If you were an adult in the early 2000’s you very likely had a Nokia mobile phone.
I know I did, including the banana one made famous in the Matrix!
What’s the relevance?
Well, when the Nokia business collapsed, the Finnish city where it employed 4,300 staff also nearly collapsed.
Long story short, rather than accept defeat, those ex-Nokia employees started up lots of new tech companies.
They recognised that they were highly skilled, and so founded new businesses to take advantage of that fact.
This helps demonstrate that having an existing expertise is the most successful way to start your own business. This is especially so with a consulting business.
Now there are people out there promising that you can have a successful consulting business, and that all you need to do is go out and find what people want, then go consult in it!
I think that’s mostly a thing of fantasy.
Sure, as always there’ll be outliers, but for the most part that model is selling people a dream that will likely become an expensive nightmare.
It’s much better to think about your existing skills, and to identify the needs and wants that people have that align with what you’re already an expert in. Then all you need to work out is how to run a successful consulting business.
That means learning marketing skills, sales skills, efficient and effective consulting project delivery, and business operations.
Well, maybe not easy, but certainly doable.
If you haven’t run a consulting business before, or been employed in professional services, and you’re aiming to consult in a field in which you have no prior experience, then you’re putting yourself under a lot of pressure!
The most successful consulting businesses that I’ve coached are the one’s that were experts in the thing they chose to consult in, and were already consultants!
In some instances, they were teams in existing large professional services firms that chose to go out on their own.
It’s interesting because, unless you’ve done it before, you’d assume that already being employed in professional services you’d know all there is to know about running a consulting business.
But that’s rarely true!
Even those who are experts and consult in marketing and sales, for example, often find it much harder to apply those same skills to their own business.
So, if you are thinking about starting a consulting business, here are 5 things you need to know that you’re probably not aware of:
ONE. There are lots of small things that are incredibly important
Non-disclosure agreements; Terms & Conditions contracts and negotiation; employment contracts and handbooks; pensions; VAT; EC sales lists; GDPR; tax returns and MTD; invoicing; payment terms; and so on.
There are tons of little details and time consuming activities that you’re going to need to learn.
In time, many of these things can be outsourced, but you should never outsource a problem or something that you don’t fully understand.
Ignorance is rarely a defence, and it won’t stop you haemorrhaging money from your business bank account!
There’s no shortcut to learning these things. You must ensure you plan sufficient time each week to get them done. If you don’t, you can kiss goodbye to your weekends because that’s when you’ll find yourself doing all the non-billable stuff.Running a #consulting business is very different to working in one. You must price your services to give you enough time to learn how to do all the non-billable activities, of which there are many! Click To Tweet
TWO. Pricing low is a bad strategy
The first thing people do when they start their own consulting business is to charge less than when they were employed.
I get it.
I understand that most people do this because they either think it’s necessary to win the work, or they lack the confidence to charge what they’re really worth.
But if you think about it, you’re the same person that was being charged out at higher rates in your previous firm.
And it was you and your team that did most of the work.
Were there really many tangible benefits to the client in the fact that you came from a big firm?
Or are you now offering the same thing just under a different brand?
The real value in a solo or micro-business is not that you’re cheaper than an established firm.
Many medium and large corporates will choose bigger firms because they ultimately provide a level of insurance – you’ve probably heard the old adage, ‘Nobody got fired for hiring IBM,’
This is not something that you can compete with. But for the solo and micro-business, there are many benefits to the client including:
- Focus and attention: You’ll be able to provide your client with levels of attention that the big boys simply can’t afford to do. Your overheads are less; the number of clients that you’ll be working with will be less; there won’t be endless and mostly pointless internal meetings. Instead, you can spend your time giving your clients your best, most focused attention.
- Quality: Most big consultants sell via partners and seniors but then bring in the graduates on day one of a project. That’s not to say that these graduates aren’t smart – in fact many of my best team members have been the most junior! But there is a client perception that they’ve been duped when this happens. Of course, it won’t happen in your business. Sell the fact that it is you the client will be working with.
- Adaptability: This is one of the most valuable assets a solo or micro-business provides. The big firms often come with a level of arrogance in their approach. And it makes sense if they’ve delivered the same thing time and again for many clients. However, consulting in the micro-business is much more about working with your client than doing to them. That means you can be flexible in the approach to your assignments. You can discuss and agree changes with the client, and you can be highly adaptable and flexible.
THREE. You’ll be tempted by shiny objects
Running your own business, whether on your own or in a small team, can be – in fact will be – incredibly stressful at times.
Many consulting businesses start by selling to people they already know.
And this works well for the first 2 years, but then all of a sudden projects dry up.
You’ve exhausted your existing client base of opportunities, and you’ve been so consumed in delivery that you haven’t spent enough time marketing.
But the chances are, you’ve never been schooled in marketing anyway!
And marketing can be the polar opposite to consulting.
When you consult, you’re doing:
something for someone that they asked for;
that they’re excited to see the outcomes of;
and that you’ll get feedback on.
When you market, you might be doing things that people neither expect nor want – cold calling, cold email, social media posting, etc. – that they won’t give you any feedback on – just you try and get engagement in a LinkedIn group!! – and that they might simply be downright rude and unprofessional about.
As the pressure builds for you to land some work, you’ll start to explore all the different things available out there.
You’ll see lot of adverts and promises, like…
- “…How this one LinkedIn hack will guarantee you 5 new clients a week”
- “…How launching a webinar will transform your business fortunes – our client Geoff landed 150k off the back of his first webinar”
- “…Cold calling is not dead – in our course we’ll teach you how to close 90% of your opportunities”
And on and on and on.
Most of these course providers utilise copywriters, so their arguments are compelling. And they’ll all have the odd outlier that can substantiate their claims.
I’m not saying they’re all lies because the chances are they’re not. It’s just that these courses only ever address one specific element, and they exaggerate their claims.
They don’t seek to understand your business, or to show you where and how their technique should fit into the overall picture of your business.
But you’ll be convinced that one of them will work because, quite frankly, you’ll be desperate for it to.
And when it doesn’t work as quickly as expected, you’ll jump to the next thing.
You’ll be chasing shiny objects rather than sticking at anything long enough to make it a success.
FOUR. You’ll be let down by the people you hire
One of the biggest challenges in growing a business is taking on staff.
Obviously in a services firm it’s essential to grow your team in order to grow your capacity.
The temptation initially will be to take on contractors.
Yet the overriding characteristic of a contractor is that they are mercenary.
Before you throw your arms up in disgust, I spent 6 years as a contractor. And over my 20+ year career I’ve hired and fired hundreds of contractors.
I don’t hold their mercenary tendencies against them. You just need to know that it’s not compatible with a micro consulting business.
Well firstly, you typically need commitment from your team before you’ve won the work. This is classic chicken and egg. You need to promise the client a team, whilst awaiting a promise from the client that the work is yours.
Ninety-nine percent of contractors are looking for full-time equivalent contracts for the longest periods of time possible i.e. 5 days a week for 3 months or more.
Many of your consulting engagements won’t require support 5 days per week, and the effort may be spread over much longer periods of time.
Contractors typically get paid weekly or every other week. Consulting businesses can wait anywhere up to 90 days to get their invoices paid. That means contractors can make a huge hole in your cash flow.
And finally, if a contractor doesn’t have experience of working in a consultancy environment, he or she will largely see you and your business as just a recruitment agency.
That means they won’t be there fighting your cause. They’ll make a clear distinction between them and your business, especially if you need to leave them on client-site long-term without supervision.
So to repeat, I’m not saying contractors are bad, but I am saying they’re not compatible with a micro consulting business, even though they might be compatible in big consulting firms.
FIVE. Building a successful consulting business takes a long time
I read articles and press releases all the time about consulting businesses that have just been sold or achieved investment. Here are two examples:
- Consultancy in Manchester, UK, takes on its 16th staff member – this was in 2018 and the firm was started in 2007
- Consultancy hits €2.5m in annual revenue – it started 16 years ago!
When I first started my consulting business I’d come from a firm that was doing around $50m in annual revenue after nearly 30 years. Yet I still had a desire and belief that I could achieve 8-figure revenues in 5 years.
The trouble with chasing massive revenues all the time is that you don’t stop to enjoy the journey.
Your first target should be to create a sustainable business. One that can pass the inevitable drought at the two-year mark.
Once it is sustainable – through choosing marketing channels that you can turn on/off at will; through an efficient and effective sales process; and through creation of the right blend of products and services – you can then focus on scaling it.
And scaling doesn’t necessarily mean bringing in lots of new staff.
Too many micro consulting businesses only focus on selling to SME’s, who in my experience are the most challenging to sell to, and the most demanding of clients! So you might choose to scale up in respect to your target audience.
Regardless of who your ideal clients are, the fact remains that a consulting business is not typically a fast path to riches.
And often many of those that say that it is are in fact selling online training courses, yet reference their businesses as a good example of a successful consulting business.
That’s not a consulting business in my view, that’s a training business.
Starting, running and growing a successful consulting business is hugely challenging yet wholly rewarding.
The journey is much easier if you focus your consulting business on a skillset that you already have.
And just because you might already be a consultant, it doesn’t mean that you know how to run a consulting business!
Be prepared for the following 5 things:
- There are a ton of small things that you’ll need to learn, and so you need to schedule the time during the working week
- Don’t underprice your services as your business model just won’t work without you working 7 days a week!
- You’ll be lured by shiny objects, especially of the marketing kind, if you don’t start focusing on marketing from the very beginning
- To grow you’ll need a team, but the chances are you’ll be let down along the way. If you can, avoid contractors because they’re not a good fit for a consulting business
- Strap in and enjoy the ride. It’ll be a long one. If you don’t plan for a long ride you’ll likely get frustrated and depressed at your lack of progress. Ignore all the marketing hype that’s out there about entrepreneurial growth. Set a Google Alert for ‘Consulting’ and get a more realistic understanding of consulting business growth from the press releases of existing consulting firms
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