The Top 5 Challenges Boutique Consulting Firms Face

Boutique consulting firms, or firms that operate within niche markets, are attractive to many in the consultant community. The more close-knit culture, focus, and flexibility they afford provide a welcome change to the hierarchy and bureaucracy of many larger firms. Yet boutique firms are not without challenges, as well. Challenges differ according to consultancy size and services provided, but in our conversations with our clients, we’ve identified a number of trends among the challenges they face. Here we discuss the top five challenges for boutique consulting firms.

1. Business Development: Where does the next deal come from?

While some boutique firms are larger and well-established, most boutique firms are on the smaller side, ranging from around 10-50 employees. Just as any smaller company does, these boutique firms must constantly worry about where the next sale will come from. These firms have neither the brand recognition nor the established client bases of larger firms, so losing a client can place a strain on a firm. Many boutique firms tend to rely on word-of-mouth marketing from their current clients in order to win new business, but this passive marketing is not always sufficient. Boutique firms must therefore put a lot of effort, time, and resources into marketing so that potential clients know that they exist. Strong sales and marketing skills are vital to boutique consultants.

2. Competition with the Top Tier

In a similar vein, boutique consultancies must not only make themselves known to the business community, but they must do so while competing against the well-established and well-reputed top-tier firms. Some boutique firms find it easier to compete because they are so highly specialized, but many still compete with particular services the larger firms offer. For these boutique firms, lower prices are frequently their biggest differentiator. While lower prices may be attractive to smaller clients or in difficult financial times, many companies will opt to go with the larger firm with the established reputation, regardless of how much more they must pay for it. Boutique consultancies must therefore work to find additional points of differentiation from larger firms, such as in better client relationships, tools that improve speed or quality of engagements, etc.

3. Resources Spread Thin

Most boutique firms have minimal, if any, administrative staff. As a result, while boutique consultants have the benefit of being on the front line of every engagement, they must also do most if not all of their own clerical work. Unless consultants have tools to help them accelerate either their clerical duties or their consulting work, many will find themselves overwhelmed when business is moving quickly.

4. Speed or Quality?

Because resources are often spread thin, many boutique firms are not able to scale to the extent that larger firms can. If a boutique firm has a large client, for example, its consultants must gather and sort through a large amount of client data in order to thoroughly understand the client’s business. With a small staff, performing this kind of thorough client discovery can require a much longer timeframe than many clients expect today. One of our clients informed us that it took a full four months to schedule meetings with 40 people in a client organization, simply because it was difficult to coordinate everyone’s calendars! If the consultants are forced into a smaller timeframe, the quality of their deliverables and recommendations may suffer because they were not able to gather sufficient data.

5. Disconnected Tools

Because boutique firms have fewer resources than larger firms, they frequently do not have the same access to the tools that larger firms do. Many top-tier firms have their own tool sets that are connected and allow the consultants to operate efficiently, while boutique firms are still operating with highly manual Microsoft tools such as Excel. Similarly, many boutique firms lack established methodologies or frameworks, requiring a highly customized process for every engagement. Without tools to help accelerate this process, many boutique firms will find it difficult to scale their businesses.

Although the challenges boutique firms face may seem intimidating, there are certainly solutions to all of the above. In some cases, growing a boutique business to the point where everything runs smoothly and business is consistent may simply take time. In other cases, adoption of consulting tools may aid consultancies in accelerating their engagements, providing consistency and repeatability, and furnishing a point of differentiation from other firms.