Services firms: 5 lessons in profitable agility from startups

Successful startups share winning traits that project-based businesses of all sizes can learn from to drive more revenue with less overhead. Mark Gandy, consultant and founder of Free Agent CFO™, and Vinita Venkatesh, VP Product Marketing at Replicon, recently explored these in a webinar titled Achieve Profitable, Agile Services Growth.

Check out their five key takeaways on supercharging growth while remaining profitable in the professional services space:

1. Services businesses of all sizes have much to learn from startups

Startups, especially in the tech industry, are known for their dynamic and innovative approaches to growth. In this high-risk/high-reward pursuit of becoming the “Next Big Thing”, winning market share from competitors is a life-or-death challenge, made more difficult thanks to modern trends like pickier customers, deskless workers, and shrinking margins across the board.

The startups that beat the odds and become established brands serve as excellent case studies for larger businesses who must also cope with similar economic forces. It’s common knowledge that IT companies such as Google and Microsoft watch these success stories closely and will imitate or even outright buy those who use the ideas they need to stay competitive. This mentality is spreading beyond tech, so decision-makers in other industries would be wise to become more agile before they find themselves left in the dust.

2. Create more A-players by coaching your B-players

A major hurdle faced by startups and big companies alike is acquiring and retaining the best talent. Often referred to as “A-players,” these individuals usually know that they’re A-players and require a level of compensation and career prestige that can be difficult or impossible to provide. Startups certainly don’t have the money or brand-power to hire them, so they focus instead on developing what they can get: the B-players, who are great workers that want to be the best — they just need some help to get there.

Unless you’re a shiny brand like McKinsey or BCG, you probably have fewer A-players than you’d like. Consider how you can better measure your workforce to identify those who show the most promise. Once you find your best B-players, invest in coaching them to improve their performance and reap the resulting gains in productivity.

3. Move fast by avoiding the “B” word

Bureaucracy. Viewed as a necessary evil by some and productivity-poison by others, it’s a fact of life for those in large companies with complex workflows and hierarchies. Startups, on the other hand, minimize bureaucracy and focus instead on speed of execution while accepting the risks that come with that approach. This gives them a huge edge in the market, as it enables a volume of experimentation and learning that established industry players cannot hope to reach.

In practice, what this means is big companies get stuck executing only those plans that worked in the past. This results in a lack of differentiation — a “me-too” service — where the margins and cash flow are slim. To reverse this, leadership must look for ways to improve communication across the organization, replace manual processes with automated ones where possible, and accept that the price of innovation is an occasional failure.
And if you think your services are too antiquated to transform, Mark suggests taking a look at the work of Arlen Music Productions in Chicago, who developed an innovative process to delight customers in an industry many thought to be commoditized.

4. Plan for profitability and deliver on your plans

To plan for profitability, it’s critical to understand what actually affects your bottom line and measure those things as granularly as you can. These are table stakes for startups but often ignored by those with triple-digit headcounts. Consider what metrics can tell you who your best and worst clients are and prune those who are hurting you more than helping. Likewise, granular metrics should be used to better inform your pricing strategy, overhead, and understanding of how well you are performing against yourself (historically) and others (benchmarks).

Delivering on your plans is all about matching your capabilities to customer needs. Track these if you are not already. Place your hand-off processes under a microscope and look for communication gaps or friction between Sales, PM, and Clients. If you are capturing details sufficiently well, you should be able to identify how each resource is performing (e.g. individual Project Managers) and be able to take action in real time when needed.

5. Culture is key to operational excellence

The efficiency necessary to grow profitably is not the result of a one-time initiative: it’s a culture. Culture starts from the top, so it’s important for senior leadership to commit to long-term change from the outset and to adopt a spirit of continuous improvement. This means building measurement into your processes.

Mark suggests his clients perform a post-mortem on every single client engagement. There is always room to improve somewhere. Waste can never be eliminated, but it can be minimized over time as long as your business is fully bought into an agile mindset. Move fast and either succeed or learn from your mistakes. Just keep moving.

Want more detail? Find the entirety of the Achieve Profitable, Agile Services Growth webinar here.

Sam Arnold
ABOUT THE AUTHOR
Sam Arnold
Sam does marketing at Replicon. You know about Replicon, right? It's the company that provides award-winning products that make it easy to manage your workforce.
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