Businesses that charge for hours are traditionally called professional services firms, but the trouble with these types of firms is that a lot of people immediately think of old fashioned lawyers and accountants. They forget about all the important and interesting businesses like marketing, public relations, consulting firms, architects, engineers, software development, IT consultants, digital agencies, people that create things, and people that build things. In the absence of quality operation information, these businesses usually construct operational tactics and processes from first principles; yet they can often benefit greatly from taking a good look at how they do things.
Lawyers and accountants have always had their own particular way of managing growth. Their business model has been around for centuries and the skills have been passed down from one generation to the next. One of the fundamental principles of these traditional firms is called “leverage.” Leverage is basically the assumption that young people joining the firm will work for lower wages in return for the chance to share in the spoils of the partners one day, or to use the reputation of the firm to secure a well-paying job in the industry. They are set up with hierarchical structures and systems. Lately this business model is becoming under pressure from the new economy, due to both automation and the fact that less and less young people are willing to work very long hours for low wages. The smart young people want to work for the smart cool firms. This is putting pressure on the traditional firms’ margins to the extent that they are being forced to look for new revenue streams.
The good news is that it doesn’t have to be that way. Right now, the best cool service firms are thriving by selling their expertise. You know that running a business is challenging and hard work, and that’s why clients need people like you, because you have the special skills that can relieve them of their headaches.
Having expert skills, not just process-orientated training, is the professional services model of the future. Juniors pumping out work will be overtaken by the much cheaper business models that use automation and international outsourcing. Basically, there is a choice between competing on price and competing with expertise.
This book is not about dropping on price, it’s about still having juniors around, because they add spark to the lifeblood of the firm, but not to be the boiler room.