services gross margin tends to be impacted most heavily by the following:

• Bill Rates: For firms that primarily charge on an hourly basis, you want bill rates as high as possible, without meaningfully hurting the close rate.
• Value-Billing: For firms that charge on a fixed fee or "outcome" basis, you want to leverage intellectual property and repeatable processes to maximize efficiency and lower delivery cost.
• Labor Costs: If services can be reliably delivered in a lower labor cost market, that will often boost services gross margin.
• Billable Utilization Rate: Each individual, and the delivery organization as a whole, should consistently hit its billable utilization target.

Operating Margin

Operating Margin is the firm's operating profit divided by its revenue. This metric is shown as a percentage. The operating profit is the gross profit minus the cost of sales, marketing, finance, and related back-office functions. If firms have too much "overhead" in these non-revenue-generating roles, a very healthy gross margin could still result in weak operating margin. Ultimately, operating margin is where the "rubber meets the road" in terms of the firm remaining solvent.

A reasonable operating margin goal for most professional services firms is in the 10-25% range. The best way to drive healthy operating margin is to start with strong gross margin. Firms with efficient back-office functions might achieve higher operating margin. Firms with excessive non-billable personnel might achieve lower operating margin.

While professional services firms often deliver complex engagements, the fundamental success drivers for those firms are fairly straightforward.

The Seven Characteristics of Successful Firms

Regardless of the professional services sector, there are seven key attributes that leading firms consistently exhibit. High-performing firms will:

1. Generate a robust volume of leads from both prospects and existing clients.
2. Sell engagements that are priced to yield healthy gross margins.
3. Hire and retain strong team members that fit the culture.
4. Deliver successful engagements (on-time and on-budget with high quality).
5. Ensure clients are immensely satisfied.
6. Consistently hit the delivery team's billable utilization target.
7. Provide non-billable business functions efficiently.

That's it. Do those seven things really well and you will have a standout firm. Of course, easier said than done.

Market Selection and Positioning

Building a sustainable growth engine is about much more than a set of best practices and go-to-market (GTM) motions (how you sell) and channels (where you sell). The basis of a growth engine starts with the selected market itself and the ideal customer profile (ICP) within that market. Building a successful growth engine depends on both market dynamics and channel execution.

Find a Blue Ocean

Peter Thiel, the famous Silicon Valley investor, once said, "Competition is for losers." Thiel's point was that intense competition tends to have two negative side effects for companies: weak growth and margin erosion.

Around the same time as Thiel's quote, W. Chan Kim and Renée Mauborgne wrote Blue Ocean Strategy, which is a book based on a similar premise. Blue Ocean Strategy posits that companies can achieve lasting success, not by battling competitors in crowded markets (“red oceans”), but by seeking out, or creating, uncontested market space (“blue oceans”). In short, you need to find or create a market that has limited competition and a high potential for future growth.

The global professional services industry’s compound annual growth rate (CAGR) over the past decade has consistently been between 4-6%. So, while the consulting market is indeed growing, that growth is roughly inline with the 5.2% annualized nominal U.S. GDP growth over that same period. Fine growth, not amazing.

While the overall industry is growing at 4-6% per year on average, there are consulting subsectors that are growing at much lower or higher rates. For example, in recent years, the CAGR of accounting services has hovered around just 1%. Due to AI automation, the tax accounting subsector, in particular, is projected to contract in the years ahead. On the other end of the spectrum, enterprise AI consulting services are predicted to grow at an astounding 20-30% CAGR over the forward decade.

Arguably the most important component of a sustainable growth engine is the market you choose. You want high growth potential and limited competition. If your market doesn't have those attributes, consider changing markets, creating a new market, or otherwise adjusting the firm's messaging and delivery focus.

A Rising Tide Lifts All Boats

The legendary investor Warren Buffett has often commented that "a rising tide lifts all boats." Buffett suggests that when a market experiences significant growth, all of the providers in that market tend to benefit.

As an example, in the early days of the Internet, essentially all website development firms experienced impressive growth, including firms with subpar capabilities. There was such intense demand for websites, any services firm that could build one was able to rapidly grow.

So, in addition to wanting a blue ocean (limited competitors), you want a tide that is quickly rising (or soon will). This can be difficult to achieve, but it is not impossible. Sometimes this requires specialization on a particular horizontal or vertical niche within your broader market.

Service a High-Growth and High-Margin Market

Leaders of professional services firms often do not realize how closely their firm's performance is correlated to the performance of their clients. The easiest way to build a high-performance firm is to focus on markets and clients that have exceptional growth and profitability.

Focusing on clients with phenomenal businesses has numerous benefits, including:

• Less Price Sensitivity: The attention will be on the quality and speed of delivery - not on the price.
• Better Billable Utilization: Projects tend to be larger which leads to consistently higher utilization and margin.
• Additional Engagements: Much more likely to produce follow-on projects.
• Strategic Partnership: Your firm will have a seat at the table and a more meaningful overall impact.
• Improved Cash Flow: Healthy clients pay quickly and almost never default.

One of the better ways to attract high-growth and high-margin clients is to focus on a vertical industry. For example, you might tailor your service offering to a high-growth area such as private credit (within finance) or biotech (within healthcare). You then produce thought leadership artifacts that connect the dots between that vertical and your solution area. Additionally, you customize the service offering to address the specific needs and pain points of the companies in the vertical.

Position as the Leader

Regardless of the size and maturity of your market, you want to be perceived as the leader. Leaders of a market enjoy several benefits, including:

• Greater lead volume: Leaders may not win every deal, but they are usually "in" every significant deal.
• Brand recognition and trust: Leaders are known to prospects and do not have to spend time proving themselves.
• Pricing power: Leaders are able to command higher bill rates or higher fixed fee pricing. This drives greater revenue and gross margin.
• Recruiting and retention: The best candidates want to work for the leader.
• M&A opportunities: Leaders find it easier to engage on either the buy-side or sell-side of business transactions.

To be considered the leader in a market, it takes more than just stating that you are the leader. You need to provide impactful thought leadership (not just fluff) related to the solution you deliver and the market you are serving. That thought leadership may be in the form of website content, blog posts, videos, webinars, white papers, and the like.

If you aren't a leader of your market today, you need an honest assessment of your potential to become a leader. If that isn't likely (e.g. there are strong, tenured leaders already), you should consider switching markets or creating a new market altogether.

Moving to a new market does not necessarily mean changing the types of services your firm delivers. There are less risky paths to becoming a leader. You can often become a market leader by:

• Defining a new take on the original market. Ideally the new framing is perceived as more strategic and higher value.
• Narrowing the service offering to a strategic subset that is in high demand.
• Narrowing the industry focus to a specific vertical market such as banking, real estate, healthcare, etc.

Keep in mind that if your market selection proves fruitful, competition will soon follow. The natural dynamics of capitalism ensure that competitors will pursue financial rewards. It is vital that you solidify your firm as the leader of your new market before the fast-followers arrive on the scene.

It is almost always better to be a leader of a smaller, niche market than to be a lookalike vendor in a large market.‍

General Best Practices

While many firms immediately jump to building out GTM motions and channels, it is important to first establish some best practices.

Regularly Sharpen Your Message

Periodically, it’s worth asking, “Are we still communicating clearly who we help, what we solve, and why we’re the best option?” Firms change over time and it is not uncommon for the public messaging of the firm to become stale and outdated. It is important to periodically assess and sharpen the firm's messaging.

If your firm is selling “Strategy Consulting” to Fortune 500 companies, you're in a crowded arena. The more specific you can be about your audience and your value, the easier it is to attract aligned clients and avoid chasing the wrong ones.

✅ Broad Messaging: “We help companies grow.”

✅ Sharp Messaging: “We help B2B SaaS companies go from MVP (minimum viable product) to $10M ARR (annually recurring revenue) by refining their go-to-market strategy.”

Sharp messaging drives quality leads, builds trust, improves referrals, and supports pricing power.

💡 Internal check-in: can your ideal client peruse your website and immediately say, “This is exactly what we need!”?

If not, it may be time to revisit and sharpen your messaging, especially if your firm has evolved in capability or size since you first defined that messaging.

Test and Reconnect with the Market

All firms benefit from market feedback loops. Your services may be valued by many of your legacy clients, but are you aligned with the needs and pain points of current ICP prospects?

Here are simple ways to find out without spinning up major research efforts:

• Ask new prospects: “What’s the biggest pain point you’re facing right now?”
• Provide existing clients with a survey to better understand both their satisfaction level and business needs.
• Run a short LinkedIn poll to capture feedback and spark relevant discussions.
• Revisit past sales calls and proposal feedback to extract pain points and gaps.
• Stay close to niche communities including local meetups, Reddit, Slack, LinkedIn groups, or peer masterminds.

Feedback not only validates demand, it fuels better messaging and stronger offers.

Don’t Overbuild, Stay Lean and Focused

Consulting firms can grow bloated, with too many offers, custom solutions, internal tools, and layers of complexity. That bloat can make it impossible to achieve sustainable growth. Often the better path to growth and smoother delivery is simplification.

Here are the basics you need in place, regardless of firm size:

• A clear, high-leverage service you can deliver consistently and profitably
• A simple way for people to understand and engage with what you do
• A smooth path from interest to conversation to engagement
• A reliable platform to manage the operation and analyze performance

Efficiency isn’t just operational. It's a strategy.

Nurture Relationships

Whether you're a boutique shop or a large publicly-traded firm, relationships still drive many of your best prospects. While the GTM motions discussed later in this post can certainly produce leads, your existing relationships can often be more productive and efficient.

Your next great client may come from:

• Past projects and long-term client relationships
• Trusted introductions from your network
• Niche communities and industry events
• Strategic partnerships and adjacent service providers

The culture of your firm should be one that nurtures all types of relationships including clients, partners, communities, and networks.

Sell Outcomes, Not Hours

If your proposals are still focused on tasks, line items, and hours, there’s likely room to improve your positioning, pricing, and delivery. Clients are increasingly preferring to pay for outcomes instead of "buckets of hours".

Examples of client outcomes are:

• “Reduce churn by 25% in 90 days”
• “Improve onboarding speed by 3x”
• “Increase qualified lead flow without increasing ad spend”

Clients want solutions to problems. They want to know the amount of money it will take to produce the desired outcome by the specified deadline. Selling outcomes is likely better for your firm in terms of both win percentage and project gross margin. Through leveraging intellectual property and well-defined processes, you can deliver with greater efficiency, quality, and profitability.

Specific Go-To-Market Motions and Channels

Once you have finalized your market and established important best practices, the next step is to experiment with various GTM motions and channels. Not all motions and channels work for all firms. The key is to experiment, gather and analyze results, and then "double down" on those motions and channels that appear to be working well.

✅ GTM Channel: Where and through whom you sell your services such as direct sales, partners, outbound, referrals, paid acquisition, etc.

✅ GTM Motion: How you sell your services through those channels including product-led growth, sales-led, marketing-led, relationship-led, etc.

Nearly all professional services firms leverage GTM motions that are a combination of sales-led, marketing-led, and relationship-led. While the motions are fairly consistent across firms, the channels vary depending on the service offering and market.

To properly evaluate a GTM channel, you need an accurate understanding of the total customer acquisition cost (CAC) of the channel (including labor cost) and the dollar value of the won engagements (bookings) through that channel. You want to evaluate this "bookings-to-CAC" ratio for each channel as well as for the company as a whole.

For example, if you spend $100,000 on GTM (across all channels) in a given month (including salaries, commissions, advertising, etc.) and you have $300,000 in bookings, your bookings-to-CAC ratio is 3:1. A bookings-to-CAC ratio of 3 or higher is generally considered to be strong performance for a professional services firm. It is especially strong if clients tend to become repeat buyers.

It is common for firms to adjust their bookings-to-CAC ratio to account for the average sales cycle of the company. For example, if sales cycles are 60 days on average, your bookings-to-CAC ratio could use the current month's bookings and the CAC from two months ago.

Below are some of the more successful GTM channels for professional services firms.

Referrals (Word of Mouth)

Client referrals are one of the most powerful GTM channels for professional services firms because they compound trust, reduce selling friction, and improve economics across the board. When an existing client vouches for your firm and puts their reputation on the line, it speaks volumes.

Referrals are powerful because:

• Trust is transferred and pre-established
• Conversion rate improves
• Sales cycles are compressed
• CAC is reduced
• Prospects are more likely to be a good fit
• You'll have better pricing power
• Referrals compound over time

Strategic Partnerships

The two most common partnerships for professional services firms are technology partners and complementary partners.

• Technology Partners: These are often independent software vendors (ISVs) who are focused on selling their software but need partners to implement that software.
• Complementary Partners: These are often companies that provide adjacent products or services to your firm's offering. These partners aren't competitive and each side of the partnership can help the other side succeed.

Account-Based Marketing (ABM)

If your typical client is a large company (e.g. Global 2000) and your average engagement size is also large (e.g. $500,000 or more), ABM can work well because any client win can produce enough revenue to justify the ABM spend.

ABM allows you to target paid advertising to specific individuals, job titles, and functions within a large company. You can even customize the messaging based on the role of the individual. This type of advertising can work extremely well when companies are in a buying cycle for the services that your firm delivers.

With ABM, you are targeting specific, named accounts. This is the opposite of a "spray and pray" approach that you might leverage with paid search.

Local Events

Hosting local events that include both existing clients and prospects can be an excellent way to generate leads right in your back yard. The common approach is to host a small group (e.g. 30 or fewer people) at a high-end restaurant. Your firm should present on a topic of interest to the audience and then ideally have an existing client speak to their experience of working with your firm.

Clients speaking about the value they receive by working with your firm resonates extremely well with prospects.

Website Content

Producing high-value website content for your market is one of the best ways to generate inbound leads through search engines or AI LLMs (large language models). Content types often include:

• General content (such as service descriptions)
• Blogs
• Client testimonials
• Whitepapers
• Webinars
• How-To Videos

Social Media

Depending on the type of services firm and its market, social media can be a good way to reach potential clients. The most common social media platforms for consulting firms are:

• LinkedIn (by far the most important)
• Twitter / X
• Youtube (for video content)
• Reddit
• Facebook
• Instagram

Paid Ads

While paid advertising must be carefully managed (because the spend can easily get out of control), the channel can certainly drive high-value leads that are "in market". Paid ads are most effective when you are targeting a narrow audience and the ad platform allows you to tightly define your audience. The most common types of paid ads leveraged by professional services firms are:

• Google Search
• Bing Search
• Reddit
• LinkedIn
• Youtube (pre-roll video ads)
• Facebook
• Instagram

Outbound Prospecting

While outbound has become less effective in recent years, it can still work with the right message. Most outbound involves some combination of cold calling, emailing, and engagement on LinkedIn.

The key with outbound is to provide something interesting and of value to the recipient. The days of the "can we meet for a virtual coffee" are over. To get a prospect to respond to outbound engagement these days, it takes high-impact and personalized content.

Nurture Campaigns

Most prospects you come across will not be in a buying cycle. Your job is to periodically touch base such that your firm is "front of mind" when they do enter a buying cycle. This is most easily handled through an email nurture campaign where the prospect gets an email update roughly once per quarter.

National Conferences and Trade Shows

Depending on your area of specialization, participating in a national conference that is attended by your ICP buyers can yield high-quality leads. These types of conferences are especially beneficial if you are sponsoring (e.g. have a booth), speaking, or hosting roundtable discussions.

The large conferences are typically multi-day and have various after-hours networking events that are more casual. Those after-hours events can be just as effective from a lead generation perspective.

Final Thoughts

Building a sustainable growth engine for your professional services firm should include:

1. Defining success
2. Selecting or creating your market
3. Crafting your leadership position within that market
4. Adopting common best practices
5. Evaluating GTM motions and channels
6. Doubling down on the motions and channels that work

Applying meaningful effort to each of those steps is required in order to drive results.

Refine your messaging. Engage with your market. Build better habits around how you sell, deliver, and communicate.

That's how you build a sustainable growth engine.

📘 Want to dig deeper?

👉 Grab a coffee and dive into our free guide for operating a consulting firm: The Compass eBook

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