- What’s hot and what’s not in professional services right now?
- Successful providers seek out opportunities, seize them and then do what it takes to fund operations.
- Agility is one key to success for all-size firms. Here are nine more.
Some services firms managed to survive and thrive through a difficult first half of 2020 while others struggled. Why? And how can the successful continue riding high — and those with less of a track record rally?
First some good news: The playing field is more level than it’s been in years.
“In disruptive times, the value of long track records can be upended by a professional who has a finger on the pulse of a new trend or opportunity,” said Ben Wright, founder and CEO of Upsuite a broker of flexible and co-working office space.
The services success story today comes down to how quickly firms recognize and reach for opportunities and how well-positioned they are to capitalize. We spoke with a CEO who works with marketing services firms and says one key is having the means to reach customers where they hang out now.
“It is highly likely that, at some point, the current spike we are seeing in demand for online marketing services will flatten out,” said Thibaud Clement, CEO and cofounder at Loomly, a platform that marketing teams use to manage social media communications. The company counts Porsche and L’Oréal among its customers and has seen what Clement calls “extraordinary growth” since March.
“Things will at some point calm down a little,” he said. “But we see the trend as a durable, offset ‘up and to the right’ of the demand curve for marketing services, with a temporary spike, followed by a long-term larger market than what we saw pre-COVID.”
Some services exist in dual universes, scoring a ranking on both the winner and loser lists.
“Interestingly, marketing agencies and freelancers fall into both categories, those who have been in danger of failing and those who are going gangbusters, because of a form of clientele renewal,” said Clement.
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Rebound advice: Stay in touch with customers, even those that are flagging. Clement watched as thousands of marketing agencies and freelancers suffered an exodus of clients from mid-March to mid-April due to budget cuts. Some, but not all, rebounded in late April as clients pivoted from physical interactions, including on-site sales calls, to digital outreach, such as SEO and paid search. For marketers, he also saw major changes to how their customers attract new prospects.
“About three weeks into the lockdown, businesses unfroze from their ‘deer in the headlights/what just happened’ panic and moved to, ‘This is the new normal — we’ve got to move forward,’” said Marcia Golden, managing partner at DJD/Golden, a marketing services firm. “Companies who want to stay in business are moving forward. Period. They are investing in marketing, planning and business development.”
Rebound advice: Stress value for the money. Despite often having fewer cash reserves, smaller firms may thrive as much or more than their larger competitors.
“CPAs, attorneys, PR and media consultants — these are all areas where skilled people are available at smaller, nimbler firms, where you’re paying for the service and not the fancy office,” said Christine Wetzler, president at Pietryla PR & Marketing. Customers who were once impressed by a fancy reception area and $2,000 espresso maker now care about one thing: a strong return on their investments.
Rebound advice: Don’t have profitable customers? Figure out who they are and how to reach them. Sometimes, that means consulting with an expert.
“We actually see many agencies thriving as they do the heavy lifting to help businesses cope with change,” said Ted Chan, CEO of CareDash, a doctor and hospital referral and review service. “Telehealth has been one of the prominent in our space. We have tripled telehealth listings in the last two months, to over 25,000.”
The company works closely with agencies, IT vendors and business consultants to help them win business in the health and medical sector.
“At the same time, these agencies and IT vendors are also doing the work to change workflows — especially service queues,” he added. “For example, we talk to partners about how they are shifting waiting rooms to in-car texts.”
In addition, the service provider ecosystem has expanded significantly in recent years, according to Jay McBain, Forrester principal analyst, channel partnerships and alliances. McBain shared the diagram, below, to illustrate some collaborative possibilities and writes that creating an “influencer channel,” made up of affinity partners, referral agents, affiliates, advocates, ambassadors and alliances, is critical to success in 2020.
If you’re a security services provider, for example, think about the value your expertise could bring to an accountant or CPA who is seeking to launch a virtual CFO business. A cobranded educational webinar delivers value to potential customers and leads and visibility for both providers.
Rebound advice: Carpe the WFH diem. Many of the hot services today support employees working from home, help improve daily life for humans on lockdown and prepare for when business resumes.
“Demand for cloud remote collaboration and communication tools has gone through the roof since COVID-19 has forced people to work from home,” said Colton DeVos, marketing specialist for Resolute Technology Solutions, an IT services company based in Winnipeg. “Many companies that were operating with on-premises equipment and networks have had to scramble to configure VPNs and plan for remote capacity on their networks.”
Got expertise with tools like Office 365, Slack, Zoom, cloud storage, document management systems and digital signing tools? Get the word out, because all have surged — and will continue to be relevant even as distancing measures ease.
“Now that we are approaching a ‘new normal’ with pandemic restrictions easing, businesses of all kinds are looking at investing in cloud collaboration in case of a second wave or a future crisis and to enable easier remote access as many people may continue working from home,” said DeVos.
Rebound advice: Think about how you can cloudify your service. The “as-a-service” trend is not going away even when the pandemic subsides, so if your service can be offered as a subscription or on a SaaS marketplace, invest in doing so, say analysts.
“While some longer-term cloud-based transformational projects may be put on hiatus, the overall cloud spending levels Gartner was projecting for 2023 and 2024 will now be showing up as early as 2022,” said analyst John-David Lovelock, even as overall IT spending declines some 8%.
Gartner attributed the predicted growth to the demands of modern applications and workloads, which traditional data centers fail to adequately handle. Given the great worker migration from office buildings to home offices, cloud services surged even faster than predicted.
Previously, Gartner predicted that SaaS, the largest cloud market segment, would grow from $99.5 billion in 2019 to $151.1 billion in 2022. That growth is poised to accelerate. And, SaaS is where service providers can make some side money, if they’re creative.
For example, a growing trend is ghost kitchens, where chefs rent space to prepare and package food, without any eat-in component. A provider of wedding planning services who’s seen business drop could pivot to develop an exchange to connect local chefs with event facilities that have idle commercial kitchens, for a fee. As a bonus, you keep your business top-of-mind with venues by helping them monetize unused space.
In our Brainyard Summer 2020 Finance Priorities Survey, 38% of respondents said they’d significantly increase the number of products or services they offer.
Sectors That are Struggling and Why
Not all service providers are in a position to take these steps, for a variety of reasons.
“There is no way for some companies to pivot their businesses — there is simply no digital equivalency for their product, or the service is temporarily banned,” said DeVos.
Further, some professional services, such as MSPs, may be stalled by clients who are unable to pay their bills for the reasons DeVos cited. Sectors such as IT services are hurting from predictable budget cuts, resulting largely from fears of a sustained blow to the economy. But there are some surprises in the list of struggling services too, such as accounting and legal.
“There is a cruel disconnect in that the need for quality consulting services is likely higher now than it has ever been, while the ability to pay for those services — particularly for the early-stage companies that need the most help — is at its lowest,” said Mike Minihan, a longtime tax professional and managing partner of BX3, a firm that connects startups and small businesses with sources of funding and business advisory services.
And while everyone knows that bankruptcies are inevitable in recessions, lawyers are still waiting for the call to action.
“We bankruptcy lawyers are baffled by clients,” said attorney Dai Rosenblum, who says he sees business owners wait too long to reach out for help and as a result lose assets that they didn’t have to.
However, legal services providers expect a jump in demand for their services soon.
“We anticipate a tsunami of business filings in late summer, early fall,” said Rosenblum. “Then they will drop to practically nothing after that, because everybody who is going to file will have already filed.”
And, while marketing services did make the thrive list, there is plenty in that category that is being cut back too. So what if you’re still struggling?
Rebound advice: Show how your service pays off quickly. “The firms that have been hit the hardest don’t solve a key immediate pain point for keeping a business running or focus on a longer-term investment,” said Chan.
He says companies want to see immediate ROI.
“One area we’ve seen get hit very hard is search engine optimization,” he says. “SEO is a longer-term investment and a longer-term return, so businesses have been cutting it to save cash.”
Rebound advice: Consider a flexible payment model. If you can afford to, allowing a cash-strapped client with a strong business model to defer fees can pay off long-term.
“Revisit a more flexible pricing and engagement model,” said Wetzler. “For example, we eliminated 12-month contracts and narrowed our billing down to two different tiers. Easier to understand, to manage and to see very clearly where the value is.”
When the economy turns around, clients you helped survive will remember. Customer empathy can be good business.
Rebound advice: If you have not yet maximized runway, do so now. Successful companies cut their overhead early on to avoid laying off precious talent, give customers better rates and protect their margins.
“Any service firm that has significant overhead or a large percentage of hourly or entry-level people is looking at a rough ride,” said Wexler. As customers seek value, services that cut away unnecessary expenditures but keep core skills intact will be more able to deliver.
Rebound advice: Diversify, diversify, diversify. While some companies could see no path forward to profitability, others created new revenue streams, even if they were only temporary.
“One interesting example of a struggling business is our Winnipeg Airport parkade — no flights mean no business,” said DeVos. In response, it invested in temporarily becoming a drive-in movie theatre. That allows the parking company to recapture a bit of lost revenue and also gives people an opportunity to get together to watch a movie on a big screen while adhering to physical-distancing measures.
Ultimately, service providers that are thriving were quick to undergo the necessary purges and restructurings.
“There is a new demand for pricing flexibility that will weed out the most dedicated start-up consultants from the posers, and this is true across all types of business consulting — accounting, legal, tax, operations and marketing,” said tax consultant Minihan.
MSPs are reporting that ARR is solidly holding, but the associated consulting services that would go toward acquiring new customers are trending downward.
“Unprecedented risk? Yes,” Minihan said. “But also, the opportunity for unprecedented reward. Consultants are staring at a stunning opportunity to build goodwill and client relationships that will last a lifetime.”
A prolific writer and analyst, Pam Baker’s published works appear in many leading print and online publications including Security Boulevard, PCMag, Institutional Investor magazine, CIO, TechTarget, Linux.com and InformationWeek, as well as many others. Her latest book is ”Data Divination: Big Data Strategies.” She’s also a popular speaker at technology conferences as well as specialty conferences such as the Excellence in Journalism events and a medical research and healthcare event at the NY Academy of Sciences.