The US professional services industry comprises 900,000 companies providing employment to over 9.4 million Americans and generating a combined annual revenue of $1.8 trillion. Sectors within the industry include: accounting, advertising and marketing, architectural, consulting, engineering, IT, legal, and scientific research services..
Prior to 2020, the industry had seen positive YOY growth influenced by the performance of numerous economic variables, including real US GDP, total media expenditure, gross private fixed expenditure on residential and nonresidential investments and per capita disposable income. Similar to many businesses in the United States, the professional services industry was hit hard by the Pandemic. Social distancing measures intended to slow the spread of the virus resulted in a sharp decline in economic activity, hurting industry revenue.
TRENDS & CHALLENGES
The tumultuous environment of 2020 has accelerated changes reshaping the professional services industry. More professional firms are embarking on the digital transformation with a forced transition to remote working. Service firms have turned their attention to the new ways of working, considering the long-term sustainability of remote and flexible working, and its impact on enterprise culture.
The industry is increasingly focusing on the client experience, demanding greater accountability in efficiency, speed, quality and cost. This is driving a shift to more market specialties and strategic partnerships.
The new workplace environment is triggering changes in the hiring process, the on-boarding of new talent and the retention of the workforce. Firms are questioning the level of productivity associated with a more flexible and remote working environment.
Following an expected loss of revenue in 2020, the sector is forecasted to recover gradually over the next 5 years. Strong growth in 2021 is expected, but only to recover the pent up demand that lagged in 2020. Growth above the 2019 base will be influenced by the performance of numerous economic variables, principally the extent and duration of the current recession and social distancing protocols.
With most US businesses realizing revenue declines in 2020, cost minimization will likely be a primary focus for management in 2021. As a result, spending on advertising services is anticipated to drop.
Professionals that provide accounting services, legal services and management consulting services may see a spike in demand from businesses and individual clients seeking guidance as the pandemic forces the world to shift to a new normal and volatility remains high. Overall, demand is projected to slow as businesses shed costs to protect profit amid high economic uncertainty.
key performance indicators
The information contained has been obtained from different sources deemed reliable, including DealStats, Deloitte, Dun & Bradstreet and Business Reference Guide. PBB does not make any representation or warranty as to the accuracy of the data.
- cost of goods sold: 28%
- gross margin: 72%
- net margin: 12%