Weaknesses may include undifferentiated services that the firm offers in relation to its competitors, previous damage to the firm’s reputation, a historic inability to successfully manage the expectations of the firm’s clients, and lack of experience in particular areas of the firm’s practice.
Opportunities and threats are external factors. Opportunities might
include developing markets that represent potential new clients, strategic
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alliances, new services that offer additional ways for the firm to drive revenue, and areas of the market currently being serviced by a competitor that offers an ineffective or inferior product.
Threats can include new competition within the firm’s market, new and innovative services offered by the firm’s competition, successes of the firm’s competition, and superior expertise and experience being offered by the firm’s competition.
Defining the Firm’s Target Market and
Ideal Client
In addition to defining the firm and its capabilities, you can most effectively utilize resources by identifying a specific target market or type of client. The shotgun approach is an inefficient way to develop business and usually results in bad business for both the firm and the client. Defining a focused market and identifying specific clients or industries allows you to focus marketing efforts and better understand prospective clients and their concerns. After identifying the ideal market or clients, the firm will be positioned to efficiently market its services and ensure the efficient use and allocation of your financial and human resources. A common mistake, made particularly by smaller firms, is to attempt to be all things to all clients. Not only does this lead to disappointed clients but also to burned out delivery staff as they move from project to project with very little carryover of knowledge, skills, and intellectual property to help them. A tight focus on a specific, narrow service offering is important for small to mid-sized firms.
When defining the target market, the firm should evaluate the following characteristics:
• Whether the client is an individual or business entity,
• The industry in which the ideal client does business,
• The annual revenue (or other measure of size) of the ideal client,
• The geographic location of the ideal client,
• The number of employees, and
• Whether the ideal client is publicly or privately held.
After determining a target market, the firm should focus its efforts on the ideal client based on the analysis. For example, if the best client for the firm is a mid-size manufacturing company, then all marketing efforts should be targeted toward acquiring business from new clients in that industry or market. Putting the firm in front of the target market and developing a reputation within that market will ensure success.
A few years ago, a New York-based law firm specializing in securities compliance found itself assisting several privately held companies with general
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corporate issues. After engaging in this exercise, the firm discovered because of specific expertise that it had developed, that its ideal clients were actually publicly held companies and organizations involved in the securities markets.
The firm then refocused its efforts and was able to increase its client base significantly. Additionally, by focusing on larger companies and well-established securities firms, the firm was able to achieve higher billing rates. Finally, by developing a niche and becoming an expert in its field, the firm soon found itself turning away business to manage its rapid growth. Although this firm’s experience may be exceptional, it is not unique and is a useful example of the value of focus in service offering and target market.
Using Human Resources Efficiently
and Effectively
An important challenge facing professional services firms is the efficient allocation and utilization of its human and financial resources in the pursuit of new business. While the firm may offer an excellent product and exceptional service, if you are unable to market those services and develop a reputation within your target market, your firm will fail to satisfy its potential and may even fail to survive.
As discussed in Chapters 3 and 10, most professional services firms are structured as partnerships or corporate entities with members who serve as decision makers. Therefore, in the spirit of maximizing the return on human and financial capital, it is not surprising that most professional services firms use their partners/members and employees to market the firm and develop business.
The Partner Model
There are numerous techniques and models used by professional services firms to market themselves and develop business. However, using the firm’s personnel—the partner model—is by far the most common method employed by small and mid-sized firms.
ADVANTAGES AND DISADVANTAGES OF THE PARTNER MODEL.
There
are numerous advantages of the partner model. Some of them include:
• Professionals are often motivated by monetary gains and personal grat-ification to successfully market the firm. Using the firm’s personnel ensures that financial and personal interests are aligned. The synergy of aligning financial and personal interests is a powerful motivating factor.
This is important because developing business is difficult and requires a
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great deal of hard work, dedication, and comfort with rejection. Aligning firm and personal interests increases the chances of success.
• The professionals within the firm are well positioned to understand the product and speak knowledgably about it. While it is possible to educate a professional salesforce or marketing firm about the firm’s services and attributes, it is expensive and, if not managed appropriately, can be less productive than the partner model. Further, it is a powerful message for clients to realize that the firm’s personnel are personally dedicated to the firm and its success.
• By utilizing the firm’s partners and members, the firm preserves its financial resources. While the firm potentially loses revenue through the loss of billable time, it is able to preserve its financial resources that would otherwise be spent on outside services or a dedicated sales team.
• The relationships developed during the marketing process are the same relationships that continue during the firm’s work with its clients. An important determinant of professional services firms’ success is their client relationships; this is an important characteristic of the partner model. The sales approach is grounded in the concept of establishing relationships rather than selling services. It is important to establish a strong bond with your clients from the start.
The partner model, while relatively efficient and appropriate for small-and some mid-sized firms, is not without its disadvantages:
• When using firm partners or professional staff to drive business, ensuring the efficient allocation of resources is critical. Typically, as firms grow and the number of clients increase, management is faced with the decision of offering additional services to leverage existing clients while continuing to develop new business. It is difficult to quantify but it is much easier to expand on an existing relationship than to develop new ones. Exhibit 5.1 illustrates the issues surrounding allocation of resources as the firm continues to grow and increase its client base.
The most efficient use of human and financial resources is traditionally found along the slope of the line. As a firm grows at some point management will be faced with the opportunity to develop additional
services through leveraging its existing client relationships. As a general rule, professional services firms should, as they increase in size and client base, begin to offer additional services (as opposed to adding new
clients) as a means of securing efficient growth.
The small firm, including the traditional litigation boutique, is
represented by Firm X. Exhibit 5.1 shows that Firm X has relatively
few professionals as compared to its larger competitors and that it is offering only one or two primary services. However, within its target
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Y
Z
Number of professionals
X
Number of services
Exhibit 5.1
Firm Resource Allocation over Time
market, Firm X is specifically focused and proficiently services its clients. In fact, by specializing in the services it offers, Firm X, even with its limited human resources, can experience great success. Firm X is also uniquely situated so that it can, as discussed earlier, preserve resources by specifically focusing its marketing and business development efforts.
The mid-size firm, represented by Firm Y, is at a fork in the road.
Firm Y must determine whether to offer new services to existing
clients as a means of increasing its revenue or focus its resources on developing new clients. Firm Y may be able to expand on its existing relationships by offering additional services more efficiently than developing new client relationships. If Firm Y offers additional services to existing clients, it can increase revenue without being forced to expend the human and financial resources to develop new clients. Fi-
nancial modeling, which is discussed in Chapter 15, is critical when determining whether to expand your human capital and increase your
financial obligations.
There are, however, always exceptions to the rule. For example, a
specialized commercial litigation firm, which is represented by point Z
on the exhibit. As a general rule, Firm Z should offer additional services to its existing clients to maximize its efficiencies and capitalize on its human resources. However, this is where pragmatism and theory diverge because Firm Z is, with its numerous attorneys, focused solely on