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Private equity firms can do great things for professional services firms. They bring structure and rigor to people management, growth strategy, financial discipline, and other areas many firms find difficult to build on their own.

Many professional services leadership teams grew up inside the business and have technical, not business leadership, backgrounds. Firms are often run by consensus. And shareholders tend to optimize for maximum annual payouts to partners, which naturally pushes decisions toward the short-term.

Professional services firms are also attractive assets for private equity. The core markets tend to be stable, and many firms have existed for decades. Well-run firms often produce strong cash flow and healthy margins.

Private equity activity in the sector has accelerated in recent years. Over a third of the 30 largest accounting firms in the U.S. had private-equity sponsors by last year, up from zero just a few years earlier.  PE firms provided over $50 billion in new capital to CPA firms during the last six years. And the trend is expected to continue.

But professional services firms operate differently than many other industries PE firms invest in. Growth, incentives, and client relationships follow different rules.

None of these dynamics are barriers to investment. In many cases they are exactly where the value creation opportunity comes from. But they do shape how growth initiatives actually play out inside these firms, and it can save time and minimize friction to be aware of them.

Below are a few operating realities that shape how growth actually happens in these firms.

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Scaled growth usually comes from changing expert behavior, not just adding salespeople

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Many PE firms’ value-creation plans include a material build-out of the firm’s sales organization.

This can make a material impact in many cases. But in many professional services firms, the larger opportunity sits with the seller-doer organization. These are the subject matter expert partners or Managing Directors who are responsible both for generating revenue and delivery high-quality workproduct.

The population of seller-doers is often large, and a few behavioral shifts, if consistently implemented, can produce meaningful results.

I have seen MDs fully responsible for revenue growth go an entire year without bringing in a new client. A common issue is their compensation: incentives are tied to total revenues, not growth. If an MD has a solid book of recurring client work, their overall pay is generous. Firms often don’t penalize MDs for lack of growth because the risk of losing an MD (and their revenue base) is too high.

Many firms also have invested very little in training  or coaching around business development. It is not uncommon to rigorously evaluate a MD candidate’s business plan during the hiring process, and then, once they’re part of the firm, leave them totally on their own to figure out how to get it done.

Dedicated business developers can help, certainly. And in some cases they are critical.

But for many situations, clients tend to prefer speaking directly with the expert who will be performing the work. High-level introductions and connectors are welcomed, but interjecting an intermediary for more than the first meeting can actually reduce chances of winning work.

In addition, adding BD team members has a significant cost. They do not replace seller-doers, they add another senior role onto every opportunity. Because they are not subject matter experts, they require time to get up to speed on the firm’s services, pricing logic, internal experts, and differentiators, all while operating in markets with long sales cycles. Twelve to eighteen months to full productivity is common.

PE firms can accelerate growth by asking “are the existing MDs’ BD efforts fully productive”?

If the answer is no, improving consistency within this group can drive meaningful growth.

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The buyer determines the growth strategy

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A firm I was working with wanted to capitalize on a cross-selling opportunity. The firm had established several tax-related capabilities, and minimal cross-selling was happening between the relevant teams. The services included tax valuation, property tax, transfer pricing, tax diligence and unclaimed property. Certainly buyers of one tax-related service would benefit from all five?

It quickly became clear that a major hurdle existed: each of these services actually had different buyers:

• Tax valuation and transfer pricing services were purchased by Heads of Tax at Fortune 500 multinational corporations
• Property Tax services were purchased by State & Local Tax Directors at large utilities companies
• Tax Diligence Services were purchased by Private Equity Deal Team Partners (invariably bundled with a full due diligence project)
• Unclaimed Property Services were purchased by Directors of Indirect Taxation at large retail companies operating in specific  states
  
  

These differences did not eliminate the cross-selling opportunity, but they changed what was required to realize it.

The original growth plan assumed that a Managing Director working on one tax engagement could introduce the other services directly during active engagements. In practice, that rarely worked. Reaching the relevant buyer usually required two or three internal referrals before the right decision-maker was even in the conversation.

The result was predictable. Opportunities took longer to develop, fewer materialized than expected, and the firm had to invest more heavily in enablement and training than originally planned.

Experts in professional services firms are highly specialized, and often their buyers are too. Here’s the lesson for private equity investors: If cross-selling is a meaningful part of the growth thesis, it is important to rigorously examine the buyer overlap between services early.

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Cross-selling depends on structure, not just intent

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Every PE investment thesis I have heard related to professional services firm has assumed material growth from cross-selling. In many firms, it does not come to fruition.

In some cases, it could be structural like described above: the buyers of one service truly are not the right buyers for other services.

But in other cases there are material opportunities but firm structures are getting in the way. The most common roadblocks include:

• Incentives are perceived to not reward cross-selling;
• Managing Directors are not trained to recognize opportunities outside their subject matter expertise; or
• The activity itself is not clearly defined, measured or tracked.
  

PE firms that investigate these issues early will have an edge. It’s much better to put in an operating model that supports cross-selling behaviors than to waste months working against the existing system.

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Sales tools from other industries need adaptation

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Some sales tactics common in other industries, such as scripted sales plays, call-center outreach, or large-scale prospecting campaigns, do not translate well into this environment. Those work well when buyers know the problem and they’re evaluating fixed products to solve the problem.

In professional services firms, buyers look for experts to help frame the problem. Each service is uniquely tailored, and the sales process is the beginning of the work. Stakes are high - often reputational risks of projects gone wrong can enter hundreds of millions, or billions, of dollars.

That does not mean firms should avoid investing in business development infrastructure.

Marketing teams can help identify target clients and coordinate outreach. CRM systems can improve visibility into pipeline activity. Business-development professionals can help make initial introductions.

But these tools typically work best when they support expert-led relationships rather than replace them.

The goal is to free up experts to spend more time in meaningful client conversations. For PE investors, the most effective teams and tools are the ones that enable seller-doers rather than insert intermediaries between the expert and the client.

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Managing Directors need autonomy, but not unlimited autonomy

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Managing Directors are the center of the client relationship. The service itself consists of their judgment.

Because of this, professional services firms need to provide significant autonomy to Managing Directors, especially in the area of engagement framing and execution. Often much more than client-facing roles in other PE-backed companies.

When MDs feel overly constrained by centralized processes, they can start to worry that their client relationships will be negatively affected. These relationships are their lifeline within the company, and for their career in general. They will start to resist.

That said, unlimited autonomy creates problems of its own. Most Managing Directors have never been taught skills of business development in a formalized way. Business development tends to take a back-seat to the urgency of client project deadlines. Too much autonomy results in uneven or ineffective BD effort within the MD population. So whereas there is a structural benefit of providing maximum autonomy in the “doer” area of seller-doers’ responsibilities, more guidance and monitoring is usually beneficial in the “seller” part.

The goal is to find the right balance. The operating models that tend to work best combine:

• Clear firm priorities
• Simple guardrails
• Effective enablement
• Shared visibility of key individual metrics
  

Within these boundaries, MDs retain control over how they build relationships and deliver work.

For example, to advance its cross-selling goals one firm combined the following for an effective result:

• Communications action plan emphasizing the “Why?” behind cross-selling (clear firm priorities)
• 3 in-person MD training sessions throughout the year (effective enablement)
• Documented cross-selling definition explaining common exclusions (simple guardrails)
• Bi-weekly dashboards  including # of meetings, # of projects sold, and estimated fees from opportunities and closed deals at the individual and group level (shared visibility of key individual metrics)
  

The takeaway for PE investors? Over-centralizing decision-making can damage the responsiveness and judgment that clients expect from professional services firms. But leaving MDs fully autonomous usually leads to inconsistent business development and weak coordination across the firm. The goal is to preserve autonomy and add clear priorities, guardrails, and visibility into growth behaviors.

Conclusion

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Professional service firms operate differently than many other industries PE firms invest in.

Growth often depends on improving seller-doer behavior, understanding the specific buyer, structuring cross-selling intentionally, adapting sales tools to expert-led relationships, and balancing autonomy with accountability.

Investors who account for these dynamics early will build stronger value-creation plans and see better results from these firms.