How long does it take to sell a professional services firm?
The Path to Profits in Professional Services
1- ~years 1-2 custom work = margin in the teens
2- ~years 3-6 standard work = margin in the 20s
3- ~years 7-9 offshore work = margin in the 50s
4- ~years 10-12 tech-enabled work =margin in the 60s
5- ~years 13+ productized recurring work = margins in the 70s
Founders of Professional Service Firms Earning $1+ Million
Collective 54’s Chart of the Week shows the bigger the firm, the more money the Founder makes. The data reveals three clusters:
1) 1-50 employees = Founder income $100k-$200k
2) 100-150 employees = Founder income $1+ million
3) 200+ employees = Founder income $1.5 -$2 million
Interesting note: Firms run by co-founders making less. Why? Profit pool getting shared by more than one person.
Stop Giving Away the Farm.
This is meant to be a wake up call for professional service firms.
For Heaven’s sake, raise your prices. Your input costs (wages) are up, so you must raise prices or your margin gets crushed.
Clients are paying more for everything BUT your services. Don’t believe us? Here is some proof.
The relationship between a fixed bid pricing strategy and a firm’s valuation. More fixed bids = higher valuation.
Why? Better margins.