The Point: Business Development is the lifeblood of any organization. If nothing happens in business until you sell something, then no sale is made until you develop some business! But at a professional service firm, what role does leadership play in Business Development? In this post, we’ll explore professional service firm leadership and their role in Business Development… Enjoy!
Why are You in Business?
“We’re in business to make money” a Professional Service Firm Leader exclaimed during our initial acquisition interview. The question that prompted this answer was a nice, slow, softball right down the middle of the plate for him, namely “Tell us about your business?” A simple question… An even simpler answer!
Most businesses, especially professional service firms are in business to make money. While there may be those nonprofits that are in business to assist customers to “Never Stop Exploring” or some other tagline, the vast majority are in the business of business to make money and return/create value for their owners. Along those lines, the topic of Business Development should be considered the “lifeblood” of any professional services firm (or any organization that sells anything for that matter!)
During the acquisition due diligence phase, we’ve seen the effect of poor Business Development during the most recent pandemic. Businesses that we looked at acquiring at my Private Equity firm shared financial information reflecting decreases in revenue of 20% to 50%, and we’ve heard horror stories of those that have fallen significantly worse! A business’ health and sustainability can be directly measured by the revenue they produce. If revenues drop faster than expenses or are off-pace, this poor health indicator could eventually lead to the death of the organization (i.e., a road to bankruptcy or sale – Cutting expenses can only go so far and typically are not a way to grow a business).
So, the simple question that started off our acquisition interview has a complex underpinning to it, especially when you consider the role of the professional service firm’s leadership!
Leadership’s Role in Business Development
Leadership’s role in driving Business Development at a professional services firm (Accounting, Architecture, Law, etc.) can be seen as a fairly simple initiative — Creating a Sales Strategic Plan, implementing a Business Development Model, and proper Prospect Identification are key aspects that we look to identify in those acquisition interviews. These topics will form the basis of this four (4) part series.
It’s important to keep in mind that Business Development starts with leadership at the professional services firm (Firm leaders, practice leaders, and niche leaders). In conducting acquisition interviews, I’ve seen it play out at far too many firms where leadership rejects the premise and therefore communicates the boomerang-expectation that business development is something that only “rainmakers” can be successful doing. In other words, someone other than themselves. These firm leaders accept the idea that most partners are not capable of Business Development and should therefore focus their efforts/energies on their subject matter expertise (SME) – Accounting, architecture, law, etc. However, in following their SME path of getting the work out the door and letting the rainmakers drive new clients and organic growth, there is a dichotomy that presents itself. Viewing the firms’ revenue in this way results in a sort of bilateral view — rainmakers bring in new clients and the rest of the partners’ service clients. Carrying this further, since firm leadership has no expectation of Business Development from most partners, there is no training or coaching and especially no need for accountability. So, Is there any wonder that so many professional service firms struggle with achieving significant growth year over year?
We Have a Plan…
“Yes, of course we have a Business Development plan… It’s just different from the one you may have been told exists” a Professional Service Firm Leader shared with us during our acquisition interview. Upon further review, I found that the plan that existed on paper was rarely, if ever, followed. This inconsistency led to poor results in Business Development, and overall firm financial figures being reported. I’m often puzzled why leaders believe that we will not “see” something as being off or different when they give us this contrarian perspective. Afterall, it’s not that these firms are large enough to hide these individuals or their erratic performance.
Sales Strategic Planning
If the adage, “Nothing happens until you sell something” holds true (and why shouldn’t it, even at a professional services firm?), then what are the major actions leadership needs to take in order to drive significant growth year over year and build a successful business development structure? From a high-level perspective, the following three (3) actions should be incorporated in a Sales Strategic Planning document annually:
Professional Service Firm leaders need to clearly communicate that it is every partner’s responsibility to be successful at Business Development and drive top-line revenue for growth. Business Development goals need to be established for every partner — goals that are stretch goals and that take into account each partner’s strengths and weaknesses. The issue here is not to give every partner the same revenue goal, but to give every partner a revenue goal for them to hit individually. These individual goals should roll-up into the stated goal for the overall firm.
Training and Coaching
Just like any sports team, there is a range of ability from the superstar to the team members who just make-up the team. To carry-on with the sports analogy, the coaches must understand the span of abilities that exist amongst the individual team members and as well as the responsibility to ensure that every member of the team improves their abilities each day (This is what practice is for!) It’s no different with a Professional Service Firm. Firm leadership must ensure that there is a strong training and coaching model in place to provide continuous improvement to the entire partner group as it relates to their Business Development abilities.
For the above two steps (Expectations + Training and Coaching) to achieve the overall goal of driving revenue and successful Business Development, there needs to be an effective accountability model in place. Every partner has to be held accountable for their individual performance against the goals established for them. Accountability needs to be focused on helping each partner achieve greater levels of performance, versus laying blame for not achieving their goals. Accountability needs to be established with a carrot and stick methodology… There is motivation and training tools that act as the carrot, not as a Billy club acting as the stick in the event goals are not achieved. Accountability is a key ingredient necessary to drive every partner’s success in Business Development. Lastly, Professional Service Firm leadership should be held accountable for creating and implementing a successful Business Development model throughout the firm.
Leave the Networking to Leadership
“It’s the expectation that every leader in our Professional Services Firm network to increase our client base” I was told during an acquisition interview by our prospective organization’s Managing Director. If it was clear to him, it apparently wasn’t too clear to everyone else at the leadership level or beyond (Sales year over year were down a whopping 50%!)
A Business Development Model
Let’s look at the three major stages of an effective Business Development model:
Building a Network
Business Development starts with each Professional Service Firm Leader building their own network of contacts that are in a position to create an opportunity for the firm. This is the single most challenging piece of the Business Development strategy, and one that generates the most fear and concern for most partners. The bottom line is that most partners are just not comfortable going into an industry conference or local business association meeting and making contacts that matter. Professional Service Firm Leaders need to understand this and build training and coaching programs that will help each partner learn and become comfortable with building their network. There is no one approach to successful networking, and each partner needs to develop a process that works for them.
The value of a personal network is in the potential opportunities for new clients. A major mistake that many partners make is thinking any contact is a good contact. This strategy is based on “hopes” and “wishes,” not on strategic decisions. Unless the contact is a decision maker at a potential client, or the contact is a key influencer with access to target clients, the contact has limited value in terms of the potential for opportunities to be created. Turning a contact into a valuable contact is a critical process that includes training, mentoring and a defined plan of action. Most critical in this process is the contact must be able to build trust in the partner.
Closing the Sale
All the best networking and opportunity creating activities results in little/nothing if the sales closed percentage is low or not where it should be according to the goals established for the partner/firm. So, what percentage will you set? Too low and you can modify higher. These adjustments are important because you have to start with something stated. It’s only based on the autopsy of either business won or lost that you can identify not only the proper percentage to target, but what activities you should train/monitor for successful Business Development.
Of Course We’re Driven to Acquire New Clients
“Of course we’re driven to acquire new clients. At this Professional Services Firm each of the partners take growth very seriously!” a leader at the firm shared with us during our acquisition interview. But where exactly were the firm’s leaders focused on acquiring new clients? After a few additional questions, it became obvious that they were looking at very low-hanging fruit clientele (i.e., those that were extremely easy to acquire!)
Who are Your Prospects?
There are three types of prospective clients to be taken into consideration for your Sales Strategic Plan as part of your Business Development efforts for the Professional Service Firm, Price-driven, Relationship-driven, and Value-driven. Let’s review each in more detail.
This type of prospect is only interested in the price, and from their perspective the lowest price. If that is the type of prospect you want to pursue, your win percent will in all likelihood be low (probably below 30%). Professional Service Firm Leadership caught in identifying Price-driven prospects typically believe that they can secure clients from other Professional Service Firms on price alone (“If we lower the price of our services, we’ll increase our client base). These same leaders tend to believe that once secured, they will be able to sell future services at a significantly higher rate so the overall profit on the client will be acceptable. This rarely happens, as these clients tend to find other low-price firms to do business with.
The Relationship-driven prospect is one who has a direct relationship with a part of your network or was referred by someone who has a good and trusted relationship with the prospect (i.e., they have a relationship with someone/somewhere which is why they’re doing business with your Professional Service Firm). Price may still be a driver for them, but the relationship often trumps price as long as the price is within a reasonable range.
The Value-driven prospect is one where the client agrees to do business with your firm due to the value they derive. Typically referred to as the “gold” standard, they never use price as a factor in selecting the Professional Service Firm, as long as they can see the connection between what your price is and the value that you deliver.
The best client-prospect is the one that is both relationship-driven and value-driven. As the firm or practice leader, you have to create a winning Business Development model that will drive growth every year, with each partner improving their Business Development success every year. For your firm to achieve significant annual growth, the best path is to implement a Business Development model that capitalizes on every partner’s strengths (and limits their weaknesses), sets clear expectations, and holds each partner accountable for results — the results being the actual new clients acquired.
Professional Service Firms struggle to achieve significant growth year over year. Business development in its simplest structure consists of (a) building your network; (b) creating opportunities: and (c) closing the sale. So why is it so difficult for so many professional service firms to consistently drive substantial annual growth? Serving the firm in a role that’s larger than compliance and client service to one where all partners have a responsibility to sell is the purpose of this four (4) part series.
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