The professional services market at a glance
You often see articles about the professional services market or hear people mention this as the area they work in. However, what does this term actually mean?
With such a broad range of services and skillsets falling under the ‘professional services’ umbrella, it’s no wonder many of us only have a vague idea of how to quantify this line of work.
Today we’re going to investigate the term further. Read on to learn how this sector fits into the Australian and New Zealand markets, and some of the challenges people working in the industry face.
Defining the professional services market
Across the globe, if you say you work in professional services, this typically means you offer some type of professional service to clients.
Unlike other organisations that sell tangible, physical products, people in this field sell their knowledge, expertise, and time.
In both Australia and New Zealand, the governments have broad definitions for the sector.
Titled the “Professional, Scientific and Technical Services Division” (PST) in our part of the world, this classification covers anyone engaged in providing professional, scientific and technical services, where the input of labour is integral to the delivery of services or some other production type.
People working in the division specialise in an area and the activities they undertake usually require a high level of training, expertise, and formal qualifications, typically at a tertiary level.
This sector covers people working in fields such as:
- Computer systems design
- Scientific research
- Market research
- Professional photography
- Veterinary science
- Management and other consultancy types
Consultants work in numerous areas, like sales, agriculture, the arts, merchandising, environment, tourism development, efficiency, forestry, operations research, human resources, building and construction, public relations, events, and more.
But, this division does not include people who provide health care and social assistance services, as these job types come under a specific separate sector.
State of the market
The Australian Trade and Investment Commission notes that the “professional service sector is an important contributor to the Australian economy both in terms of employment and productivity improvement.”
It acknowledges that “Australia has a strong capability in business management services and the industry as a whole has grown in recent years mainly due to many companies outsourcing business management services.”
The industry has grown by approximately 30 per cent since the beginning of the decade and has become one of the largest industry groups in the country.
According to statistics released by the Australian Bureau of Statistics (ABS) in early 2019, the division employees over 1.14 million people, accounting for 8.9 per cent of the total workforce.
The ABS projects employment growth in the five years to May 2023 will be a healthy 10.2 per cent.
The ABS data also shows that employment in this industry has increased by 23.3 per cent over the past five years.
The professional, scientific, and technical services industry has overtaken manufacturing and construction. It sits behind the healthcare, food services, and retail and accommodation sectors, which have all been driven in recent years by an ageing population and growing tourism.
According to government information, the top ten occupations in the PST industry are, in order of highest employment levels:
- Software and applications programmers
- Graphic and web designers, and illustrators
- Management and organisation analysts
- ICT support technicians
- Advertising, public relations, and sales managers
- Advertising and marketing professionals
- Architects and landscape architects
In New Zealand, while it is a much smaller market in general, the PST industry is still quite healthy. As of 2018, there were more than 60,000 businesses in the sector, employing over 161,000 people.
Stats NZ reported that, between February 2016 and February 2017, the industry grew by 4.3 per cent in employee numbers, and 3.5 per cent in the total number of enterprises involved in professional, scientific, and technical services.
People working in these fields may work independently, as solopreneurs, or they own, manage, or work in larger service-based business.
Much like with the apprentice system of old, in the PST industry, we also see people working their way up.
Most start as juniors in their field, learning from more experienced workers and from plying their craft, and build up their knowledge and expertise over time.
Clients usually pay base amounts for juniors, higher fees for mid-level people who have a few years’ experience, and a premium for those who are at the top of their field with extensive training, knowledge, and skill.
People working in this industry charge for their time, although not necessarily always by the hour.
Some people charge a per-project fee or use other calculations, such as per report, word, page, or other factor.
Since businesses and individuals cannot be experts in everything, they turn to those in the professional, scientific, and technical services industry for both advice and task completion.
Some people in the sector simply provide guidance and information, on a consultancy basis. Others spend their time doing jobs so their clients don’t have to.
For example, copywriters create content, accountants prepare reports and lodge documents, and architects design buildings.
Challenges for the PST market
While the industry is growing in general, people working in professional, scientific, and technical services face challenges just like those in any other sector.
A common problem is building up the expertise and experience needed to not only land clients but to also achieve a decent rate of pay.
Another issue is standing out in a crowded marketplace, as more and more people are entering this field each year. Each business and individual has a significant amount of competition to go up against.
With the advance of remote working tools, this competition comes from all across the country and the world.
People in the PST industry must also be wary of scope creep, where they quote for a particular service but then face their clients attempting to add on more and more work without paying anything extra.
Those running businesses in the sector also often find it difficult to find and retain the right staff members.
This is particularly the case when they work in a small, niche area with few appropriately qualified candidates.
Technology is an aid for many people in the professional, scientific, and technical services division, but it also has its downsides.
For example, workers must continually understand the impact of new tech tools on their businesses and the industry.
They need to factor in time to learn how to use such programs, plus the costs of implementing them.
Another challenge is continually delivering to deadline and facing burnout because of the potential difficulty of delegating work to anyone else.
Getting paid is another common problem PST business owners have to contend with.
Cash flow is often a struggle because clients take too long to make payment, or don’t finalise bills at all.
Also, people working in professional, scientific, and technical services typically never know what level of work they will have coming in over the months ahead.
This makes it hard to know how to schedule staff members appropriately and when to employ extra team members, as well as when to take time off for a holiday.
A threat that faces all people in the PST industry is that of a global or local recession or other downturn.
When consumer demand drops and businesses struggle to make ends meet, one of the first things they cut back on is usually consultancy services or outsourcing other work.
There are specific problems for each sector to contend with, too.
For example, accountants have to handle the constant changes to the tax system and stay up to date on a wide variety of regulations.
Similarly, those in law have to continually stay abreast of new developments, as do people working in information technology arenas, business management, human resources, and building and construction fields.
An issue facing many people in legal, accounting, finance, advertising, and business strategy and consulting fields is that many large firms are now diversifying.
This means companies like Deloitte, KPMG, and PwC are selling services in more fields than ever before.
These corporations use their big budgets and well-known names to land clients, taking work away from smaller, more specialised firms.
Also, technological change means there are now new ways for many PST businesses to develop services.
However, the issue is that doing this often requires a high level of investment, particularly when one looks at computer systems design.
It’s often necessary for people to use investors for funding assistance in developing IT systems.
By doing this, they can take advantage of the economies of scale required to get services out to many users at once and thereby remain profitable.
Having to part with a percentage of business ownership and working with investors can be its own challenge, though.