Consultancies achieve lasting success by prioritizing growth over rapid scaling. Before reaching critical size, firms rely on personal relationships and informal processes, making premature scaling risky. True growth involves honing offerings, testing markets, building culture, and strengthening expertise. Social media promises of quick scaling often mislead, emphasizing flashy marketing over substance. By focusing on measured, profitable growth, founders enjoy more varied and fulfilling work, develop resilient systems, and prepare their firm for sustainable expansion when the right structures and team are in place.
Key Takeaways
- Scaling Challenges: Consultancies typically do not scale until their revenue reaches at least £3m and employee count hits 25, relying on personal relationships and lacking structured systems.
- Misleading Scaling Promises: Social media ads often promote unrealistic scaling strategies, focusing on marketing funnels rather than tangible growth, leading to wasted resources.
- Growth Over Scaling: Growth involves understanding profitability, testing markets, improving offerings, and building firm culture and expertise, which are crucial before attempting to scale.
- Enjoyment and Profitability in Growth: Many founders find the growth phase more fulfilling and profitable, with a focus on personal, varied work rather than process-driven hierarchy.
You’d have thought that “help me scale my firm” is something I would be glad to hear from a potential client. However, it usually creates a little anxious feeling in my throat. Let me explain why.
The Reality of Scaling a Consultancy
No consultancy scales until its revenue is at least £3m.
Over the last fifteen years, I’ve worked with around 500 small consultancies to help them grow. In addition, I’ve interviewed another 100+ founders who have grown and sold and surveyed 2000+.
Virtually none of these has scaled until their revenue hits at least £3m, or their employee numbers hit 25 or so. Even then, I’m not convinced that scaling is the right metaphor. It just sounds too…. easy?
Exceptions generally involve consultancies that evolved by creating software to automate, enhance, or transform their original consulting services and methods. Digitopia, for example, found it could offer more value using SaaS to benchmark the digital maturity of firms than delivering digital transformation consultancy services.
Why £3m? Well, for three reasons. Until this stage:
- Small firms, shaped by transaction costs and institutional inertia, often rely on personal relationships, intrinsic knowledge, and primarily verbal communication. Without clear systems, roles and processes, no scaling is going to happen.
- The firm is not structured to ‘scale’. Scaling (usually) requires a leverage structure of juniors and partners which simply doesn’t make sense when you have fewer than 30 people. Indeed, to get to a leverage structure the consultancy will need to start doing different (bigger and simpler) kinds of work.
- For many partnerships, scaling, and the implied leveraged strategy above is not part of their strategy – at least while they remain small. A strategy or innovation firm will rely on the experience of its partners which in turn requires a strategy inimical to scaling: experimentation, personal relationships, and mentoring. This firm will generally grow rather than scale.
- The consultancy often does not know what it should scale. This really gets to the heart of the difference between scaling and growth. It often takes a while (in a good small firm, 3-5 years) to really work out what the profitable, do-able, and growing niche should actually be.
The Promise of Scaling Your Small Consultancy
Where does this obsession for ‘scaling’ come from? As is true of many of our ills, the answer is social media. Any consultancy owner that strays onto LinkedIn or Facebook will have seen ads to “scale” your firm.
In fact, more often it’s a call to “SCALE!!! TO SEVEN FIGURES!!!!”. Often emanating from a suspiciously young man who is photographed in “his” private jet or penthouse office.
Though these young entrepreneurs promote scaling courses through Facebook ads, they curiously fail to offer genuine evidence of scaling successful businesses themselves.
More pertinently, they generally are selling nothing more than the design (not implementation!) of a marketing funnel. Indeed, that is what their own business is.
Let me take a second to tell you what you would have got your $5k marketing funnel. It would comprise:
- You will create a Facebook ad. that gets in front of a minuscule percentage of your target audience.
- Ad clickers visit your site, submit their email, and watch a webinar promising solutions to their problems without revealing methods.
- After the webinar, they will be prompted to book a ‘strategy call’ with you where you (or your sales rep) will deliver a hard sales call. This typically uses 1970s psychological techniques to make the lead feel that only you can offer them salvation.
- For those who don’t purchase, send persuasive discount emails featuring countdown timers and promises of private-jet freedom and remote-working luxury.
- You will realize, usually too late, that the cost of FB ads outweighs the revenue and you have spent £15k + the £5k course fee in exchange few some likes.
Consultancy is (still!) a relationship business. Research shows clients buy based on trust, choosing consultants they know from past work or those recommended by trusted sources.Facebook is not a trusted source.
The promise of scaling is therefore highly attractive. “Scaling” sounds easy. Unless you’re a fish of course. Scaling is just doing the same thing but on a bigger scale. Bigger inputs, bigger outputs – simples!
Grow, Don’t Scale
When a company has unresolved flaws, scaling intensifies weaknesses, creating larger operational problems that can harm overall performance and long-term profitability.
Resist digital-funnel salesmen’s temptations and prioritize real growth; taking private equity for promised scaling traps you on an endless treadmill.
Growth is a really, really important phase that is harder than the scaling phase. Growth is a phase where you:
– find out what you enjoy, is profitable, and you’re good at
– test the market to see what your pricing should be
– improve your offering through experience and research
– build the culture and values of the firm
– accumulate capital to invest in scaling
– build expertise at actually running a company
– understand what systems, people, and technology you need to scale
