Unlike 2009 when firms were lucky to keep their revenue flat, the vast majority (83 percent) of consultants anticipate growing their revenue in 2010. Their optimism is fueled, in part, by a gradual increase in demand. And there seems to be at least two underlying metrics that may give merit to the renewed confidence, according to a recent survey by Consulting.

An increasing share of consultants anticipates improvements in fees and sales cycles in 2010. If consultants are indeed able to sell projects faster, and charge more per hour for that work, top line growth may be possible. But even if it’s not enough to overcome cuts to capacity (following layoffs in 2009 and an expected surge in voluntary attrition across many consultancies in 2010), progress in fees and sales cycles certainly bodes well for healthier bottom lines.

As of the third quarter of 2009, the vast majority (61 percent) of consultants expect they will be able to raise their average realized rates somewhat in 2010, up from just over one-third (34 percent) of consultants who shared that optimism just three months earlier. There are also far fewer pessimists. Just five percent of consultants anticipate further reductions in their average hourly fees in 2010, down from 20 percent of consultants who shared that sour forecast when the same question was posed in the second quarter.

To be clear, few consultants are anticipating a significant uptick in their hourly rates in 2010. Client sophistication isn’t going away, which means clients will continue to know where, how, and to what extent they can continue to push back on fees. And while the economy is slowly improving, clients will continue to contain their costs as much as possible.

What this optimism may suggest is that the supply/demand pendulum may finally be reaching equilibrium. With the supply of consultants down over 2009 levels, and demand rising—albeit slowly, consultants may be able to push back on fee pressure a little.

Even if rates merely remain flat over 2009 levels, it would be a positive sign for the consulting market. In 2009, many firms sacrificed their rates in order to secure work, increase utilization among remaining consultants, lure new clients and protect client relationships. Having to worry less about those pressures in 2010 would be very welcomed news.

Sales Cycles Also Poised For Improvements

How fast one can sell a consulting project is an important indication of the health of the market. The more deliberate clients are in purchasing engagements, the more likely projects are to be postponed or not bought at all. And the longer it takes to pursue each sale, the higher the cost per sale.

Clearly, the pains of longer sales cycles were a lesson learned in the last two years. The good news is that as of the third quarter of 2009, only 51 percent anticipate longer sales cycles in 2010, down from 85 percent last year. For half of the profession, a third consecutive year of longer sales cycles will still cause pain to bottom lines. However, these numbers are trending in the right direction.

—Jess Scheer



Who Was Surveyed? The data analyzed is based on two separate online surveys conducted in the second and third quarters of 2009. Combined, the two surveys collected data from nearly 8,500 consultants from more than 200 consulting firms. The vast majority of respondents work for firms that generate more than $100 million in annual consulting revenue.