I still remember it like it was yesterday.

The energy startup I had been working for went belly up over night because the owner embezzled millions of dollars. My six figure income and company sponsored health insurance disappeared and I was left with only a few small freelance clients, while my wife was a stay-at-home mom to our fragile micro-preemie daughter.

"I am pretty sure I won't be getting paid for these past few weeks" I told my wife.

We discussed our options and agreed that the best thing to do is to take our destiny into our own hands and build an agency. The three freelance clients I had wouldn't be enough. Over the next 24 hours, I put together a logo and a website, and we both began reaching out to our network. We hung our shingle, and began everyone we know about it.

Within a few weeks, we had a number of meetings scheduled either directly with prospective clients, or with contacts who would later give us referrals. Within a few months, we had a full roster of clients.

Over the next year, we delivered some good work, and got a few referrals from those clients. We used this reputation to grow to about $1 million in revenue over the next few years.

Not including the origin story, this is a fairly typical growth progression for a professional services firm. But that's where firms hit their first snag.

There is a natural progression to how firms grow, and while you can do things to accelerate your firm through these stages, if you do things out of turn or over-invest in activity that is built for the next stage, you will undoubtedly caust growth to stall.

The Consulting Firm Growth Maturity Model

1️⃣ Network-Led Growth: When you first started your firm, it was all about who you knew at that point in time. You needed the business and you reached out to those people who you have either worked with prior or those close to you who have connections to the types of people who could use your expertise.

At this point you likely didn’t have your positioning figured out yet and were solely focused on getting some sort of revenue through the door based on your existing skills and contacts.

For the average consultant, this gets you to about $250k in revenue. Yes there are some very successful solopreneurs that are able to build $1M - $2M businesses, but if your focus is strictly consulting revenue, then this is a pretty good benchmark.

2️⃣ Reputation-Led Growth:  As you worked with more clients, you developed a reputation for delivering results. Some of your clients either openly referred you business, or would talk about you in passing, which drove more business. This is the first hurdle because without a good reputation, your business is toast.

At this point you likely started seeing some patterns in the type of clients that benefited the most from your services and also those that were most profitable for you. Hopefully there was a good amount of overlap between these two groups. This is usually the start of a solid positioning - a clearly defined ICP.

For the average firm, this gets you to the $1M revenue mark. There are of course exceptions - I have seen very senior industry experts that went out on their own and strictly because of the niche they were in, the depth of their expertise, and the breadth of their network, they are able to build $2M+ firms just based on reputation and network.

3️⃣ Networking-Led Growth: By doing more business, you started to meet more people. You also purposefully and strategically expand your network. You attend events, join industry groups and associations, and look to build relationships with key influencers.

At this point you likely have figured out who your best-fit clients are, and identified what pain points of theirs you can solve better than anyone else. And you also have the beginnings of some differentiation figured out - not only do you think differently, but you make your ICP think differently.

For the average firm, this will get you to the $5M revenue mark. The key is having solid operational efficiency, and a focus on strategic business development in place to avoid the feast/famine cycle that often kicks in between $2M and $3M.

4️⃣ Sales-Led Growth: You grew to a point where more passive business development isn’t enough to sustain growth. You need dedicated outbound activity to drive net-new client acquisition.

To be successful here, you need to figure out a sales processes, create a solid pitch that anyone in your company can repeat, and implement some technology and systems to enable sales conversations and relationship nurturing. But most importantly, you need to have your IP and Functional Differentiators fully fleshed out.

For the average firm, this will get you to the $10M revenue mark. Though because off these stages compound on each other, if you started with a better network and reputation, you can likely push through to $15M with a sales-led approach.

NOTE: This doesn't mean that you aren't doing any promotion - notice that I say "promotion" and not "marketing" - but it can be fairly limited to founder or executive thought leadership via some strategic partnerships, always with a focus on business development though.

5️⃣ Ecosystem + IP-Led Growth: You have growth to a point where natural churn is catching up to your ability to drive new business and the unit economics of bringing on more business development resources likely no longer make sense, at least not without a change to the overarching go-to-market approach.

To be successful here, you need to focus fully fleshing out and bringing your IP Differentiators (frameworks, methodologies, and concepts) to life, while also maximizing your access to and leverage within the industry ecosystem. This is how you differentiate your go-to-market from your competitors.

For the average firm, if you want to grow past $15M in revenue, this is how your growth system will need to evolve. While I have seen some firms with very large networks, strong reputations, and strong business development acumen scale to $30M without this, those are definitely exceptions, not the rule. And in all those cases, they likely could have gotten there more profitably, and likely faster, had they evolved their approach sooner.

Where things go wrong

To successfully navigate your firm throug the various growth stages, it's important to understand which stage your are in and what your core focus should be. And if you want to be able to accelerate through these stages you need to be willing to run parallel workstreams to focus on the core needs of your current stage, while also setting up the infrastructure for the next stage. This involves incremental investment with the understanding that it won't pay off until much later.

The average firm grows fairly linnearly, or maybe with a slight curve. This is because they don't invest in future stage infrastructure until their current approach no longer works. This causes them to stall out for extended periods of time - sometimes years.

Successful firms, anticipate where they are going and invest ahead of time, but not too far ahead, which allows them to have much shorter plateaus, and bigger growth spurts, driving exponential growth.

Now back to my story - while we were in the reputation-led stage, we started investing in sales-led and ecosystem-led infrastructure. The problem was that we hadn't yet fully defined our ICP nor fully developed our IP. This created a lot of waste. The sooner you are able to define your ICP and develop IP, the quicker you can accelerate through these stages, but there aren't any shortcuts to doing that work, and if you get it wrong, and start investing in sales, for example, before those things are fully fleshed out, you are generally in for a world of hurt.

There are two core things that firms get wrong, which cases their growth to stall or decline:

1. The get too comfortable in the stage they are in, and choose not to invest further. Sometimes this is a consious choice, and the founders/partners are looking to build an asset of a certain size, and then sell. But in many cases, it's subconscious and stubornness. These firms tend to die a slow death. The stall out for so long that the market and their competitors get ahead of them, and the asset value of the business declines.
2. They get ahead of their skis and invest too far ahead of where they are. This most often causes a fast collapse, or a quick contraction to regroup and rebuild.