Using Your Firm’s Big Data to Create a Growth Strategy
Christine Nietzke, Founder, Rainfall Consulting
For many firms, the fourth quarter means budgeting and planning for the upcoming year. Budgets for marketing are often calculated based on a percentage of total revenue for the firm or what was done in the previous year. To better identify where marketing and business development budget monies should be spent, segmentation of the firm’s revenue can identify areas that warrant investment.
Deeper Segmentation Provides More Insights
Segmentation Level 1. Firms generally capture revenue segmentation by service line and, if multiple office locations are involved, revenue is captured by location as well. Segmentation of firm revenue by these two methods provides valuable reporting to validate the initiative to increase consulting services revenues or to identify underperforming office locations.
Segmentation Level 2. However, taking revenue segmentation further provides a deeper view into the types of clients and what the firm provides them. This kind of information not only shines a light on what the firm does a lot but puts a beacon light on what the firm doesn’t do.
Using NAICS codes to segment firm revenue by industry concretely identifies where depth of industry experience exists in your firm. Conversely it also identifies where the firm has little involvement in an industry which could mean potential opportunities. Service line leaders and niche teams can use this information to create a coordinated plan to target specific clients in an industry with specific services when they are developing their growth plans.
Segmentation Level 3. Taking segmentation even further by reviewing firm revenue by industry, then by billable code, can be completely eye opening for a firm. Seeing the proof in a report that a firm does a better job of capturing all the opportunities in some industries than others helps marketers and business developers strategize and plan. Don’t be surprised when some of the partners are surprised by the numbers. When partners or principals see their firm this way for the first time, they are always surprised by one or more aspect of it.
Reports like this show in black and white where the firm is successfully providing multiple services for clients and where it is not. Showing data at this level in both dollars and as a percentage of total revenue keeps the focus on the important numbers.
Segmentation is Powerful Knowledge
The insight the firm receives from segmentation reports moves business development and marketing planning from concept-based to research-based planning.
Segmentation is the research-based information a firm needs to validate a decision to target clients in an industry. Segmentation reports identify which services are currently provided in addition to which professionals in the firm are working with those clients. It removes the guessing or gut feelings and bases it on true numbers.
Step 1. For firms not currently capturing their revenue this way, the first step is to generate a segmentation report for each of the previous two to three years. Firm administrators, controllers or COOs are incredibly helpful to gather this information.
New reports are heavily scrutinized; therefore, the totals must be absolutely valid. Creating these reports from historical information first allows the numbers to be checked for accuracy against the previously reported numbers. This is an important step to complete before reporting current segmented numbers. These numbers must be credible if they are going to be used to make decisions.
Step 2. Segmenting the numbers in previous years allows trends to be identified, which then allows planning for the upcoming year to be based on actual results. The first to benefit from this information are clients. Clients benefit from this segmentation because it identifies where the firm is solving problems for clients (only one service provided) and where the firm is helping clients improve their businesses (providing multiple services). This is the proverbial low-hanging fruit.
The easiest organic growth comes from current clients and the firm now has a map to direct marketing and business development activities toward a first plan of action.
Step 3. By having a detailed account of clients, NAICS codes and services provided based on billable codes, the firm’s current overall situation can be analyzed to create solid plans for future growth beyond just the upcoming year. Segmentation at this level provides a lot of details that are missed in financial statements. It’s akin to viewing the firm through a camera’s zoom lens.
Combining the segmentation insight with firm commitment, research, and industry and client knowledge, a strategic growth plan can be created and resources can be allocated with more confidence. Resources can also be reallocated to support initiatives that may have had limited support in the past simply because the data didn’t exist to validate the spending.
By the Numbers
When marketing budgets are mainly calculated based on a percentage of firm revenue or with a reference to historical spending, it can be difficult to rid the firm of pet projects that do little to promote or grow the firm.
Revenue segmentation helps determine what to start doing, what to stop doing, and what to keep doing well. Based on the firm’s own big data.