Why One-Stop-Shop Consultancies Are Bound to Be Low-Performing

Not long ago, I had a lengthy chat with the owner of a one-stop-shop (OSS) boutique consultancy. This firm offers services ranging from bookkeeping and accounting to tax and financial advice, HR consultancy and payroll admin, digital transformation, and more. 

“Luk, we offer growing and medium-sized businesses the convenience of sorting out a large chunk of their business needs in one place” – that was the selling point. 

There is nothing inherently wrong with this approach. Who am I to say that such businesses have no right to exist? However, I have yet to come across a one-stop-shop consultancy (or full-service - FS) that comes even close to the profit margins that successful specialised firms can achieve. 

I’ve spoken to owners and leaders in multiple such firms in Europe and North America. What I find in abundance at boutique OSS or FS consultancies is stress, though. 

Almost every conversation, once we start discussing topics just slightly below the surface, reveals the enormous pressure and the burden of uncertainty that these consultancy owners carry on their shoulders:

• The inability to accurately forecast revenue and project pipeline consistently,
• The constant chasing of prospects to sell as much as possible of the service portfolio,
• The endless demands from clients, order-taker-like (with a tendency to overservicing and hourly billing),
• The tough employee hiring challenges to cover all the different expertise domains across the service portfolio,
• The constant service offerings switch and adaptations to satisfy the broad prospects’ expectations.

You name it, I’ve heard it!

In this article, I want to explore why the very design of OSS or FS consultancies prevents them from becoming high-performing and what can be done about it.

How one-stop-shop boutique consultancies operate

I want to clarify that I’m referring to boutique consultancies only in this post. I’m not talking about large multinational consultancies – the Big Fours of the world. 

That’s a completely different ball game where an OSS or FS model can flourish due to the sheer volume of resources these firms have.

The consultancies I work with and talk to are between 20 and 125 consultants and/or deliver between €2 million and €30 million in annual revenue.

An OSS consultancy offers clients a wide range of independent services, intending to meet all their needs within a single firm. The idea is to be a single point of contact for all consultancy needs, theoretically simplifying the client's life and ensuring cohesive, integrated solutions. 

There are three main reasons why I noticed consultancy owners gravitate toward this business setup:

1. Differentiation: Many owners try to set their consultancies apart with a “there is nothing we can’t handle” approach.
   
   
2. Convenience: A common view is that the OSS model will eliminate much of the hassle for clients since they can now sort out multiple—or all—of their needs in one place.
   
   
3. Risk reduction: It is perceived as a business model that minimises risk—the more services a consultancy offers, the larger its target audience, and the more avenues for revenue it opens up.

Unfortunately, research and everyday experiences have taught me that OSS or FS often disappoints expectations. 

Here’s why an OSS model typically underperforms.

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

The problem with the one-stop-shop business model

The idea of offering diverse, independent services sounds great in theory but usually leads to underutilization and diminished value. More specifically:

• Dilution of expertise: One of the most significant issues with the OSS model is the dilution of expertise. While an OSS aims to cover all bases, it often results in superficial knowledge across many areas rather than deep expertise in a few. 
  
  This expertise dilution is detrimental to both the client and the consultancy. Prospects are increasingly cautious buyers – this trend was only accelerated by the pandemic but was building up for a while before it. Clients seek consultants with profound knowledge and experience in specific areas to address their most pressing challenges. They are looking for truly transformational results that will impact their bottom line. When a consultancy spreads itself too thin, it risks delivering subpar service quality. And prospects know it.
  
  
• Underutilization of services: Clients rarely utilise all – or even most of – the services an OSS offers. They tend to hire an OSS consultancy to address a specific need, never even considering taking advantage of the complete list of services. And really, how often do we, as consumers, try every single item on the menu at a buffet restaurant?
  
  
• Operational inefficiencies: This underutilization of services leads to wasted resources, as maintaining a broad range of services requires a substantial investment in hiring and retaining diverse experts. This results in higher operational costs without corresponding revenue, which, in turn, leads to diminishing profits. 
  
  Instead of benefiting from the efficiency gains that come with process repetition, automation, and standardisation of processes, OSS consultancies spread their resources paper-thin.
  
  Recommended reading: Why Repetition Is the Path to Becoming a High-Performance Consultancy
  
  
• Client confusion: An OSS model can sometimes overwhelm clients with too many options. Clients may struggle to understand how to best utilise the range of services offered, leading to unclear expectations and, ultimately, dissatisfaction. 
  
  Straightforward service offerings that clearly show how certain problems will be tackled and what outcomes will be achieved are generally more attractive to clients than a convoluted, expansive menu of options.

"When you hang out a “full service” shingle, you’re advertising your firm as the equivalent of a family doctor or a country lawyer. Just remember that this business strategy attracts mostly small, unsophisticated clients with limited budgets". (Tim Williams)

How OSS boutique consultancies can revise their model to achieve higher profit margins

While my base advice to aspiring consultancy owners would be not to go down the OSS route to begin with, the reality is that I don’t work with early-stage firms. My clients—and consultancy owners that I speak to daily—run businesses that have been around for at least 4-5 years and have built up significant resources, be it the number of employees or annual revenue.

So, the issue that I help these consultancies tackle is what to do next, how to transition the consultancy into a business model that would be more conducive to delivering high-profit margins and would remove a large chunk of the stress of running an OSS business.

With that in mind, here is what I recommend that boutique consultancies stuck in the OSS model consider:

1. Reducing the number of services for more focus

Rather than spreading thin, I suggest consultancies concentrate on their core strengths. By narrowing focus, firms can deliver higher-quality services and become experts in specific areas. This approach enhances client trust and ensures more efficient resource allocation, addressing the utilisation challenge. Specialisation allows for deeper expertise, which can lead to better client outcomes and higher satisfaction.

2. Creating clear client journeys

Designing structured client journeys can significantly improve cross-service utilisation by guiding clients through a sequence of connected services based on their maturity or improvement process. This creates a more coherent OSS model. 

This approach helps clients see the value in utilising multiple services in a logical progression, which, in turn, can improve their engagement and satisfaction. A well-designed client journey ensures that clients are not overwhelmed but see a clear path to comprehensively addressing their challenges.

3. Designing and implementing vertically integrated services

Vertical integration involves creating seamless, interconnected services within a particular domain. 

For example, a firm with strong expertise in digital transformation might offer a suite of services that include strategy development, implementation, and ongoing support, all tightly aligned and supporting each other. 

This approach ensures that all services are interconnected and, as a result, provides clients with a holistic model. Vertical integration can enhance service quality and deliver a more consistent client experience.

Recommended reading: Why Vertical Service Integration Is the Future of Growth for Boutique Consultancies

4. Leveraging cross-functional teams

Cross-functional teams can gather experts from various services to collaborate on client projects. This approach can be more integrated, but it’s not easy. 

The holdings/portfolio companies OSS challenge

A common trend in the consulting landscape involves investors and buyers acquiring consulting firms to create a portfolio of specialised services. These portfolios are strategically formed to integrate various boutique consultancies that complement each other.

While not all of these portfolios are created with the one-stop-shop (OSS) approach in mind, those that are will face the typical challenges associated with the OSS concept. The primary objective of these OSS-similar portfolios is to offer clients a one-stop-shop experience similar to what large integrated consultancy firms provide. However, as described in my article, they must navigate the challenges of maintaining coherence and integration.

The projected benefits of these portfolios could include:

• Broad service offering: Clients have access to a wide range of specialised services under one umbrella, making it convenient and efficient for them.
  
  
• Cost reduction: Unified management of finance, marketing, and HR functions helps in reducing overhead costs, as these functions are centralised and streamlined across the portfolio.
  
  
• Potential synergies: The portfolio aims to create synergies by leveraging the strengths of each boutique firm, leading to cross-functional collaboration and integrated solutions for clients.

Having worked with several such syndicates—all with varying degrees of centralised management and resource planning—I noticed that they tend to experience the same problems as solo boutique consultancies with an OSS or FS business model.

1. Integration of services: Creating synergies at the service level involves integrating the different expertise areas of each boutique firm. This is complex because:
   • Varied cultures and processes: Each firm has its own culture, processes, and methodologies, making it difficult to standardise and integrate operations.
   • Coordination and collaboration: Effective collaboration across firms requires robust communication channels and a willingness to work together, which can be hindered by competition or differing priorities.
     Differing expertise domains: Each firm specialises in different areas of expertise, making it challenging to align and synchronise their services into a cohesive offering.
     
     
2. Consistency in quality: Maintaining consistent quality across diverse services is challenging:
   • Quality control: Ensuring each firm adheres to the same standards of quality and service delivery can be difficult.
   • Client expectations: Managing client expectations and delivering a seamless experience across different service areas requires meticulous coordination.
     
     
3. Marketing and business development: Consulting marketing is fundamentally about building trust at scale, with its roots in educating the target audience. Given the vast differences in expertise domains within the portfolio, creating synergies in marketing efforts is nearly impossible:
   • Unified messaging: Crafting a unified message that effectively represents each firm's diverse services and expertise is highly challenging.
   • Audience education: Educating a target audience that spans multiple domains requires tailored content and strategies, which can dilute the overall marketing efforts.
   • Trust-building: Building trust across different markets and services simultaneously can lead to fragmented and less effective business development initiatives.

In my experience, the myth of "finding synergies" in these diverse portfolios often crumbles under scrutiny. In reality, forcing alignment among vastly different expertise domains and attempting to standardise marketing, quality, and operations across boutique consultancies is a Herculean task that rarely pays off. 

My advice: Instead of chasing elusive synergies, focus on leveraging each firm's unique strengths and specialisations. This approach – together with cost savings at the headquarters level, such as finance or HR – will yield far more practical and impactful results.

In conclusion

In my experience, the OSS or FS model in consulting often promises more than it can deliver. Despite aiming to provide comprehensive, integrated solutions, it frequently leads to inefficiencies, diluted expertise, and reduced profit margins.

However, boutique consultancies can take several approaches to overcome these challenges. Narrowing their focus, creating structured client journeys, implementing vertically integrated services, and leveraging cross-functional teams are strategies that can deliver better value to clients. 

I advocate these methods based on my experiences in the field, but I am sure other solutions may also be effective depending on each consultancy's specific context.