The pandemic has knocked most professional services, and even many SaaS, firms off their 2020 revenue targets. This article outlines a simple framework for identifying new growth opportunities.
At this point, the financial cost of the pandemic to the U.S. is hard to fathom. With over $3T in U.S. government spending it’s the second most expensive crisis in history. No matter where you live in the country you can probably point to more than a handful of local small businesses that have closed never to re-open. Of course the economic impact isn’t uniform. Many technology companies are way up (infrastructure revenue at AWS, Microsoft, and Google soared $29B in Q1 2020). Despite that and the pandemic’s impact on accelerating digital transformation initiatives, many SaaS companies may miss their 2020 revenue targets by as much as 30%. In the early days of the pandemic, Source for Consulting, estimated that the global consulting market would shrink by as much as $30B in 2020 alone. These latter figures jive pretty closely with what we see from many of our professional services clients (a 20-30% revenue decline) and our SaaS clients (stalled revenue growth though not necessarily revenue declines given their annual licensing models).
In the early days of the crisis it was tempting for many professional services firms to just wait it out. Let the pandemic run its course and pick things back up as the economy recovers. But as the situation has unfolded it’s become abundantly clear that this is not a typical crisis. And, as Dan Doran of M&A firm, Quantive, likes to say, “The passage of time is not a strategy.” Getting back to 2019 revenue levels and unlocking new growth will require new strategies and new ways of working. Fortunately, most professional services firms aren’t facing a complete revenue collapse the way many consumer services companies did. Very few had to completely reinvent their business over the course of a few weeks. But if you want to get back onto a growth trajectory you do need to think about some thoughtful pivots to create new sources of value.
A Framework for Pivoting Into Growth
I introduced this simple framework in our April webinar on resetting your marketing strategy for the pandemic. It’s a classic consultant’s 2×2 matrix that we’ve used to help our clients think about where and how they can pivot their businesses to recapture lost revenue and lost demand.
The vertical axis represents new products, new services and new ways of working. Essentially, it’s thinking about ways to deepen your existing client relationships by creating new forms of value. Generally, this is the best place for a firm to start—get as close to your existing clients as you possibly can and be a resource to help them navigate through a very difficult time. Introduce new services and new ways of working to help them do so. If it’s a service you’ve never provided before be clear about that from the onset. But, use the pandemic as an opportunity to deepen your expertise within a key vertical or a set of key accounts. In some cases you may use it as an opportunity to increase the value you provide clients now, trusting that revenue will follow later. Consumer marketers would call this “expanding your share of wallet.” But I’d prefer you think about it as “expanding your scope of value.”
The horizontal axis represents taking existing services to new customers. This could be entering new vertical markets where expertise you already have is highly transferrable. Or, it could be developing new relationships with other buyers within an existing client organization (either by introducing them to existing services you provide elsewhere within the company or new ones you’re introducing as well).
In either situation, you’re expanding your positioning model a bit to take advantage of adjacencies in the marketplace where you can create value and generate new sources of revenue.
3 Examples from Financial Services, Software, and Consulting
While every firm looks a little different, here are a few examples of successful pivots I’ve seen over the last 12 months. In the early days of the pandemic, a prospective client at a large insurance company explained to me how they pivoted their underwriting policies to write new business. Obviously, a pandemic like COVID-19 has forced a lot of people to think about things they might’ve been putting off. Things like life insurance. Suddenly, there was an increased demand for life insurance policies. But, of course, underwriting a policy generally requires a health screening to determine an applicant’s risk of insurability. But, performing a health screening during a stay at home order was virtually impossible. This particular company chose to skip this requirement for consumers under 50; relying solely on the consumer’s response to a health questionnaire (and presumably a whole host of proprietary analytics models). The private data that was shared with me was that this strategy had increased account openings by 25% YOY within the first month of the pandemic.
One of our software clients, a provider of risk, compliance and payment solutions for financial institutions worked with us to implement a pivot into providing cybersecurity services. We repurposed an existing research report on cybersecurity risks the firm already had into a short eBook on steps banks can take to combat cyber attacks and implemented a LinkedIn advertising campaign targeting Information Security leaders at banks across the EU, the Mideast, and North America. The campaign simultaneously introduced a new service to a new buyer, but leveraged the organization’s existing reputation within the global banking sector. The campaign ran for 3 weeks and generated nearly 100 leads.
One of the long-term demographic trends within the U.S. is the transition of baby boomers out of the workforce. This, of course, includes company owners as well. In fact, according to the Exit Planning Institute 66% of businesses are owned by boomers meaning that many of them will need to exit in the next 10 years. But, many of these exits won’t create enough revenue to fund owners’ retirements. Essentially, owners are counting on selling their businesses for much more than they’re worth. In order to achieve a successful retirement, they will need to make substantive changes to their companies. Organizations like EPI and BPI have sprung up to help accounting and consulting firms develop the expertise they need to build “exit planning practices” designed to guide owners through the value creation journey to a successful exit.
There’s Never Been a More Important Time to Consider Pivot Opportunities
Fortunately, you probably don’t have to completely reinvent your firm to get back to your pre-pandemic revenue levels. But, investing in the marketing of your firm is no different than managing an investment portfolio. Your firm is made up of a collection of practices (a combination of industries and services). Each practice represents an investment in your portfolio. Each one has a growth trajectory and the marketing resources you invest in it is a bet on that future growth. Unfortunately, the pandemic has probably altered some of those growth horizons. As a result, now is a good time to think about that investment mix and plot a course forward for the remainder of 2020 and beyond.