Remote work vs in office vs hybrid work continues to be a debate in the professional services industry.
It appears service firms are voting with their wallets as vacancy rates are trending up. And as long term leases start to expire, expect this trend to continue.
Generating expansion revenue from existing clients is the most reliable growth strategy for boutique professional service firms. You have access to the client, you have done good work for them, and you are behind the walls hearing about their needs.Â
Here is the split between existing client and new client revenue in boutique pro serv firms.
Boutique pro serv firms can be lumpy businesses. Matching revenue and expenses with limited forward visibility can be very hard.
Firms should be able to forecast out one year, at a minimum.
Unfortunately, small firms can see out ~4 months, and medium firms can see out only ~7 months. Only large boutiques (100+ employees) can see out 1 year.
Boutique pro serv firms have lots to improve on when it comes to sales forecasting.
Despite the great resignation, and recession fears, employee turnover in professional services remained low in 2022. By historical comparison, employee turnover in 2022 was not a problem for most firms.
Boutique firms (10-250 billable employees), in particular, added headcount and increased wages in 2022. Many report they have too much work and are having trouble finding enough talented workers.
One segment, marketing and advertising agencies, continue to run approximately 2x higher than the other segments in pro serv.
Full time employees vs part time contractors as a % of a firm’s workforce.
As a small firm scales to a large firm, contractors get replaced by employees. And the Founder earns more as employees are less expensive than contractors.
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