Balancing growth with profitability is never easy, especially for service-based businesses. It’s a challenge many consultancies face in fields such as PR, marketing, design, IT, and HR. They start small and build their reputation with a minimum number of employees. As growth accelerates, pressure mounts, yet there’s often a reluctance to hire more people for the sake of cash flow. If they do decide to hire, they rush to fill a gap, exacerbating the problem.
Your service will always suffer if your workforce can’t deliver on the company’s promise. And if there’s one thing you can’t risk as a service business, it’s compromising the quality of your service. Creating a positive customer experience is vital. Happy clients are more likely to stay longer, buy more from you and recommend you to others. When people are satisfied, you cultivate long-term relationships built on loyalty. Research shows that engaged clients are more likely to remain loyal even if the occasional issues arise. On the flip side, dissatisfaction spreads fast.
The UAE consultancy space is thriving. The country recorded the second-highest growth rate in the GCC’s consulting market in 2022 at 14.3 percent, with revenue hitting $841 million, according to Source Global. It’s an excellent time keen to capitalise on opportunities but consultancy is also highly competitive. With new entrants joining the market every day, customer service is more important than ever.
Signs it’s time to expand
In simple terms, you should bring in new talent when the workflow is steady enough to require extra help, and your finances can manage the additional costs. Take a look at your revenue over the past 6 to 12 months. Has it been growing steadily?
If so, you need to start scaling up for that growth to continue. Put a 12-month forecast in place, factoring in potential risks as much as possible. This will help ensure you have funds available to cover salaries, as well as the hidden costs of hiring. Extra costs might include recruitment and advertising fees, onboarding and training expenses, and productivity loss during the learning curve.
It’s also important to understand what capacity your current employees have. Are they spending more time in the office to complete tasks? Do you get the sense they feel overworked? They may even be taking on additional unbilled scope that you’re unaware of, which will obviously impact your profits.
The best way to know if people are struggling is to speak to them individually. Some may be happy to do extra work if they are paid overtime, which could be a good short-term solution rather than hiring someone new and waiting for them to settle in.
Try to bolster your team before you reach a crisis point because the hiring process takes time. A sales pipeline will show you the progress of leads, as well as your conversion rates. Analysing this data lets you identify any potential hotspots coming up. You’ll also see how long it usually takes for a lead to move through the pipeline and how early to start the hiring process.
If you have a lot of leads and a good conversion rate, having a few staff “on the bench” could be beneficial. Use this downtime to onboard them properly so they hit the ground running.
Different companies have different ratios for revenue versus employment costs. There is no hard and fast rule, but a higher ratio indicates you generate more revenue per employee, suggesting greater efficiency and productivity.
Whereas a lower ratio suggests lower revenue generation relative to the number of employees. If your ratio is 1:1 then you will be loss-making, a 1:2 ratio would mean breakeven/low profitability. Anything over a 3:1 ratio would be a healthy, profitable business.
Honing your hiring process
Once you recognise that it’s time to hire, consider the following:
- Don’t base decisions solely on cost
Hiring the cheapest people rarely works out in the long run. They might lack the experience you need, and you’ll have to spend more time and money training them and fixing their mistakes. Team morale can be affected if new starters aren’t contributing effectively. Plus, if they leave quickly, it means additional recruitment and training expenses. - Before you hire, think about your culture
As management consultant Peter Drucker said, “culture eats strategy for breakfast”. What type of organisation are you? What skill sets and mindsets do you need? - Get clear about your A players Create the ideal profile of your employees and recruit on that basis. And don’t forget to look ahead to what skills you’ll need to excel as the organisation develops instead of replicating who you already have. There is a misconception that A players are the most educated and experienced or Alpha-type personalities. Actually, everyone’s A players are different. They are the type that fit your needs the most.
- Spend time with new employees so they feel welcomed and involved from day one. This is how you build an engaged culture, not just by giving perks.
- Continuously monitor productivity
Hiring new people isn’t a magic bullet. Behaviours, processes and the business environment are always changing. The productivity challenges you face now will be different in a year. Keep reviewing productivity levels and be open to adapting your approach.