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Wednesday, February 20, 2008

Small or big (3)

Ford Harding just posted this comment to my earlier posting "Small or Big". It is worthy of reposting here:

Dear Mark:

Your comments on my posting helped me realize that the piece is missing something. Some firms welcome a professional who sells many small projects.

For example, I know one MEP engineering firm that specializes in doing all the small projects that other firms would find to be a nuisance and give to their weakest engineers. They have built a strong niche by doing so. Others find it is not in their best interests to do small projects, excepting those that provide a portal to larger ones. Doing small projects is often less profitable, because leverage is lower. Selling costs can also be much higher per dollar of project.

Administering so many small projects is also expensive, especially if a firm is set up to administer large ones.

Our study of professional firms that experienced geometric growth for several years, revealed that many felt that turning away small work and small clients was one of the elements that kept them on a high revenue growth track. Firms like Accenture, CSC Index, and Diamond Technology grew extremely rapidly by turning away work and clients that would have distracted thier professionals from bigger clients.

One firm I know would only work for clients paying fees of at least $250,000 a month. During the go-go years they increased this to $450,000 per month. I also know the profitability of this firm which was at jaw-dropping levels.

Even with my own little firm, we found that profitability grew noticeably when we stopped taking small assignments that were in no way linked to larger ones. Pushing the minimum up each year has helped us grow. Of course what is large to us is still small to a big firm. I hope this helps.

Ford Harding

Ford's points are well taken. It can take courage to drop the small jobs, but in many cases this could be the key to growth.

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