The Consulting Year in Review (Part 2): Headwinds for 2023
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By: Kevin Plexico, Senior Vice President of Information Solutions at Deltek
Recently, we asked consulting leaders and industry experts to discuss their biggest challenges in 2022 and what they were doing to set themselves up for 2023 success. Part 1 focused on the top 3 consulting challenges of 2022. While Part 2 of our 2022 Consulting Year-In-Review blog series tackles the headwinds facing consulting and other professional services organizations as we look forward to 2023.
In our conversations, the economy emerged as the most significant area of concern for consulting firms as they prepare for 2023.
It’s the Economy, Stupid ;)
Jason Mlicki, the founder of the marketing consulting firm Rattleback, expressed a concern which was echoed by most of our experts. “Our biggest worry involves the dual tension of inflation and a potentially slowing economy. It seems likely that business activity in certain sectors will slow down due to rising interest rates. As a result, some clients will become more price sensitive. Simultaneously, most firms will need to charge more to keep pace with inflation. Navigating these opposing trends will be a challenge.”
Most of the experts we talked with are preparing for increased sales cycles in 2023. Scott Montgomery, Chief Customer Officer at Worldgate, LLC and WSJ Best-Selling author, explained, “We already see the economic downturn affecting our sales cycles. An already long process is getting longer, and projects are being put on hold for the year ahead.” Combating a longer sales cycle will require consulting firms to do one of three things:
- Increase Win Rates
- Increase the Average Deal Value
- Increase the Number of Opportunities
Accomplishing any of these three requires an investment in sales, marketing, and reporting tools. As we see in the 2022 Hinge High Growth Report, the most successful firms are the ones who invest in automation tools and those who are able to accurately track, measure, and report on their pipeline.
The Secrets of High Growth Consulting Firms
Hinge High Growth Report
For Kelly Waffle, Managing Director at Hinge Research Institute, the ability to continue to deliver superior service in this new environment is a concern. "One of the 2023 headwinds that we are seeing involves consulting firms' ability to clearly understand their clients' priorities and deliver on expectations. Over the last year, consulting clients have expected higher accountability, better transparency, stronger communications, faster results, and greater value--without paying more. Our research shows that clients want to work with firms with whom they have a relationship. But loyalty is not guaranteed. Consulting firms must build relationships and meet priority expectations for existing clients and new clients if they want sustainable growth."
Adversity Creates Opportunity
Despite the headwinds, the global management consulting industry is still estimated to grow at 4.1% over the next few years. As Andy Jordan, President of Roffensian Consulting S.A. expounds, "The economic uncertainty looks set to continue, and it is clear that clients are avoiding commitments beyond the next couple of quarters. This creates uncertainty for our firm, but we remain confident that our reputation for quality and value will see us through without any major impact." He continues, "We also view the uncertainty as an opportunity to build new relationships with organizations that are looking to become more efficient and effective."
Although 2023 is set to be a difficult year, firms who are able to survive or grow incrementally should emerge with great opportunities to take additional market share in 2024 and beyond.
A Remote Balancing Act
Throughout 2022 many consultants returned to the office. We saw the return of in-person meetings and implementations, as well as an increase in industry events. According to Forbes, in-person and hybrid events increased 255% between the fourth quarter of 2021 and the second quarter of 2022.
Unfortunately, the economic headwinds may slow down that acceleration in 2023. According to Tim Bailey, VP of Global Consulting at Deltek, finding equilibrium is a top concern for next year. "Balancing the new reality of limited full-time office staff, with the renewed desire for a higher level of face-to-face contact will be difficult with tight budgets." Figuring out the right mix of virtual and on-site meetings and the competing priorities of customer’s resources will require consulting firms to have a firm grasp of client needs as well as their own people, skills, tools, and optimal deployment.
Remember Your Core Competencies
Common mistakes consulting firms (and other small businesses) make during times of economic stress include spreading resources too thin and taking on projects or clients that are not a fit. These are understandable, as firms may need to take some risks to keep the lights on. However, this strategy comes with pitfalls, including lower profit margins, weakening your strategic market positioning, and a risk of decreased client satisfaction for new and existing customers as your resources are strained.
And Speaking of Consulting Challenges & Solutions …
Make sure to watch our on-demand webinar of consulting leaders (including many of those cited above) as they discuss the challenges they faced in 2022 and how they are preparing for growth in 2023 and beyond.
Thank you to our consulting partners who helped with this effort:
- Andreas Georgoulias, Director of Sustainability and ESG, Environmental Financial Consulting Group, LLC.
- Andy Jordan, President of Roffensian Consulting S.A.
- Dave Hofferberth, Managing Director, Service Performance Insight
- Jason Mlicki, Principal of Rattleback
- Kelly Waffle, Managing Director at The Hinge Research Institute
- Scott Montgomery, Chief Customer Officer at Worldgate, LLC
- Tim Bailey, VP of Global Consulting at Deltek
2022 Consulting Year in Review Roundtable
Consulting Leaders Discuss the Challenges of 2022 & Opportunities for 2023
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