How good are fee earning firms at generating fees?
I benchmarked how good fee earning firms are at earning fees – here’s what I learnt.
After spending 20+ years in business development, in & around professional service firms - I couldn't find any research (formal or informal) on what 'good fee earning capability' looks like. So I thought I'd do it.
This article is about the research I did, and what I found out.
So far, I've interviewed an average of four firms per month, every month, for 12 months. I talked to a mix of law, accountancy, consultancy and IT firms and creative agencies. I talked to the leadership teams and the fee earners.
I also interviewed the experts who influence fee earning capability in a services firm - the marketers, the business developers, the finance teams - but more on that, and why that matters, later.
I found that fee earner/professional service based firms, regardless of sector, have remarkably similar problems when it comes to business development.
Firms were kind enough to be really open about how good they were at lead generation (which isn't entirely the same thing as marketing), selling (yes, even lawyers sell), and helping clients to leverage their firm’s expertise (cross selling, up selling).
This is the aggregate view of the average professional service firm's capability to generate fees:
What this table means:
Lead - most firms don't have a good enough lead generation plan (or they pretend that a generic, vague marketing plan will do the job). They don't feel confident they have the right people or skills in place (either in house or external). Whilst they get some new leads in, they are always looking for a slightly better method, but rarely track the quality of the results they get.
Sales - professional services firms often refuse to have a written sales plan/method. They view themselves as having 'sort of OK' sales skills, yet have never trained, mentored or supported a sales culture, through process. A few firms track sales win/loss ratios, but usually only for large bids/tenders.
Leverage - with few notable exceptions, the overwhelming majority have no plan, skills, process or even basic measurement relating to cross selling. At all.
Guess what most firms want to fix?
They want to fix the top right box - how they 'do lead generation'.
So they want a slightly better website, a slightly better Google Adwords partner, slightly better emailshot results, slightly more productive events.
In essence, they want to fix the same thing that everyone else is trying to fix. In the same way. And that’s all great. But in the process, they are missing the easy bit…
I mentioned I interviewed the people who influenced fee earning. I wanted to talk to the people who aren't fee earners, but have expertise relevant to generating fees. So I spoke to sales trainers, experts on culture and experts on change implementation. I talked to business development guys at small firms, sales directors for vast multinationals, sector specialist marketing firms and even finance professionals.
I wanted to know: What is the minimum percentage uplift if you get it right?
Here’s what that looks like:
A minimum uplift of 30% in new leads, if you have a clear, focused and measured lead generation plan, executed with the right skills, process & confidence
A minimum of 30% in amount of leads converted into clients, if you have a good plan and you have invested in the right skills, process & confidence (this includes training on pricing work!)
A minimum of 30% improvement in revenue, if you have an effective cross selling plan and you have invested in the right skills, process & confidence.
Well, actually that last one is a bit misleading. Fixing the 'leverage' bit, tends to give a better return than that. Quite a lot better. Loads better.
Here’s the really interesting bit that came from the professionals... In professional services, if a client buys more than one service from you, on average, they stay three times as a long, and spend twice as much.
So, for every 10% of your client base you manage to cross sell, it puts 30% on the top line.
If you cross sell to a third more of your clients than you do today, what does your top line look like?
Scary stuff.
And there’s an old adage – it’s seven times easier to sell to a current client compared to winning a new one. Turns out it’s true…
To summarise:
Most of your competition is doing the same thing you are - looking for a slightly better way of getting new leads. Just to be clear, I'm not saying stop doing lead generation, far from it, but make sure you have a clear context and you measure the results (both quantity and quality). Be aware that lead generation is the hardest and most expensive way to win more work.
Most of your competition is terrible at sales (to clarify - being able to 'take an order' from a client is not the same thing as having sales skills and a process). Being better isn't hard, but it does need investment.
Most of your clients want to buy more services from you. In fact, most of the time, professional services firms are so bad at helping the client get more value (which is what cross selling really is), the client just doesn't get the work done at all. By anyone. The returns on fixing this are vast...
Here’s a few key questions to ask your business:
Are we really clear on who our target market is, and what their client journey could look like, through our firm?
Which sources (referrals, events, SEO etc) gives us the best quality (not just volume) leads?
How many quality leads do we need to hit our 'number' this year? Will the plan support that?
Do we have a written plan for pricing and winning work, or do we just make it up as we go?
Whose job is it to manage the margin?
What are our win/loss ratios?
How many of our clients buy more than one service from us?
What is our plan to change that number?
What is the easiest/fastest/most cost effective way to put 30% on the top line?