look at your service offering like a stock portfolio. any losers?
by august j. aquila
price it right: how to value accounting servic
can you ever spend too much time thinking strategically about your accounting and consulting practice? if you are like most professionals, you usually have outlined some goals. you know where you want to go.
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the real question you must ask is this: “do you know the best way to get there?” in other words, “what’s your strategy?”
do you have a service portfolio strategy?
your service portfolio strategy tells you what you are going to do with each of your current major services. you must look at your service offering the same way you look at a stock portfolio. some services are winners, and some are losers.
first, identify the major services your firm offers. second, determine what you are going to do with each of these services. there are only four strategies you can employ with each of your current services. you can get rid of some, maintain others, cut back or expand.
developing strategies
many years ago, the boston consulting group developed a portfolio evaluation tool that is still relevant today and can help you determine which of the above four strategies is right for different services. the boston consulting group rated services or products according to two variables – market growth and market share.
the following chart shows how the boston consulting group looked at products and services. the horizontal axis represents relative market share, and the vertical axis represents the market growth rate.
| growth share matrix | ||
| high market growth | stars | question marks |
| low market growth | cash cows | pets |
| market share | high low | |
“stars” are in high-growth areas and have a relatively high market share. most firms invest in their “stars” to keep them shining. “question marks” have a small market share but are in a fast-growing market. can you turn the “question marks” into future “stars”?
“pets” (they were called “dogs” when the matrix was first developed) are in low-growth areas and with a small market share. unless you feel that the “pets” are necessary for your overall market position you should consider getting rid of them as soon as possible. finally, “cash cows” have a high market share in a slow-growth or stagnant market. you have invested a lot of time and resources in “cash cows,” and they now generate a lot of cash and profit for the firm. you want to hang onto them for as long as possible.
what’s your strategy to stay competitive and profitable?