While there are several levers for bringing more revenue to the bottom line (and some will depend on your specific firm’s nuances), this article offers four broad strategies and then drills down with specific tips and examples that can enhance your firm's profitability at any stage and in any economy. These tips call for a blend of precise financial planning for smart allocation of resources, forthright communication to your clients to hold current revenue and minimize discounting, strategic pricing to balance market demand with revenue goals, and cost-efficiency measures that don’t handcuff innovation.
1. Strategic Financial Planning: Your Compass. Understanding your firm’s financial posture isn’t rocket science, but operationalizing the insights requires the discipline of regular attention to pivot at plateaus or upon receiving new information along with a bias towards smaller and faster changes (instead of wholesale and sluggish improvements). It’s easy to agree on the importance of clear financial visibility and allocating resources effectively, but the devil is in the execution – real and lasting change sprouts from incremental, data-driven adjustments that sidestep the traps of tradition and internal politics.
Start with the fundamentals—your revenue and expenses—but don’t just observe; analyze to identify which practices yield the best results and which are merely legacies of “the way we’ve always done it.” Your financial strategy should act as your firm’s compass, not just a retrospective ledger. By basing your decisions on data (not just gut feeling or past patterns), you navigate away from the well-worn path that leads to mediocrity. Focus on the micro-adjustments that can be made today, and the compound effect will steer your firm toward sustainable profitability and away from the icebergs of economic uncertainty. So how can you get started?
- Implement Rolling Forecasts: (1) Adaptive Staffing: Adjust your staffing model quarterly based on projected work volumes and, if work is cyclical or unpredictable, create a flexible staffing model to supplement your core workforce. (2) Flexible Marketing Budgets: Marketing for professional services often takes shape in the form of thought leadership, so earmark funds for market research and client feedback initiatives to better align with client needs and market shifts and continually create better and more resonant content and value. (3) Resource Redistribution: Reallocate internal resources dynamically between departments as needed and develop cross-training across departments to better utilize junior professionals with similar skillsets.
- Focus on Value-Driven Budgeting: (1) Invest in Technology: If automation and other tools promise to cut down on manual billing tasks and free up time for client-facing activities (and increase employee satisfaction), it’s a valuable investment. (2) Allocate to Innovation: Dedicate a portion of your budget to developing new service offerings or rearticulating your current offerings when analysis shows a market gap, ensuring future revenue streams. (3) Prioritize High-Margin Services: Analyze your service offerings to identify those with the highest profit margins and allocate more resources to highlighting your distinct advantage in these areas. At the same time, regularly assess your portfolio of services to retire those that are no longer profitable or in demand, and reallocate resources to emerging opportunities instead.
2. Clear Communication: Keeping Clients and Minimizing Write-Offs. Effective communication with clients transcends politeness—it’s how you safeguard profitability. Clients are increasingly demanding more value, and establishing an open dialogue from the get-go can help circumvent the profit-draining pitfalls of misunderstandings, scope creep, and write-offs.
Initiate a robust intake process that anchors expectations in reality, and encourage ongoing conversations about budget and project scope that evolve as clearly as the projects themselves. These regular checkpoints ensure alignment, driving both parties forward on the same financial and strategic track.
When it comes to billing, don’t just send an invoice; narrate the value you’ve delivered through a story of unmistakable value and quality. If complexities bubble up—and they will—tackle them head-on with the client. Collaborative recalibration of budgets and timelines not only demonstrates flexibility but also cements your role as a trusted advisor. Specific tips that help with getting started include:
- Set Your Firm’s Communication Standards: (1) Response Policy: Implement policies for how and when you expect professionals to respond to client communications, ensuring consistent respect for your clients’ sense of urgency and fostering a reputation for reliability. (2) Standard Project Updates: Create standard operating procedures for project updates and modify them to fit individual projects’ needs, such as weekly summary emails or bi-weekly calls, to ensure consistent touchpoints that clients can expect and rely on. (3) Structured Scenario Templates: Develop templates for common communication scenarios, like project kick-offs or status updates, ensuring everyone knows what “good” looks like while leaving room for project-specific details.
- Develop a Communication Training Program: (1) Active Listening Skills: Conduct workshops on active listening and clear articulation, so your team can better understand client needs and express solutions effectively. (2) Challenging Conversation Bootcamp: Role-play exercises that simulate challenging client conversations, helping your team to practice navigating difficult discussions regarding budget adjustments, timeline shifts, or requests to write off time. (3) Best Practices Examples: Provide best-practice guidelines for written communications (e.g., emphasizing brevity, clarity, and tone), time entry (e.g., demonstrating clear value received), and other important communications.
- Craft Tailored Client Communications: (1) Targeted Advice: Give lean and purposeful advice, centering on what the client needs to know to make informed decisions without overwhelming them with every possible contingency. If necessary, succinctly highlight what hasn’t been covered, ensuring the client is aware without burdening them with the weight of exhaustive details. (2) Customized Details: Modulate the level of detail according to the client’s experience and familiarity with the subject. For novices, provide comprehensive explanations to guide their decision-making. For veterans, cut straight to the advanced insights, respecting their time and knowledge. (3) More Relevant Updates: Instead of generic marketing updates that highlight your firm’s prowess more than your clients’ issues, tailor updates to include a pragmatic note on how to integrate this new information into their operations. Even better, offer to discuss these updates in a phone call, adding a personal touch that can facilitate immediate clarification and deeper advisory.
3. Pricing: Simplicity and Profitability Combined. Setting the right price is, of course, a potent driver of profitability. Choose pricing models that are transparent and straightforward, reducing the cognitive load on clients and freeing them from the complexities of managing fine details like how many hours your team is working and what mix of hourly rates they are being charged.
This approach not only enhances the client experience but has the added benefit of providing you with the space to refine your operational efficiencies. By utilizing blended rates or adopting flat-fee structures, for example, you ensure that clients know what to expect financially, allowing you to focus on delivering value more efficiently with lower cost resources, templates and SOPs, or improved service delivery methods. It can be difficult to know how to start on turning the tide on pricing, but you can get started with the following:
- Introduce Pricing Flexibility: (1) Tiered Service Levels: Offer different levels of service (e.g., basic, standard, and premium), each with progressively higher pricing accounting for higher-level strategy moving into execution and enhanced nuance/detail. This caters to different client budgets and needs, while also introducing the concept of price anchoring, where the premium tier makes the standard option appear more cost-effective. (2) Menu-Based Pricing: Depending on your offerings, you could provide a menu of services with individual prices, allowing clients to choose and pay for exactly what they need (e.g., a marketing agency could include items ranging from a full-scale campaign to individual services like market analysis or ad design). (3) Project-Based Pricing Ranges: Your firm can offer project-based pricing with a range, where the final cost depends on the project outcomes and client satisfaction, allowing for flexibility and performance-based compensation.
- Align Price with Value: (1) Outcome-Based Pricing: Consider moving away from hourly billing to a fixed fee with a bonus structure for favorable outcomes, or a lower hourly rate with that same bonus structure, aligning the client’s success with your own. (2) Retainer for Ongoing Value: Offer simple but continuous service that offloads “your mess for les” and puts you in a position to handle event-driven work as it arises without the need to get up to speed (e.g., IT firms can provide system updates and cybersecurity services, while employment lawyers can ensure clients are continually up to date with the latest laws and practices). (3) Post-Service Value Assessment: Invite clients to reflect on the tangible outcomes of your work, and use that feedback to ensure your pricing aligns with the impact and satisfaction experienced to modify your fees and services accordingly over time with that same client and others.
- Test New Pricing Models: (1) Pilot Program: Before overhauling your pricing structure, select a few loyal clients to trial a new pricing models (e.g., new flat-rate pricing), collecting detailed feedback before deciding on a full-scale implementation. (2) Market Research: Use market research to assess client reaction to new pricing (e.g., a subscription-based model for ongoing service), comparing it to your traditional per-service pricing.
4. Cost-Efficiency: Pruning for Growth. Cost efficiency isn’t short-term cost cutting, it’s directing your investment to its highest use, meaning ensuring your resources are fueling high-impact growth areas. Importantly, it is more than the allocation of dollars and includes your teams’ time and priorities; after all, there are only so many hours in a day and priorities on which any one person can focus. Whether it’s leveraging automation to streamline workflows, negotiating more favorable terms with suppliers, or reimagining your workforce to be more versatile, the goal remains constant — to redirect every saved dollar into initiatives that propel your business forward instead of weighing it down or distracting your talent. Some concrete ways you can think about how you’re allocating spend include:
- Flexible Workforce: (1) Fractional Help: Engage industry veterans on a part-time basis for their expertise in high-level strategy or specialized areas. For instance, hire a fractional CFO to optimize financial strategy without the overhead of a full-time executive. (2) Outsourcing Non-Core Functions: Partner with external agencies for tasks like social media management or customer service. This leverages expert efficiency while freeing your team to focus on core business functions. (3) Lower-Cost Talent Options: Tap into global talent pools by hiring remote professionals in regions with lower living costs. Utilize platforms that connect firms with skilled talent for project-based work, providing the same quality of service at a fraction of the price.
- Smaller Physical Space & Culture: (1) Hot-Desking Environments: Focus more on service than square footage and implement hot-desking with great amenities to encourage team members to come together for collaborative work while also respecting the trend towards remote work. (2) Community Building Initiatives: Instead of relying on a physical office, invest in regular team-building retreats or off-site workshops that nurture company culture and promote cohesion among team members in more intentional ways. (3) Virtual Collaboration Tools: Use virtual collaboration tools to maintain team dynamics and culture. These tools can host everything from project hubs to virtual water coolers, ensuring that team spirit thrives regardless of physical distance.
- Better Marketing Spend: (1) Content Marketing: Invest in creating high-quality content that positions your firm as a thought leader, which is more cost-effective and impactful than traditional advertising, as well as adds value to your prospects. (2) Focused Events: Spend in-person time with prospects or clients one-on-one, hosting salon dinners focused on industry or function (e.g., CFOs, healthcare, etc.), or creating your own firm’s panels and cocktail events instead of big box conferences where you’re more likely to meet your competition than your prospects simply because “you’ve always attended.”
Conclusion
As we steer through yet another unpredictable year, anchoring your business with sound profitability strategies is more crucial than ever. And franly, no matter the economy, it’s always the right time to do the right thing.
To understand how the above strategies can be customized to your business, or to discuss the issues you're seeing in your firm that are pushing on profitability, feel free to reach out to Maior. We specialize in combining best practices with each firm's unique culture for sustainable solutions that fortify our clients against uncertainty and prime them for growth.
