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Tuesday, November 03, 2009

I was speaking with a client recently and we were discussing how the business climate seems to be improving.

Budgets are starting to thaw and prospects will at least speak with you... but we both agreed that things are unlikely to go back to "the way it was" anytime soon.

New business in the current climate is best characterised as follows:

1) "Jumping through hoops" - decisions take longer and lower-level investments are attracting higher-level scrutiny.

2) "Show me the money" - ROI is paramount and you need to clearly demonstrate the value you will deliver.

3) "More for less" - clients are re-configuring or watering-down large engagements to mitigate exposure and demand more for their budgets.

Now, whilst none of this may be startling news to any of us running business services firms over the last 12 months, it does throw up an interesting question:

Is this just a passing phase and an example of tactical, survival-based decisions by vendors and clients... or is this "business as usual" for the next few years?

I guess that depends on whether you subscribe to a V-shape recovery or whether you think it's going to be a long slow climb up. If you're in the latter camp, you might see this as an opportunity to re-shape your business to a more sustainable model.

What do I mean by sustainable?

Well, for example, I know of a major consulting firm who, in the last six months, have been over resourcing projects at no cost to the client just to avoid pulling people back to the bench.

This may be a sound short-term tactic to avoid losing talent but it's clearly not sustainable? If business does indeed rapidly bounce back then it could be the right choice since it enables the firm to quickly fulfil demand once the floodgates open.

Otherwise, it's just delaying the inevitable and handing an advantage to leaner competitors who can offer a more sustainable alternative.

Whatever you believe, there's some merit in looking at your current model and thinking in terms of sustainability.

As an example, at Maine Associates, we've always had a shared-risk engagement model, with some fixed fees and some upside. Sustainability for us means delivering new business revenue for clients within a timescale that allows them to continue their investment with us.

In the current climate that's been tough.

The approach we have taken is to re-configure engagements so that they deliver more "quick wins" and shift more of our fee earnings to a % share new business won. This enables clients to both commit to working with us over a longer period (which is necessary to develop a new business pipeline) and generate short-term revenue from our activities.

Crucially, as a model, this is sustainable for both parties.

It's not a short-term deal that we'll whip away when business picks up. If we do get a V-shape recovery and business bounces back then we'll share in our clients' success.

But if it's a long slow recovery, then our model enables both parties to maintain a relationship that's sustainable.


Posted by: David Regler @ 12:41 pm |   | Links to this post  

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