Consulting in the middle market

The vast majority of consulting takes place in big companies.  Despite the wealth and variety of resources at their disposal, their complexity has out-paced their ability to respond quickly to new challenges and their scale makes it hard for them to see the world objectively.  They also have deep pockets.  Small companies, especially start-ups, rarely need external help because they’re still in the process of testing their strategy (so any gap between strategy and implementation is less obvious) and have very limited cash.

What about mid-sized companies?  We’ve done two pieces of research recently which suggest that these should receive more attention from consulting firms than they do.

The first is a report we’ve just published in association with Advanced Business Solutions which examines the challenges faced particularly by companies with between 250 and 500 employees.  To my mind, several things stand out from this.  First is the following chart, which shows perfectly why companies of this size need help.

We asked firms to rate their strengths in terms of strategy, marketing, people, process and technology.  Unlike their smaller counterparts, 40% of these companies felt strategy was one of their stronger suits (only 30% of smaller companies did).  The problems they face relate to execution: only 15% said that marketing was a strength, only 23% said this for people recruitment and management, and so on.

These companies need external expertise, but can they afford it?  Conventional wisdom would say no.  But if we just focus on the UK for the moment, companies of this size account for fewer than 1% of all enterprises, but 22% of private sector GDP.  Some simple maths reveals that they also just under £260,000 of revenue per employee, compared with £198,000 among slightly smaller companies and £170,000 among larger ones.  In simple terms, these companies are the most productive in the economy, so there is money to invest should they choose to do so.  So why don’t they?  Our research suggests it’s partly because don’t recognise the need or opportunity, partly because they don’t know who to turn to for advice.

This is where our second piece of research comes in.  The latest edition of our quarterly survey of client buying trends suggests that, while demand for consulting over the next few months looks pretty flat, mid-sized companies will be spending more.

This really is an opportunity for consulting firms, but the irony is that very few will exploit it.  Preferring the volume of work and, dare I say it, kudos that comes from working with blue-chip corporations, even quite small consulting firms say they’ll have nothing to do with mid-sized clients.  That’s short-sighted in a world where demand for consulting among big clients is stagnating, where competition is fiercer than ever and where the average size of consulting projects is shrinking.