Climbing Mount Audacity

04: Professional service firms: six unique characteristics

professional service firms their unique characteristics image

Professional services defined - It’s all about people - Clients rule! - Leadership quality - The marketing challenge - The selling challenge - The Art of Pricing

As you may have pre-read in an earlier blog, Method Grid was originally conceived and developed for professional service firms as the core user base. This blog series (Climbing Mount Audacity), similarly, aims to impart advice and practical tips to all leaders seeking to build “an awesome professional service firm (whilst enjoying the journey en route!)”. As such, before I go much further – and really get into the guts of all of this – it is incumbent on me to explain what I mean by professional services – and – the unique characteristics and challenges of such businesses.

The professional service firms definition is, necessarily, broad and covers a wide range of actual technical expertise/service – from business consulting, accountancy, architecture, financial services, advertising, legal, web design, engineering, recruitment, marketing, public relations, research, IT, training and development … you get the drift. As a general rule of thumb if you harness the talents of skilled, knowledgeable staff to provide expertise, advice and/or services to other businesses then you fit this category descriptive.

First things first. If you are a involved in the leadership of a professional service firm – and are seeking to build additional future value in such a company – it is critical that you acknowledge the unique entrepreneurial characteristics of such ventures. By doing so you will, in turn, start to understand where success lies – and what separates the great firms from the mediocre masses.

Professional Service Firms – six unique characteristics

To that end, let me describe six unique characteristics of professional service firms …

  1. People-based
    Suffice to say – if it were not immediately obvious to you – professional services businesses are fundamentally about people. As such, they need to be managed to attract, develop and retain the best staff, and associate team, you can find. The development of high-performing teams working to a proudly-and-collectively owned culture is where success lives or dies. Many future posts will talk to this central challenge and you will also want to read my detailed research into this area (see previous post on “what motivates employees to work” and box below). Growing a professional service business also involves an understanding of the concept of  ‘leverage structures’ (the ratio of junior to senior staff) and how this directly relates to your firm’s profitability. Future posts on business planning will talk to that fundamental aspect also.
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  1. Clients rule!
    Of course, “the customer is always king” as the cliche runs but with professional service firms this really does go way beyond the soundbite. Indeed, some early stage entrepreneurs may only have a handful of clients (maybe just one!). Suffice to say, such clients are the sole raison d’etre for your commercial existence. Any failure to not place them at the heart of everything you do, or to not design them into your organization (re: vision, services, values, structures, brand etc) is going to quickly unravel. A failure to understand this point at a deep, visceral level and to live it daily is going to lead to the failure of your venture. From the word “go” you should aim to develop a team-wide service ethic of seeking to support your client’s needs or  “die trying”. Only with such an ethic will you gain – or deserve – the permission to grow upwards.


  2. Senior Team Quality
    Closely linked to the first point, the importance of management quality is magnified in the professional service business. Professionals – by their nature smart, educated self-starters – will not hang around for long if their leaders are sub-standard. It is not just, however, about the qualities of the people in the senior roles. In future blogs, I will also describe how embedded firm-based practices, structures, habits and toolsets all impact on your firm’s management quality (and, by direct corollary, results).


  3. The Marketing Challenge
    Whilst a professional service might, at one level, seem an easy proposition to message to those who have the requisite need (e.g. ‘We build websites’, ‘we can audit your annual accounts’, ‘we design buildings’ etc), at another, competitive level you will have a significant challenge. How do you best organise your service offerings? How do you meaningfully differentiate from your competitors? How do you tangibly communicate the benefits of your service approach or the type of people you employ? This is a very different challenge to that faced by a product-based marketer. Building a great marketing capability (and recognising its subtle but very clear distinction from your selling capability!) is key to growing value in your firm – as you will get to learn in later blogs.


  4. The Selling Challenge
    Similarly, selling professional services is very different to retail-based selling or productised business-to-business (B2B) as, for example, with software licensing. A key feature of this difference is a fundamental one: in the main, those that provide the actual services are best placed and able to sell it! Unlike in other businesses, that employ generic salespeople (and then give them training in the product), in a professional service business, the challenge is rather to train your doers (consultants, engineers, designers etc) to be able to sell. Indeed, the most critical, value-determining challenge you are likely to face is that of turning this capability from an idiosyncratic skill undertaken by a select few to a systematic, shared one. Only then will your business truly have value. This is a really key area that we will slowly unpack together in future blogs.


  5. Pricing
    Finally, the pricing of professional services is also a science (and art) of its own. Similar to any business, multiple factors will influence the pricing strategy; for example: market need, competition, your service model, the brand premium you command etc. What is unique is that there tends to be a lot more flexibility available to the professional service firm; each tender competition essentially presents an opportunity to renew your pricing strategy. You will have the choice of fixed price, outcome-based risk-reward or the conventional time and materials model. How much do you discount to win that prize new client or just to keep staff utilisation levels high? Unlike unsold stock, an unbilled hour can never be recovered. There are a number of unique dynamics at play here that we will also need to explore later.


So, there you have it. Six unique aspects of professional service firms. I will soon turn to more practical guidance but, at the start of this journey, this is an important set to reflect upon.

So, what’s next?

Next up in the series, I am going to give a perspective on my own personal journey from singleton start-up to valued business within five-years. Specifically, I am going to reflect on the ten critical success factors that enabled this fast growth to value.

Hopefully, you’ll join us on this journey. It’s totally free, and you don’t have to be a Method Grid customer (though you’re more than welcome to sign up for a free trial here).

We’ll be releasing a new post each week. To get each post emailed to you as soon as it’s published, sign up for the Climbing Mount Audacity mailing list below.

Climbing Mount Audacity…
From Startup to Scaleup!

We're sharing everything we know about how to build an awesome professional service firm (and enjoy the journey en route!) PLUS travel updates, reflections on our stumbles and general musings on our Method Grid journey.

About the Author

Dom Moorhouse is a co-founder of Method Grid (a platform on which to design, build and share your methodologies and procedures). In his spare time, he CrossFits to stave off middle-age and paraglides temperamentally. All whilst dreaming of becoming a philosophical flâneur.

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