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 Nokia was near to collapse in 2010, the Finnish city - where it employed 4,300 staff - made many redundancies.
Rather than accept defeat, many of those ex-Nokia employees started up lots of new tech companies - with the help of Nokia! As a result there were 400 new companies and 500 new entrepreneurs created.
These ex-employees recognised they were highly skilled, so they founded new businesses to take advantage of that fact.
This helps to demonstrate that you can utilise your existing expertise to start your own business rather than trying to come up with something entirely new.
In downturns, when redundancies are high, lots of new professional services firms spring up. I've even seen it happen with people that I've made redundant back when I worked in corporate.
But starting a business is a walk in the park compared to running and growing a business!
So, if you currently find yourself in a position where you're starting your own professional services business here are 5 things you need to know that you’re probably not aware of:
- There are lots of small things that are incredibly important
- Pricing low is a bad strategy
- You’ll be tempted by shiny objects
- You’ll be let down by the people you hire
- Building a successful consulting business takes a long time
Let's explore each of these in more detail.
01 There are lots of small things that are incredibly important
Non-disclosure agreements; Terms & Conditions contracts, contract negotiation; employment contracts and handbooks; pensions; VAT; EC sales lists; GDPR; tax returns and MTD; invoicing and payment terms; and so on.
There are tons of seemingly small and insignificant yet time consuming activities to complete. These can also have a big impact on the short and long-term success of your business. You’re going to need to learn them, and fast.
In time, many of these things can be fully outsourced, but you should never outsource something that you don’t at least partly understand. That's a recipe for getting ripped off!
For those legislative elements, ignorance is rarely a defence. And regardless, it won’t stop you haemorrhaging money from the business! Always seek the guidance of relevant experts and don't scrimp on costs. High fees don't guarantee quality, but low fees often guarantee low quality.
Unfortunately, there’s no shortcut to learning these things. You simply must ensure you plan sufficient time each week to get them done. I'd aim for at least one day a week at first. If you don’t, you can kiss goodbye to your evenings and weekends because that’s when you’ll find yourself doing all the non-billable stuff.
02 Pricing low is a bad strategy
The first thing many people do when they starting their own consulting business is to charge less than what their previous employers would have charged, or what they believe the competition is charging.
I can understand why people do this but it's the wrong approach.
Many 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 specific tangible benefits to your clients in the fact that you came from a big firm before, or are you now providing a comparable offering, just under a different brand?
The real value in a solo or micro-business is not that you’re cheaper than an established firm. It's agility.
Many medium and large corporates will choose bigger firms because they provide a level of insurance - you’ve probably heard the old adage, ‘Nobody got fired for hiring IBM.’ Sometimes it's because they want to choose a bog firm to feel good about themselves. To feel like they've made it because they can now work with the likes of McKinsey.
You can't compete with that unless you come from a big-brand firm, in which case I'd argue that your proposition is more compelling.
However, you must understand that the big corporates also engage independents and micro-businesses. Why? Because there are lots of additional benefits, 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 consultancies 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 or stubbornness in their approach. And it makes sense if they’ve delivered the same thing time and again for many clients. However, consulting in a 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.
None of these benefits mean that you should be lowering your prices. On the contrary.
03 You’ll be tempted by shiny objects
When consulting businesses start out, clients are typically people that the business owners already know. This works well for the first 2 years, but then all of a sudden projects dry up.
This is because you’ve exhausted your existing client base of opportunities. And you’ve allowed yourself to become so consumed in delivery that you failed to spend sufficient time marketing.
Of course, the chances are that you’ve never been trained in marketing anyway!
And marketing can often be the polar opposite to consulting. For example, 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 that's mostly positive.
But 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 feedback on, and that they might simply be downright rude and unprofessional about.
As the pressure builds for you to land more work, you’ll start to explore all the different things available out there. You start seeking shiny objects because your need is urgent.
You’ll see lot of adverts and promises, like...
- "How this one LinkedIn hack guarantees you 5 new clients a week"
- "How launching a webinar will transform your business fortunes - our client Steve 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 opportunities"
And so on and so on.
Most of these course providers utilise copywriters, so their arguments are very compelling. Every provider will also have outliers that can substantiate their claims. Since you're a consultant - and therefore an expert at what you do - you'll consider yourself an outlier too. You'll believe that success is guaranteed.
If these people follow the telephone sales script to the letter too, you'll find yourself trying to convince them to take you on as a client rather than it being the other way around!
I’m not saying that all course providers are liars because they’re not. It’s just that most of these courses only ever address one specific marketing element, and they exaggerate their claims. They'll tell you that all you need is Linkedin to create multiple leads, yet it will be a Facebook ad where you first heard about them.
What these companies don't do is seek to understand you and your business, or to show you where and how their technique could fit into the overall picture of your business.
However, 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. the next shiny object.
If you continue to chase shiny objects you'll never stick at anything long enough to actually make it a success.
04 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. Taking on contractors is where you'll most likely start.
However, 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 25+ 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 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 for invoices to be paid. That means contractors can create a huge hole in your cash flow.
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 your direct supervision.
So to repeat, I’m not saying contractors are bad. What I am saying is that they’re not compatible with a micro consulting business, even though they might be compatible in big consulting firms.
05 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. It took them nearly 30 years to reach that milestone. 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 rather than simply increasing your headcount.
Regardless of who your ideal clients are, the fact remains that a consulting business is not a fast path to riches.
Often many of those that say it is are the same people that are selling online training courses to grow a consulting a business. they make the mistake of referencing their businesses as a good example of a successful consulting business, yet in reality they are online training and coaching businesses, not true consultancies.
Starting, running and growing a successful consulting business is hugely challenging yet wholly rewarding.
The journey is much easier if you focus your 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:
- The million and one small things that you’ll need to learn. Do sweat the small stuff and make sure you allow yourself sufficient time each week otherwise your risk your business consuming your whole life!
- 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 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