It doesn’t take an enormous amount of work to be an average firm, but it takes more dedication—and knowledge—to transform a firm into a high-performance one. Let me suggest some specific metrics for becoming a high-performance firm, beginning with the priorities a principal should follow.
PRINCIPAL PRIORITIESWithout a single exception, there are five priorities on which the principal focuses. It’s not just the list that’s important—but the sequence is also in a very specific order. Make sure you’re doing the first one, and if that’s all you have time to do, then so be it. But if you are doing the first one well, you can and should advance to the second priority—and so on, until there is no more time or energy left. We’ll walk through all five of them, but you really only need to worry about the first three (unless you’re a really small marketing firm).
No. 1: Minding the finances. The first priority of a principal or manager is to pilot the ship. That means ensuring accurate tracking of the firm’s financial performance against industry benchmarks, useful forecasting and prudent decisions about the source and use of money. Armed with that information, principals will make good decisions about staffing, benefits, facility, miscellaneous overhead and the use of outside resources. Other people can help do all this, but the principal’s finger must be on the financial pulse of the firm.
No. 2: Hiring/molding key staff. There’s been a shift over the last few years to the point where it’s actually more difficult to find the right people than the right clients. It follows, of course, that there’s more at stake when principals make a mistake with employees than with clients. A marketing plan for staff is necessary to yield so many candidates that a principal can be picky about finding that influential person with the right talent and perspective on the working culture of the firm.
If you are currently spending your time taking care of clients, you’re on an endless treadmill that’ll keep you running until you’re so tired that you collapse and fall off. You’re solving the same problems every day, and growth will only exacerbate it.
Of course, a major portion of your effectiveness in managing these key people will depend on hiring the right ones in the first place. So before writing the marketing plan for staff, start with the right positioning: crafting a place where great people want to work, in part because you’re there shaping them.
By the way, if you aren’t sure who is in this group, consider that you should not have more than six people or so reporting to you. That is the group.
No. 3: Positioning/closing opportunity. Once a principal has nailed those two things, it’s time to make sure the firm has a very clear and differentiated positioning in the marketplace, built around deep expertise that’s different from nearly every one of your peer firms. Even though that task is critical, it is not time-consuming, and need only be revisited every few years. From there, it’s important to have a presence in the process of closing opportunity while making clients out of prospects. While a principal doesn't need to orchestrate that process, the prospect should register that the principal has been visible, complimented the team that will serve them and described the culture of the firm—their new partner.
These three are as far as you need to go, but if you still have time and energy left, add the next two, in order.
No. 4: Strategizing for clients. You’ve been doing this for years (standing “naked” in front of prospects and clients, thinking on your feet), guiding recommendations to clients from your acquired expertise. The best way to be involved with clients without being their daily go-to person is to bounce in and out of the relationship, while you help them formulate the strategic portion of the marketing plan for their product or service.
Clients will be grateful for your attention, and your employees will soak up the shared knowledge that’s imparted in
Finally, if there’s more than one person running the firm, you can enjoy one of the few advantages of a partnership: splitting the responsibilities and focusing deeper on the process.
Otherwise, use this checklist to make sure you’re being the leader your firm needs.
FINANCIAL PERFORMANCEExpanding on the first point about watching the financial performance of a firm, here are key metrics that should always be part of the financial dashboard.
Months of overhead cash. Measure monthly overhead, including compensation, and make sure there is at least two months of that set aside in checking or savings. What is in accounts payable or in an available line of credit doesn’t count. And if there is a single related client source that represents more than 35 percent of billings, more than two months will be needed. This is one of the most significant measurements you can make. It’s like altitude in a plane when you start having engine trouble because it gives you options and time to implement them. Many firms have managed to operate more on a hand-to-mouth basis and don’t quite see the need for such a luxury. But they often find out otherwise the hard way, with sad impact on staff, clients and themselves.
Fee billings per full-time equivalent employee. One easy way to measure utilization is to divide your full-time equivalent (FTE) employee count into the fee base. If there are six full-time employees and the fees are $660,000/year, the fee billings per FTE are $110,000, which is the national average. A high-performance firm averages $160,000/FTE. (Note that you include both billable and non-billable people in the employee count.)
Salary load as a percentage of fees. The total compensation load (not including payroll taxes) should not exceed 45 percent of your adjusted gross income (AGI). This does include compensation as the principal, though you might have to “standardize” this.
Net profit. The net profit, as a percentage of fees, should be fifteen to twenty percent.
Utilization. The utilization of all staff, billable and non-billable, should average 60 percent. In other words, if all the time that’s worked is added up, 60 percent of it should be charged back to clients.
Debt. The high-performance firm has no debt or capital leases. They fund purchases with available cash and if they can’t afford to do that, they wait until they can.
POSITIONING/MARKETING/SALESPositioning. The high-performance firm is positioned to the prospect in such a way that it's very clear that there are few substitutes for it. There is no “me too” positioning (probably around branding) that serves to scoop up all the available opportunity without having to say no. The high-performance firm develops deep abilities from the repeated application of expertise to similar situations.
Thought leadership. The high-performance firm steadily generates valuable thought leadership material that serves to attract prospects, obviating the need to have an outbound marketing strategy.
Clear prospect target. In doing that, they have a specific definition of the qualified client. They publish this in modified form on their Web site and they use it diligently in deciding which accounts to pursue.
WORKING WITH CLIENTSClient relationships. High-performance firms don’t work for small clients. Instead, they have eight to twelve clients, each of whom is delivering profitability and the chance to do effective work. By definition, then, each client is big enough, which equates to ten percent (maybe as low as five percent) of your total billings.
Internal growth. The high-performance firm has an internal mechanism, mediated through the account managers, for regularly growing clients. There are specific tactics for this and specific, measurable goals to track it.
Strategy. The high-performance firm is leading clients strategically with unbundled implementation. They estimate it separately on proposals, they have identified strategists by title on staff and they present it separately (without images).
We’ll discuss leadership and employee management in a future column, but these five steps are a good place to start in positioning your firm as a high-performance one. ca