Office life in city centres will have resumed this week for many workers, even if they don’t plan to be in every day. While many businesses are leaving town, surprised by how easy it’s been to operate remotely, those based on daily relationships and meetings with clients are staying put, even if they’re downsizing.
Of course, we’re talking about the Professional Services sector. To most people, that means firms of formally qualified advisers in areas that have been clearly defined over generations: accountants, solicitors, surveyors, architects, engineers. However, the changing needs of businesses and individuals in the 21st century has widened this sector considerably to include all manner of people-based businesses, with revenue models based largely on consulting fee income or commissions.
‘Modern’ Professional Services firms now include marketing, public relations, recruitment, design and several disciplines that did not exist when the Magic Circle law firms or Big Four accountants began life as Victorian partnerships. The consulting arms of major accounting businesses have even begun to acquire advisory companies in these fields, advertising being a notable example, as they increasingly form part of the strategic advice offered to large clients.
The people-based, consulting revenue model brings with it financial features and associated challenges that are unusual in many other sectors: relatively low levels of borrowing; disproportionately high staff and office costs; a highly competitive market for income-generating senior practitioners; and client relationships that are often too closely linked to individuals, rather than to the firm itself.
In ‘new’ professional services, in particular, barriers to entry for operators may be low, partly a result of fewer formal qualifications, lack of official regulation and debatable ‘professionalism’. Nonetheless, these and more established services share challenges of differentiation from their competitors and a need for regular reinvention to remain relevant to clients.
The last 18 months and its restrictions have not necessarily been kinder to advisory businesses than other more obvious casualties such as hospitality and leisure, or real estate. Consultancies will now, understandably, be focused on developing billable work, keeping clients happy and running teams of staff. They might also, however, give some thought to getting expert help in futureproofing their businesses and keeping them on a safe footing.
Areas to consider might range from important everyday issues, such as cash flow management, remuneration models and regulatory affairs, to taking bigger strategic steps on due diligence for acquisitions, merger integration, operational assessments or even dissolving partnerships.
It’s inevitable that sometimes busy practitioners are less than speedy in keeping their own houses in order. They are probably a stone’s throw from other, very relevant advisers who are well placed to understand the challenges, opportunities and complexities of owning, working within and managing a successful professional services business. Independence allows them to offer commercial insight and business sense that is sometimes a difficult area on which to focus. Even consultants need consultancy services.
Written by Paul Davis, Partner at Buchler Phillips, the UK’s leading independent corporate recovery, restructuring and turnaround firm.