As the leaves change from a cool green to the burning hues of fall, you can almost hear the annual groan that emanates from marketing and business development departments everywhere as we ponder next year’s budgets. We’re feverishly cramming numbers into spreadsheets, struggling to get that final hit rate report from the ERP system, and perhaps even consulting with a local palm reader, all with the goal of accurately predicting the future - next year’s sales!
Review Your Professional Services Sales Vocabulary
Many of us in the professional services industry don’t approach our sales vocabulary as clearly as we should – or worse, it’s just that “s” word that nobody wants to talk about. Let’s quickly review some common numbers:
- New Backlog. The rest of the world usually calls this number sales. It generally answers the question about the measured period, such as, how much NEW billable work did we book/contract/sell? You might sell the project one year, but could deliver it over several years.
- Earned Revenue. This number values the work we actually did in the measured period, and is recognized as such, whether we billed for it or not. Learn more about earned value in this article.
- Billings. This number is the total of all the invoices your firm sent in the measured period. Again, depending on how you count the beans, this number may or may not match Earned Revenue.
It’s imperative that that we clarify exactly which thing we’re budgeting. Most professional services firms have a theoretical limit to what they can deliver, based on staff size and utilization. But is there a limit to how much new work you can sell? Hmm.
Mix Your Sales Sauce
Here’s the point – these numbers all work together, but marketing and business development departments are usually focused on “New Backlog” when discussing sales. So, where does New Backlog come from? It comes from the strategic combination of two variables: Stuff you sell and Clients. Your job is to figure out the best mix of these combos to achieve the firm’s overall growth plans. Easy right?
Let’s have a brief look at the different ways we can combine our New Backlog variables.
Combo 1 - Sell the same stuff to existing clients
Unless you offer bread, milk or toilet paper, this combo can only take you so far. If you sell a corporate headquarters design project to ACME, Inc., when will they buy the next one? Large retail rollout programs and compliance-required assessments/surveys/reviews are good exceptions to this challenge. Watch out for “better, faster, cheaper” competitors led by well-dressed daredevils focused on Combo 4.
Combo 2 - Sell the same stuff to new clients
We should always analyze how to position our core offerings to new clients – in new markets or new geographies. Most of us claim about 80% of our New Backlog is repeat work, so that means 20% has to come from this combo and Combo 4. Leverage your highly experienced professionals who like to build new relationships.
Combo 3 - Sell new stuff to existing clients
Maybe ACME, Inc. doesn’t need a corporate headquarters designed this year, but really needs help with a facilities management system. Here’s a little secret: Your existing clients trust you and would prefer to buy new stuff from you rather than from someone they don’t know. Build internal partnerships between your key relationship managers and the technical leader(s) of the new stuff. Watch out for experienced competitors focusing heavily on Combo 2.
Combo 4 - Sell new stuff to new clients
Break out the phone books and line up the cold calls! OK, that may be excessive, but this is definitely the final frontier in selling professional services. You’re convincing people who don’t know your firm to buy stuff for which you don’t have a track record. Totally possible, but not for the faint-hearted. This combo often requires strategic hires or acquisitions, which might be the only way to beat the competition in the other combos. You could get crazy and buy a new suit, but your competition in Combo 1 knows you’re coming.
Serving over Selling in Professional Services Industry
While we can’t completely avoid the annual budgeting process, we can look at it differently. You’re in the business of professionally serving others. Instead of simply looking for more projects, more offices, or more technical credentials, why not look for the best ways your firm can serve more people next year, and get paid for the value you created? Use the combinations above as a framework and correlate the targets for each to your firm’s overall strategic plan and annual business plan. Tada! Now you’ve got a growth target that everyone can embrace. Happy budgeting, and more importantly, happy serving!