Climbing the value chain as a boutique firm
When REKOLT started, it was a solo venture—a one-woman show. I freelanced, often as a subcontractor for larger consulting firms or working with clients through third parties. It was a comfortable position, I only had to focus on perfecting my craft without the need to manage sales or client relationships. Then, everything changed when I partnered up with Karim and we published our first piece of content together. This article landed us a significant direct assignment from a client. We thought it would always be this easy, but we quickly learned that wasn't the case.
Most of our clients were other consulting firms that either lacked bandwidth or needed our specific expertise in granular market research and data analysis. We adapted to this model, started growing our team, and began to feel the limitations of being a provider. Now, after establishing a solid foundation and a capable team, we're making strategic moves to cut out the middleman. It’s time for REKOLT to climb the value chain and directly engage with our clients and offer them more integrated, high-value solutions.
There are as many reasons to climb the value chain as there are to avoid it (trust me, I counted them). Assuming that it’s the right move, the real question becomes when to make this transition.
When you shouldn’t consider climbing the value chain
When it’s just for increased margins: If you think climbing the consulting value chain means increasing your revenues and margins, then don’t do it! For a team with limited resources, the sales and marketing efforts required for direct client acquisition are enormous. You will need to either recruit a salesperson or defocus your current team away from the execution and deliverables. This is something I experienced firsthand when we tried to expand at an inopportune time. I was overworking and struggling with the switch from intensive data science and production tasks to activities like market mapping, understanding client needs, and crafting marketing materials. The mindset shift was the most exhausting. Do not underestimate the amount of back-office preparation needed to hunt for clients on your own
When you lack market alignment: The market you want to tackle does not need another consulting firm when there’s no demand for higher-tier services or when the competitive landscape is saturated. And if you lack strategic advantages like specific skills, competitive pricing, or a strong network then these are signs that you might not be ready to enter the market directly. An example of a market I wouldn’t actively pursue (but would gladly enter if approached by clients—don’t be shy ;)) is AI consulting. Currently, all eyes are on AI and the promised new world of endless productivity. Many consultants and freelancers are jumping in with overpromises. It's hard to explain to clients captivated by the next shiny thing that truly scalable use cases are still being discovered and that implementing AI in a real-world company involves a lot of experimentation. “We still don’t know the full capabilities of current frontier models.” Let’s leave it to giants like BCG XYZ Platinum and McKinsey Quantum Shades of Grey to invest in educating potential clients about what AI can do for corporates. We'd rather focus on clients recognizing the importance of investing in solid, fundamental, and sometimes boring strategies. Or where we can step in once the hype passed and the real needs become apparent. For us, it’s better to let the big names carve out the initial path and then step in when we can offer something more tailored and grounded
When you should consider climbing the value chain
When you have a clear USP: If you have a unique selling proposition that can be leveraged at a higher level, climbing the value chain can help you capitalize on this niche. For REKOLT, it was when we decided to address the data analysis needs of Private Equity firms and their portfolio companies from deal assessment to value creation
When market trends favor expansion: If market research shows that clients are looking for more integrated or advanced solutions that you can realistically provide, it may be time to expand your offerings. At REKOLT, we initially outsourced some tasks for other consulting firms during commercial due diligence phases. However, we noticed a clear demand from PE firms and their portfolio companies for similar analytical skills post-acquisition during the value creation plan and then to implement KPIs and streamlined dashboarding. They required interim data analysis expertise, as investing in a full-time Data Office was often not feasible for the PE-backed SMEs. Most of our competitors/partners lacked this capability, so we identified a gap in the market
When you have the resources for a smooth transition: Ensure you have the financial stability and the right talent to support your move without sacrificing your existing service quality. I had a clear vision of what was needed to kickstart REKOLT’s marketing, and it boiled down to three words: Sophie Radtke’s expertise. Only recently were we able to afford her top-notch services, and that decision allowed us to take the initial steps with confidence and start approaching clients directly
Climbing the value chain is a significant strategic decision for any boutique firm. It requires a careful balance of ambition and practicality. The goal should always be to enhance your firm’s overall value proposition and secure its long-term success, not just an immediate increase in margins. We are just taking the initial steps on this journey, so we are aware there's much we don't know yet.