When it comes to revenue growth, middle market, IT services firms appear to be leading the way.
2023 is proving to be a very good year for most U.S.-based consulting firms. In our latest research of 269 firms, 91% of them tell us they grew revenue in the first-half of this year relative to the same time last year. Notably, the median growth rate for all firms of 11.5% is on par with the broader U.S. middle market which clocked in at 11.8%.
Of course, growth isn’t uniform. By definition half of those 269 firms are growing faster than 11.5%. Who are they? What do they look like? What’s driving that growth?
To find out, we built a segment within the data of the fastest growing firms. These “fast growers,” 54 of them in total, grew revenue more than 20% in the first half of this year. Here’s what we know about them.
THE FASTEST GROWING CONSULTING FIRMS ARE PREDOMINANTLY TECHNOLOGY-FOCUSED
It comes as no surprise that the fast growers are likely to be IT services firms. While IT services represented only 29% of the survey sample, it comprised 52% of the fast growers. I see this as a function of the current economic cycle. The two recurring themes business leaders see in the news are a “looming recession” and a massive push into artificial intelligence. Both trends, respectively, are pushing clients to technology partners in search of productivity gains and adoption guidance.
FAST GROWERS ARE PRIMARILY “CORE MIDDLE MARKET” FIRMS
Generally high growth is associated with smaller companies. Growing a $5M firm by 30% requires finding $1.5M in new revenue – one or two strong client wins. By comparison, growing a $90M firm by 30% requires finding $27M – likely a few mega client wins.
That’s why it comes with a bit of surprise that a large portion of the fast growers were “core middle market” – firms with revenue between $50M – $100M. These “core middle market” firms represented only 21% of the sample; yet 35% of them are achieving growth greater than 20%.
FAST GROWERS ARE FOCUSED ON CLIENT SATISFACTION
Collectively, firm leaders told us their #1 growth challenge was either generating enough quality leads OR keeping clients highly satisfied. Of the broader survey of 269 firms, leaders ended up weighing these equally. By contrast, the fastest growing firms are much more concerned with their ability to keep clients satisfied.
This presents an interesting leadership challenge … clients are coming to the firm because of its expertise, its reputation, and its ability to deliver results. The result is rapid growth. That growth creates a new stressor … how do we keep clients happy? How do we stay on track?
All good problems, but problems nonetheless.
THE FASTEST GROWING CONSULTING FIRMS ARE MORE LIKELY TO KEEP A BENCH
As it turns out, one of the ways firms seem to be keeping clients satisfied is by hiring ahead of the growth curve. Fast growers are more likely to be holding some talent “on the bench” to be available as new opportunities emerge.
In fact, just yesterday I was talking with a $100M+ firm in California that had generated nearly 70% growth over the last 2 years. When I asked the CEO how they’d driven the growth he emphasized a conscious decision the firm made in 2021 to retain staff beyond their client demands. In fact, the firm took a small loss in 2021. But the CEO had a sense that 2022 and 2023 would be strong growth years and he would need that idle talent to deliver on those client opportunities. As it turns out, his “CEO-sense” was right.
IDENTIFYING YOUR FIRM’S NEXT WAVE OF GROWTH
Growing a consulting firm isn’t easy. Anyone telling you otherwise is selling snake oil. It requires …
- Developing keen insight on where the market is headed,
- Staying ahead of clients’ most pressing business challenges,
- Proactively developing a POV that offers better solutions to those challenges,
- Sharing those solutions with the market via high quality thought leadership,
- Attracting clients to you through your expertise,
- Guiding them through their buying process, and
- Delighting them throughout their business relationship with you and beyond.
Oh, is that all? If you need a marketing partner … we’re here to help.
Appendix: Survey Firmographics and Demographics
This research of 269, U.S. based consulting firms was fielded online between 7/24/23 – 7/27/23. Respondents consisted of a relatively equal mix of CEOs, firm, practice, business development, and marketing leaders. Firms ranged in revenue from $5M to over $100M. And, primarily included a mix of IT services, strategy, operations, and HR consulting firms.
