Defining The High-Performing Boutique Consultancy

“If you knew a way to become a high-performing consultancy, would you adopt it?” This is the first thing prospects see when they come across my website.

I dedicate a lot of time to sharing my knowledge and the lessons I’ve learned along the way. Much of that content revolves around helping boutique consultancies achieve the ‘high-performing’ status. 

However, what is a high-performing consultancy? 

I decided to address this question after a call with a prospect a few weeks ago – a founder and managing partner of a boutique consultancy. “Luk, I know you focus on helping consultancies become high-performing, but I think we’re already there. We just need an outside perspective on a new service we plan to launch.”

Sure, no problem. I can do that. I’ve acted as an independent outside party to provide an objective opinion on requests like this dozens of times. It's a piece of cake, I thought.

Boy, was I wrong!

The next step was to set up a discovery process where I would first gain a deeper understanding of what the consultancy does, how it does it, what problems it solves, who it caters to, and what the unique selling points are. This foundational information was crucial for me to be able to advise on the new service launch.

Unfortunately, once I started digging, I discovered that ‘high-performing’ was used interchangeably with ‘overworked’, ‘overextended’, and ‘aggressively yet unsustainably growing’.

None of the criteria that I typically use to determine a consultancy's level of performance were met to qualify it for the ‘high-performing’ status.

That’s why, in this post, I’d like to clarify what I mean by high-performing boutique consultancies and what, in my opinion, doesn’t cut it. 

What is a high-performing boutique consultancy (HPBC)?

While I've noticed about a dozen characteristics high-performing boutique consultancies share, I can narrow them down to four large categories. Now, this is not based on scientific research or data analysis. Instead, it’s based on my observations working in the trenches of consulting for many years.

1. Client acquisition is primarily inbound
2. Existing clients get retained and developed
3. Gross margins are high
4. The ability to attract and retain top consultants is strong

Let’s go over these one by one.

#1. Client acquisition is primarily inbound

The first indicator that signals that a consultancy is an HPBC is how it acquires its clients. Prospects come knocking on their door. This is usually the case because this consultancy has built up a reputation for delivering exceptional results in a specific area for a narrow audience. 

As a result, prospects seek the HPBC for its differentiating expertise and crystal clear value proposition: issue-led, outcome-driven, and ICP-based. 

This allows the consultancy to achieve the following:

• Charge premium fees: Clients are typically happy to pay the fees because of the tangible, accurately predicted value that the consultancy can deliver
  
  
• Fuel growth: HPBCs typically rely on existing clients to generate most of their revenue and keep new client acquisitions to fuel growth. They have a healthy pipeline of work and leave around 30% of revenue to be filled with projects for new clients.
  
  
• Work with “ideal” clients: When client acquisition is inbound, consultancies can afford to be picky about who they work with, allowing them to fill their pipeline with their “ideal” clients.
  
  
• Have higher win rates: The ability to turn client acquisition into a primarily inbound activity means the consultancy offers high-value results, which makes outbound client acquisition that much stronger.
  
  
• Lower client acquisition costs (CAC): Three out of four inbound marketing mediums cost less than any other outbound marketing tactic. Additionally, inbound marketing costs tend to decrease over time as consultancies build up a catalogue of knowledge that they revisit, update, and build upon.
  
  
• Turn clients into long-term contracts: HPBCs strive to develop meaningful, value-based relationships with their clients through strategic key account management.

Recommended reading: (Case Study) Replicate the Secret of This Highly Profitable Consultancy

#2. Existing clients get retained and developed

The HPBC never hits 'The Project Wall'—completing one-off, smaller projects requires constantly competing for new clients. Instead, it retains and develops existing clients over an extended period with the help of its strategic service design and key account management at the C-level. 

The outcomes of such dedication to client development and retention are typically the following:

• Revenue stability: About 70% of the revenue comes from existing clients, creating a stable revenue foundation. There is no ‘hustle mode’ to chase new clients, and there is no constant stress over cash flow.
  
  
• Balanced corporate culture: Revenue stability and pipeline predictability mean that employees – consulting teams and their leaders – work in a healthy culture where they are not underutilised or overextended at any point. It’s a balanced pace where every team member knows the expectations and what tomorrow will bring.
  
  
• Expertise depth: Continuity in client work also allows HPBCs to discover typical client journeys over a more extended period, continuously deepening their expertise, which only increases the value of their work over time.

Recommended reading: Moving Beyond One-Off Projects in a Boutique Consultancy

#3. Gross margins are high

I’ve seen such stark differences between HPBCs and average consultancies that I sometimes couldn’t believe they cater to the same audience!

The industry average for gross margins seems to be around 20-30%. HPBCs achieve >50% gross margin. I’ve worked with consultancies with >60-70% gross margins consistently!

HPBCs can achieve such outstanding results because:

• Developing existing clients is far more profitable;
• They sell their services at premium pricing because of their differentiating expertise and signature methodology (and don't get challenged);
• They foster a narrow focus and specialisation, leading to a high degree of repetition of similar projects, standardisation of methodology/process, and low variability of outcomes—all of which lead to high efficiency and productivity and more accessible training of new consultants.

#4. The ability to attract and retain top consultants is strong

Consulting is a people business. People are the main asset and a crucial contributor to success. I found that a strong client value proposition is also a strong employee value proposition. Consultants want to work for businesses that have excellent market reputations, that have prospects coming knocking on their door, and that value each team member's contribution and reward it accordingly. 

Consultancies compete in two markets: the client market and the employee market. These two are directly linked. I’ve observed on numerous occasions that when a consultancy struggles in one market, the other one suffers. The inability to recruit top talent will impact the quality of client results. Similarly, the failure to recruit the “ideal” clients and the inability to build a predictable pipeline of work and revenue results in high turnovers, poor reputation among job seekers, and poor recruitment results.

What a high-performing boutique consultancy is NOT

Now that I have covered the foundational elements that make a consultancy high-performing, I’d like to address some common misconceptions about the concept.

• Revenue growth is not a reliable indicator of high performance. While revenue growth can indeed be observed in HPBCs, this indicator means nothing. Growing at an unsustainable rate, doing so by overextending employees, increasing costs at the same or higher rate as revenue growth, and growing revenue at the expense of profits are all indicators of a consultancy that is going to implode. It’s just a matter of time.
  
  
• High variability of services is usually an indicator of a low-performing consultancy. When I see a boutique consultancy offering a buffet of services to multiple audiences, I already know that their profit margins are low (potentially non-existent), and the consultancy is overextended. It’s unable to deliver value past superficial levels, which means it’s not getting paid premium fees, which, in turn, means it always has to hustle to recruit new clients.
  
  
• The ability to recruit new clients to cover more than 40% of revenue is not high-performing behaviour. I’ve talked to consultancy owners who were proud of the fact that they had no problem acquiring new clients. However, they were not able or willing to develop that relationship into long-term client engagements. Instead, most of the revenue was dependent on client recruitment. Unfortunately, that indicates service design flaws and a lack of business maturity.
  
  
• Predominantly outbound client acquisition is not an indicator of an HPBC, no matter how successful. I don’t care how good consultants and consulting leaders/owners are at soliciting business if they do so through outbound methods. This method is simply too costly. The time of consultants with deep expertise is too valuable to be spent on sending prospecting emails, doing cold calls, and putting together sales pitches and customised proposals.

Recommended reading: The 12 Characteristics of a High-Performing Boutique Consultancy

In conclusion

Achieving the status of a high-performing boutique consultancy is about more than just impressive revenue growth or a broad range of services. It involves a strategic focus on inbound client acquisition, retaining and developing existing clients, and maintaining high gross margins. 

HPBCs create a sustainable and profitable business model by specialising and honing their expertise. They build strong, long-term client relationships, ensure stable revenue streams, and foster a healthy work environment where employees can thrive without being overextended. 

This allows consultancies to deliver exceptional value consistently, justifying premium fees and fueling continued growth. 

HPBCs don’t struggle recruiting consultants – top talent wants to work for such businesses. 

Consultancies that are still chasing clients, struggling to retain them, and operating on thin margins still have a way to go.

It's time to rethink its strategy, redefine its value proposition, and stop playing small with one-off projects at low/average pricing and no chance to develop a repeatable methodology, and instead invest in the expertise, reputation, and visibility.

Interested in receiving all my learnings to build a better consultancy?
Subscribe to my newsletter.