For a service business of any type, the pipeline of work is the most critical indicator of business health.
Consultancies are no exception. The pipeline represents potential revenue, growth opportunities, resource demands, and recruitment needs.
However, managing a consulting pipeline effectively is a challenging feat. Consulting leaders must deeply understand their market, clients, service offering design, and internal capabilities.
In my experience, there is a strong connection between how consultancies manage their pipelines and how they manage their business internally.
If one is managed poorly, odds are, internal processes (be it new business development, project and scope management, internal task allocation, hiring and knowledge management, etc.) are managed just as poorly.
Pipeline management and how it can be used as an indicator of consultancy management is the topic I’d like to dive into in this post.
Pipeline forecasting and management – while two very different processes – are both challenging. Both require a disciplined and reliable approach to make sense of an inherently unpredictable business that is consulting due to such constantly changing factors as client needs, market conditions, and unexpected challenges.
This list is not exhaustive by any measure. However, it does include some of the most common reasons and complexities of pipeline forecasting and management.
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As complex the processes of managing and forecasting pipelines are, they become infinitely more difficult for businesses that do not have a clear focus on their work. Such focus offers a buffet of services to a giant pool of prospects.
"What consultants need is the confidence that "the void" that is created by saying no, becomes an opportunity to do things that bring them further and closer to what they want to do. And with that comes the confidence that something else will come along, because they're worth it". (David Ducheyne, founder of Otolith Consulting)
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Having conducted dozens of assessments of consulting firms’ pipeline management and forecasting processes, I have yet to come across a firm that does a poor job of managing and predicting their pipelines yet doesn’t have the same issues in consultancy management.
These processes are strongly and inherently tied together.
Here are a few dimensions of high-quality pipeline management and forecasting and how they instantly translate to consultancy management.
Let’s look at the sales process.
Firms that fail to set up and standardise the system cannot effectively track and optimise the work of their sales, marketing, and business development executives. It will make it difficult to track and evaluate the performance of employees in these departments, provide actionable feedback, and determine whether there are inefficiencies or skill gaps.
Similarly, firms that fail to measure their sales pipeline accurately inevitably struggle to determine how to efficiently allocate resources internally, which includes the projected time commitments of employees – the consultants.
Call me crazy, but firms that do not bother to regularly review their sales pipelines and identify and address problem areas most likely take the same “hands-off” approach to managing employees.
The reviews of employees’ performance tend not to be a priority. Regular assessments of skill gaps – not really. Listening to employees' feedback and determining how to address the issues brought up – only when things reach a boiling point.
A positive internal culture builds a more realistic pipeline management and forecast.
A positive internal culture, marked by openness and honesty, is crucial for accurately assessing deal closures in consultancy pipeline management. In environments where transparency and alignment are prioritised, teams feel comfortable discussing the realistic prospects of deals without the pressure of inflated expectations or internal politics. This honesty prevents the pipeline from becoming a vanity tool, where deals are overestimated for appearances rather than accurate planning and forecasting. On the other hand, a culture plagued by pressure, politics, and misalignment leads to an unreliable pipeline, hampering effective decision-making and strategic planning.
Let’s look at the sales forecasting process and its success dimensions.
Consulting firms that cannot standardise the evaluation and forecasting method typically offer a buffet of services. They tend to cater to too broad an audience, chase prospects with never-ending follow-ups, and offer discounts as a way to compete.
This type of business development strategy typically leads to quite a bit of stress and unpredictability, which, in turn, impacts consulting leaders’ ability to manage their teams effectively.
Data is king, but only when data collection strategies have been standardised and aggregated over time. Unfortunately, firms that do not have a clear – and narrow – expertise focus often end up with meaningless data. It’s spread across a vast audience pool and has too many opportunities to show reliable trends and patterns. This leaves consulting leaders with nothing more than a gut feeling to make forecasting calls.
It comes as no surprise that this leads to utterly inefficient budgeting of resources. Consultants end up overworked for periods and underutilised for others. The same goes for whatever software solutions the firm uses, support staff, and everything else.
An accurate projection of revenue enables consulting leaders to make well-planned decisions. Is there a 20% growth expected towards the end of the year? Perhaps it’s a good idea to recruit new employees 3 months in advance to ensure they are up to speed and hit the ground running when the time comes. Without accurate revenue projections, teams go through turbulent times, utilisation of resources is not optimised, and client deliverables get delayed.
This brings me back to the issue of internal alignment. Consulting leaders who manage their teams effectively understand the value of such alignment and strive for it in every aspect of business. Forecasting is a critical aspect of the business.
Consultancies can use these success dimensions to assess their performance. That’s how I do it when I do my consultancy performance audits. It can tell a lot about the way a consultancy is managed.
If a consultancy can’t manage and forecast a consulting pipeline in a disciplined and reliable way, it might be a good idea to look under the hood of the business.
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Setting the proper pipeline forecasting and management habits is never too early.
If I had known 15 years ago (when I started my first consultancy) what I know today, I would have started with pipeline management and forecasting from Day 1.
Why?
Well, relatively straightforward: to avoid sleepless nights when you have to run the payroll at the end of the month. Cash flow predictability becomes extremely important once the consultancy has a few people on the team. And that's where pipeline management comes into play.
Pipeline management is an essential aspect of running a successful consultancy, and it forced me in the past to think about strategy, target audience, service offering, leadership alignment, team management, resource planning, internal culture, sales capacity, existential health, etc.
It's a core component when determining how to ensure a steady workflow and revenue. By tracking and forecasting the pipeline, a consultancy can better plan for staffing needs and make more informed business decisions.
In the early stages of a consultancy, pipeline management may be less complex, with fewer clients and projects to track. However, it is still important to establish processes and systems for managing the pipeline for future success.
At a later stage (but still early enough), I would always invest in software or infrastructure to ensure the pipeline is effectively tracked and forecasted.
I also strongly encourage consultancies to start tracking an opportunity as soon as it enters the sales process.
This means the opportunity has been identified as a potential project or engagement, and there is a clear path forward for moving it through the sales process and into the pipeline.
In consulting, most opportunities are generated by the business people (the consultants), so it's helpful to agree on a transparent process internally on how to activate it and by whom.
What-when-how-who that's what needs to be agreed on. And that's easy but requires discipline and follow-up, given the financial implications.
Over the years, I’ve worked with large and small consultancies, early-stage consultancies, and consultancies that have been in the game for a while now.
I can’t remember a single example of a well-managed consultancy with substandard pipeline forecasting and management systems.
Every successful business I audited had robust systems for almost every aspect of running their business.
They had data at the tip of their fingers that they could seamlessly turn into insights. They could accurately predict revenue for the following 6 months and sometimes even 12 months. They planned, hired, and trained newcomers in advance, not in a reactive manner. They communicated to their teams what to expect, why, and the best way to achieve it.
Last but not least, you guessed it, these successful consulting businesses had in common – they had a strong focus. They did not get distracted from it to chase irrelevant or non-ideal opportunities.
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