The Missing Operating System Behind Profitable Professional Services Firms
“Profit margins were soft this quarter.”
If you’re fearful this is a conversation you’re going to be involved in approximately one month from now, listen up and let us help prepare you.
A lot of times, professional services firms don’t just have this blanket “profit issue”. It’s something deeper that’s draining profit. And nine times out ten, we can uncover thousands, if not hundreds of thousands of dollars of it, in your service delivery framework. It’s just one of those things that isn’t an explicit P&L item so it usually gets overlooked.
The common misdiagnose here is to hire an operations manager, buy a project management tool, or try to build an artificial intelligence layer on top of it all.
The gap isn’t quite your operations, it’s your operational architecture.
Processes ≠ Delivery Model
Every agency has some level of process. It could be a 100 page book they hired someone to write, or some checklists, or templates their team enjoys. A recurring meeting cadence, perhaps.
Or, our personal favorite, “we have EOS”. (although EOS is a service delivery model, 99% of companies don’t fully adopt it so it doesn’t reach full potential. And honestly, the model didn’t scale with modern businesses so it doesn’t work as well as it used to)
This is the difference between having processes and having a service delivery model.
Think of it like this. Processes are artifacts that live inside of your operating system.
If you don’t have an operating system, every project will be an improvisation. So you develop dependencies:
Quality = dependent on who is running it
Margin = dependent on who’s paying attention
The health of the business = dependent on the founder, or the leadership team
Six Stages of Delivery Where You Lose Margin
Delivery isn’t one motion. It’s six.
Stage 1: Sold
What did your sales team promise the client? Do those capabilities exist? If not, rut roh.
Stage 2: Scope
What’s your scoping process? Don’t have one? So what happens when the client adds a bunch of stuff mid project? Are you billing for it or do you slide in a dozen favors per project?
Stage 3: Kickoff
What’s the handoff process from sales → delivery? Your new client is making a decision right now on whether or not they’ll sign with you again. If they decide “no” today, it’s a long uphill climb from here.
Stage 4: Execute
This is what everyone says delivery is. It is technically delivery. But so are the other stages. This is just where all the delivery problems show up. But the majority of those problems are created upstream at stages 1-3.
Stage 5: Review
Is your team and client clear on what “done”, “good”, “great”, and “bad” looks like? This is where rework will start killing your margins.
Stage 6: Close
Whether it’s a retainer renewal or a project closeout, what does your closeout hand off look like? This is your big opportunity to renew, upsell, or get the case study.
Operations vs Delivery Architecture
Here’s an easy example you may have heard.
Operations problems: “We need better project management.”
Delivery architecture problems: “Every project runs differently so we really can’t accurately tell which one is profitable unless the project is closed out completely.”
Operations problems are typically related to tools and habits within your team. Architecture is structural, there’s no defined system your team is moving from, so they’re just “doing their best”.
How do we standardize without becoming robotic and losing our unique edge?
People hear “standardization” and immediately break out in hives. Standardization is not about turning your organization into a factory line. It’s about taking your delivery model from scrappy → mature. Even if one of your values is, “scrappy”.
A mature delivery model just standardizes the scaffolding around the way your team thinks and moves. We want your team spending their energy on judgment calls, not making a net new kickoff deck for each client or a net new status report for all 20 of your clients. Yikes.
Maturity at the various stages of growth
$3M: a mature delivery model looks like visibility. Everyone understands what “scoped” vs “done” means for client engagements. The team can quickly reference and accurately comprehend a project’s health before clients raise issues.
$5M: a mature delivery model looks like consistency. The model has to survive the founder being permanently removed from delivery. If the architecture hasn’t been built, this is where the wheels start flying off in every possible directions.
$10M: a mature delivery model looks like capacity intelligence. Before saying an emphatic “yes!” to new work, you understand whether you have the delivery capacity & capabilities to deliver it well. If sales and delivery aren’t aligned, this is the stage where you start running into big trouble.
A big mistake? Leaders think they shouldn’t build a delivery framework or model before they grow. The delivery model stays the exact same. What changes is what it needs to bear weight for.
The 5 Load-Bearing Pieces
SOPs: this should not be exhaustive documentation (things change too much), focus on definitions of the important pieces, like handoffs. Visual process blueprints are needed.
Project requirements: upgrade your intake standard to solve scoping issues upstream (and watch client satisfaction skyrocket)
Capacity: knowing what your team can absorb and handle before you sell more of it (watch employee turnover decrease)
QA: your defined checkpoints to make sure nothing below “great” makes it out the door
Project management & technology: this piece makes the other four visible & enforceable
You probably have a fragment of 2-3 of these.
What Not To Do Right Now
Don’t document your entire company.
“Fixing delivery” ≠ writing down every process in the dang company today.
Those docs will just live in a Google Drive, Sharepoint, or Notion doc to die a slow death.
Figure out which stage of delivery is costing you the most right now and build the architecture for that one transition first. A delivery model isn’t built in a night.
If you aren’t sure which stage of delivery is costing you the most right now, take this free self assessment to figure it out now.
