Boutique Consulting Club - The Delivery Number

Many of you might be familiar with a measure called net promoter score (NPS). It was developed by Fred Reichheld almost 20 years ago. To put it simply, it is the score your clients would give you when asked:

“On a scale from zero to 10, how likely would you be to recommend our company to a friend / someone like yourself?”

Bain & Company spread out the framework, and NPS won the title as the main customer success KPI - two-thirds of the Fortune 1000 use it today. Research suggests if you score less than 7 out of 10, it is virtually impossible to generate both growth and profitability in the long term.

When talking to partners, I have another go-to question to evaluate delivery. With that said, it's always better to go straight to the source, and that's what NPS does. It is a powerful leading indicator for future success, that's for sure.

But how critical is it for us?

Boutique consultancies should take these numbers, as always, with a grain of salt. Fortune 1000 and a 5-person IT advisory business have more differences than similarities. But this doesn't mean you shouldn't measure the quality of your delivery.

In fact, I'd argue just the opposite - NPS is even more important to boutique consulting businesses than to large corporations. The two main reasons for it are:

1. Small addressable market: B2B companies can target and serve millions of individuals. If a group of customers receives defective products or poor customer support, it is unlikely the entire target market will become aware of it. But if you're a specialized consultancy and there are no more than 40-50 companies you could ever work with, a delivery disaster could easily damage your reputation among most of them. In small niches, news spread like wildfire.
2. Smaller marketing budgets: Taking price and income-generating assets out of the equation, there are only two ways to grow top line. You can either acquire new clients, or retain and grow the existing ones. The former is easier, faster, and most importantly, cheaper. Small consultancies with poor delivery capabilities are forced to continually invest precious time and money to refill their client roaster completely. Those with high NPS tend to sell more and larger engagements to the same clients. Client acquisition costs can be 4-5 times lower.

Client loyalty and satisfaction matter. That's I believe every boutique consultancy, after a specific revenue threshold, should have a head of operations whose main job is to improve delivery. And they should live, breathe, and be guided by your NPS.

Tomorrow I'll share the main levers you can pull to improve your NPS.