Three Pillars to Building a Consulting Business
Every year for the last 5 years there are over 600,000 new businesses launched. The U.S. economy (and most of the world for that matter) chugs along. Business sentiment is very optimistic. The longer the economy ticks upward, the more people see this as the time to pursue their dream of running their own business. However, a little more than 50% of business startups won’t make it to year five. In the market for independent consultants, however, it’s even higher with a closure rate of around 80%. But there is a silver lining to that number. The 80% closure rate doesn’t mean that these consultants failed, rather most consultants wind up working permanently for one of their clients – only 20% fail. So, consulting is still a great option for you to consider.
And to prevent failure from happening, let’s highlight some of the “pillars” that you can build to give your business a solid structure:
Pillar 1: You have a unique value proposition (UVP).
- You are your product. Your knowledge is what will make you money. So, it’s important to clearly articulate your unique expertise. There’s no hard and fast rule for this, but the rule of thumb is that you could be an “expert” if you have at least 10,000 hours (or 5 years) of experience delivering ever-increasing value. Leveraging your expertise framed with the right solution is your UVP. But your value proposition needs to be clearly understood for the benefit received. For example, you help someone earn $10 for every $1 they spend with you.
- You are a recognized authority. Don’t confuse this with celebrity. An authority is known as an expert within a given network, and people/businesses seek them out. That network could be as small as a few hundred people if your niche is targeted. A celebrity is so well known that even outside your market people know about you. Celebrity status isn’t essential for you to be successful. For example, almost everyone knows Elon Musk and his auto company, Tesla. He’s all over the social media channels and has millions of followers. But Ian Callum? He’s the award-winning auto designer for Jaguar. Many automakers follow his trends closely, but he has just over 20,000 followers, and is sought after continuously.
Pillar 2: You have a network (i.e., market) that you can tap to help you get started.
Does your network desperately need what you have to offer? If not, as mentioned above, can that network easily see the value you can deliver over the fees you’ll collect?
Most people have a network. However, they’re usually your industry peers – especially if you come from a corporate world. What’s important is to have a network of people and businesses who need your expertise. If you don’t have that network, go where the action is. For example, if you’re a Python programmer, don’t just go to a Python convention. Go to a conference where companies (e.g., Facebook, Google, Quora, Netflix) need your skills go.
Why does this matter? Because when you start out, sales and marketing will be a considerable expense – possibly over 50% of your capital. If you can tap into a network to get your first, second, and maybe third sale, then your money can be put to use to improve delivery, hire staff, or get other clients. Having a network gives you options. More options may make the difference regarding how fast you become “cash positive.”
Pillar 3: You have the resources (money, people and time) to make this happen.
Running out of resources is the most common reason businesses fail. It is essential to take in to account not only the money you’ll need, but who will help, and how much time you can allocate to delivering the service vs. working with clients.
Let’s start with the money. The number one priority is to maintain and grow cash – not profit – cash. There is a difference. Let’s say you have a high-dollar service priced at $10,000. You could allocate all your remaining funds to that service and get a 50% profit. However, because of its price, you only sell it about three times a year. So, you earn $15,000 in cash. On the other hand, you could sell another service priced at $1,000, but because it’s smaller and more intensive, you only make 25% profit. You can sell 100 of those products in a year. You’ll generate 100 x $250 = $25,000 cash. Given that you’re just starting, where should you put your money?
Next, a business is a collection of systems administered by your talented staff. The most common ones are sales, marketing, technology, accounting, legal, and support. Assuming you’re not a lawyer, you usually shouldn’t handle your legal issues. Similarly, you’ll need an accountant to check over your books, and a technology guru to manage your software. Luckily, as a start-up business, you don’t need to hire everyone on your first day, nor do you need to engage them full-time. There are plenty of specialists (like you) who will support you on a part-time basis. They likely have other clients. The point is to focus on your strengths and outsource your weaknesses. The hard part is to find quality talent. To source great people takes time.
Which brings up the last point – time. Time management is a learned skill. It’s easy to understand but rarely executed well. Sometimes we get focused on a particular problem, so much so, that when we come up for air, we wonder where the time has gone. All those other tasks didn’t get done. Interruptions are another time management challenge. Interruptions was one of my biggest trials. I always had a policy of making time for people. Unfortunately, that meant no time for my work. So, I worked many nights trying to catch up.
Being able to manage your time allows you to work on your business (proactive) instead of in your business (reactive). Use “time blocking” where you reserve time to priority tasks each day. And once past that time, focus on the next priority. Also, allocate your high-income activities in the time slot during the time of day where you’re most productive. Next, have a to-do-list that aligns with your goals, and that to-do-list should map to your time blocking.
You may be thinking, “What about a business plan? What about risk management? Etc.” Yes. There’s a lot more that could be discussed, but they are variations of these core themes.
Next, you may be thinking, “I don’t have all of this in place, so I’m going to fail.”
Our response is, “We don’t think you will.” Just knowing about these “3 Pillars” gives you a tremendous leap over your competition. Now you can plan how to achieve them. You can take action. You may not have this in place today, but you can tomorrow.
If you want more insider help to accelerate your ability to master these pillars and more like them, make an appointment here.