Growth vs. Profitability? Can both be a strategic focus in your PS Business?

Professional services organizations have to keep a lot of balls in the air at all times. They are acquiring new clients, keeping existing ones. Finding the right consultants, maintaining balance for the ones you have, ensuring that they have the skills needed for the work that must be done. Reviewing reporting, looking at what’s working and what isn’t, and making the hard decisions about where to go next.

Whatever other concerns you have, at its core a professional services organization is still a business. There are two things that are common concerns for all businesses – growth and profitability. As you consider your objectives and plans, the question is should you focus on one over the other? Which is the priority? Can you afford to focus on just growth and ignore profitability? Or visa versa? And how do you achieve either in a way that maintains a healthy business?”

It’s not a choice

The most important thing to know is that it isn’t a choice of growth or profitability. It must be both. You can’t have a business that survives without being profitable, and you can’t have a profitable business without growth.

Instead, you need to think about it like a sliding scale, with growth and profitability on either end and the slider your focus. You can move your focus toward one, but the other is still there and requires at least some attention.

The big question is, then, what does that balance look like when you are leaning toward one or the other.

Growth

Growth requires risk – risks that you may not normally take. The more aggressively you lean into growth, the more risk you take on. You can hire a new salesperson with the intent that they will help bring in more business or bigger projects. However, that salesperson comes with costs, like salary and expenses. It could be some time before they are paying for themselves, let alone accelerating the growth you are hoping for.

Some of that risk is an investment that you may not see a return on for some time. Marketing is another example. At Top Step, we invest significantly in our marketing. That can get reflected in our year-over-year revenue as a cost because it’s a longer-term investment. It will take time, and in the meantime, it’s a risk to put that revenue into something that won’t return right away.

Any of the investments you need to translate into growth – hiring, marketing, sales, and so on – will initially appear as costs and not as profitability. They are, however, inextricably linked.

Profitability

Of course, you can’t ignore profitability. Without it, you don’t have fuel for the business. If you’re comfortable with where your business is today, you could push the focus to the profitability side of the slider. Top Step tends to focus on growth, but as a professional services organization there are things we could do that would be less risky and slow growth, even to a standstill. It all depends on the level of risk you’re comfortable with and your long-term goals for the company.

The engine for profitability comes from cutting costs or increasing revenue, or both. You may say that you’re risk-averse and decide to cut costs. You could reduce headcount or cut back spending on training or marketing. Those activities, though, are a risk of their own. With fewer team members you’re not in the best position to take on new projects. Without marketing, you’re less likely to attract new clients, and without training, you’re less prepared to serve your clients.

The balancing act

However, what ties growth, revenue, and profitability all together in professional services is your team.  Whichever way you lean, your team is crucial for achieving your goals. Bringing on consultants can be risky, but it’s also how you bring on more clients. With fewer consultants, you can’t take on more work, and if you do, you risk burning out the team you have.

In the end, wherever you end up on the growth-profitability spectrum at any time you must take your team, their ability to be productive, and even their work-life balance into consideration to be successful.

Conclusion

At the end of the day, it’s not about choosing one over the other. It’s about growing to fuel your profitability and being profitable to fund your growth. There is a time and a place for each one of these facets to take center stage, and in truth, only one of them can be front and center at a time. But the other is always in the wings, waiting for the spotlight and supporting the one that’s the current focus. Regardless of which is most important to you at any given time, a professional services organization relies on the people who serve the clients. Focus on the strategies that help you keep them happy and fulfilled to meet your goals for both growth and profitability.