As one study led to another, we began to understand the dynamics of high growth. For instance, we found that the characteristics contributing to rapid growth also primed these firms for high valuations. Further, we discovered that those characteristics that acquisition experts valued most were also highly valued by clients. And these very satisfied clients drove more referrals and visibility, which in turn fueled further growth.
We were seeing a self-reinforcing pattern that allowed companies to sustain rapid growth and dramatically increase value. We began referring to this happy pattern as spiraling up (emphasis added)
Spiraling Up: How to Create a High Growth, High Value Professional Services Firm, is a fascinating new book. The sub-subtitle to the book is “Grow 9x faster. Be 50% more profitable. Spend less on marketing & sales.” Needless to say, when I stumbled across it through a reference on LinkedIn, I reached out to get a copy.
After reading the book last week, I had the opportunity to visit with Lee Frederiksen, Managing Partner at Hinge Marketing, a premier professional services and branding firm with a national clientele. Lee is co-author (with his colleague, Aaron Taylor) of Spiraling Up. He provided a number of insights into the book. This short review will focus on the growth aspects of the book. I’ll talk about value-creating aspects in a forthcoming post.
Spiraling Up is based on three years of original research, interviewing hundreds of executives, buyers of professional services, valuation expets, and firms that acquire other firms. The research was conducted in the major professional services industries, including accounting and finance, architecture, engineering and construction, management consulting and outsourced services, and government contracting.
Spiraling Up draws its observations and conclusions from four major research studies conducted over a three year period. Amazingly, much of the data and charts underlying the conclusions in the book are made available to readers for free.
The authors began with a hypothesis that spending on marketing had a lot to do with growth. They also observed that “professional services firms left to their own devices make haphazard and inconsistent investments in marketing.” So they began to gather data from hundreds of fims about their marketing spending and growth. They then divided the firms into three groups:
- Low spenders (lowest 20%) spent about 0.5% of revenues on marketing. Low spenders grew 13.6% over the two years studies.
- Average spenders (the middle 60%) spent 5.1% of revenues on marketing. The average spenders grew 19.9% over the two years.
- High spenders (the highest 20%) spent 12% of revenues on marketing, and grew 32.8% over the period.
Not surprisingly, they found a clear correlation between marketing and revenue growth. However, the authors found that the fastest growing companies actually spend a bit less than average (4.9% of revenues) on marketing. Chapter 3 addresses what high growth firms do differently. High growth firms are distinguished by their focus. Read this chapter! These firms:
- Focus on client needs and priorities, while average firms are preoccupied with themselves and their expertise
- Tend to pursue a well-defined group of target clients
- Focus their limited marketing budgets on their target group
- Tend to have a clearer, easier-to-understand message for clients and prospects
Chapter 4 addresses the question of how professional servies firms can command top dollar valuations, which I’ll defer discussing until a later post. The book has other interesting chapters addressing issues like:
- How and why buyers of professionals services buy
- How to expand client relationships
- A chapter focusing on marketing the “high growth” way
- High growth strategies that work
I was fascinated by the chapter on expanding client relationships. I have told a story many times about a client bank. We had valued the bank for more than ten years and had assisted them with a number of internal transactions. Over that period of time, we generated perhaps $100 thousand in fees doing their work. One day, I read that the bank had sold. They were represented by another firm that earned $750 thousand from that single representation. When I asked the bank’s CEO why they had not called us, I heard six profound and unforgettable words that changed forever the way I communicate with clients about our other services: “We didn’t know you did that.”
The takeaways on expanding client relationships echo that story:
- Clients are unaware of the services you provide and how you could help them. [This will pain many readers, but sadly, it is true in too many instances]
- Most clients prefer that you identify problem areas and suggest solutions
- Clients most often stop doing business with a firm not because they are dissatisfied but because they no longer have an identified need that they believe their current firm can address
- The majority of referrals are made in response to a specific request for a recommendation
In a section titled “The Client Has Spoken,” Frederiksen and Taylor observe:
Clients have told us what they want. First, they want their problem solved. Be careful. Don’t become order takers. More often that not, the problem a client wants to fix is just the tip of the iceberg, and you may need to look deeper to find the real issue. That’s how you deliver real value.
Second, they want you to make their lives easier. Anticipate needs. Make your firm easy to deal with. Clients want you to take care of the details. Keep them apprised of your progress on an ongoing basis — don’t keep them guessing. Make pricing fair and transparent. Do what you say you will do.
If you are interested in Spiraling Up after reading this short review, I have some great news. Frederiksen and Taylor and the nice folks at Hinge Marketing are making this new book available to you as an e-book for the amazing price of a free download here. The ideas in the book will help you focus on higher growth and higher value for your business and in your personal marketing.
In a recent post, Good Things Come in Threes, I suggested that when you find a good book, you should buy three copies, one for yourself, one for your spouse or a good friend, and one for someone you know who would benefit from the book. I get a free ride on sharing with Spiraling Up, and so do you.
If you like this review and the book, share this post on Twitter, LinkedIn, and/or Facebook with your spouse or a good friend, and with as many other friends in professional services businesses as possible. They will all enjoy and benefit from it.