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Timing is the key to high margin work in Management Consulting

February 2013

Professional services firms need more than capability to establish new client relationships, argues Iain MacLeod, Professional Services Director, INCo

For a good while now, the sustained downward pressure on consulting fee rates has been well documented. A trend seems to be developing within a large number of FTSE organisations to prioritise cost over the suitability of the consulting firm to deliver engagements, and as a result the entire provision of consulting services is becoming increasingly commoditised.

Being in the right place at the right time can make all the difference to consulting sales success Being in the right place at the right time can make all the difference to consulting sales success

Over the past few months INCo has been working with a number of consulting clients to devise effective strategies to overcome this particular challenge. Most clients seemed to feel that factors such as success-based fee modelling and the ability to differentiate - in terms of both their organisation and services - from their peer group would have been most important in gaining their highest margin engagements. While this certainly proved true in some instances, the issue of timing has proven to be a third critical factor, and one of much greater import than had been thought.

INCo conducted an exercise with several key clients. A selection of their highest margin deals from the past three years were analysed in some detail, and while elements of the results were unique to each firm and each project, the most common element in all of these deals was the timing of the initial engagement with the prospect. In almost every instance, the firm had been able to engage the prospect early enough in the sales cycle to be able to help guide them in the creation of a solution. As a result, there was evidence of much greater trust from the client side when it came to scoping the eventual engagement.

INCo experience has shown that timing the initial engagement with a potential buyer is hugely important.

Engage too late in the cycle and you are likely to find that you are part of a multi-firm beauty parade where price is often the most important differentiator. Equally, if you invest too much resource in maintaining contact and relationships with prospects until they are in the perfect position, the overall cost of sale becomes too large to sustain. Even an engagement that looks like it is delivering suitable margins is actually less profitable than it might have been.

Using a specialist firm like INCo is an important option in building a sales pipeline. INCo can be used to establish contact, build brand and capability awareness and then nurture C-Suite relationships until the timing is right for partner engagement. In this way, consulting firms can take maximum advantage of client timing whilst simultaneously freeing up high-fee earner resource for other activity.