Friday, February 24, 2017

8 Key Ingredients to a Profitable Consulting Business

consulting-businessMost of the guidance you see for entrepreneurs is aimed at those who are selling a product (Apple, Tesla, Xiaomi), or selling a service (Uber, Airbnb, Snapchat). Yet, according to statistics from the Small Business Association (SBA), over half of new businesses offer something else - personal professional services, including consulting, business coaching, and advisory services.

The challenges for making money and survival in these professional services worlds are different, maybe even tougher. The “product” value is difficult to quantify, the costs are nebulous, and entrepreneurs have to clone themselves to scale the business. Many are reluctant to really “market” themselves, and have trouble differentiating their offerings to clients, except by price.

If you are already running a business in this category, or thinking about one, I recommend a new book, “The Profitable Professional,” by Kelly Clifford. From his own successes and failures in this domain, he explains how the rules and customer expectations have changed in today’s world, and he offers some practical guidance on how to survive in this new world.

Based on my own years of experience in this space, I would like to highlight a critical subset of his key ingredients for success, to save you from the frustrations and setbacks we both have felt:

  1. Implement real competitive differentiation. If your business card and website come across as just another advisor, consultant, or accountant, then don’t be surprised if price is the only focus. Internally, you also need to do things differently to rise above your peers. This includes how you find leads, close clients, and minimize free work or rework.

  2. Shape your business by design, not by default. Announcing that you are a consultant, and hoping demand will set your focus, is not a good strategy. Focus on your passion and your vision of what you want to accomplish, and make that come alive in the design and delivery of everything you do. Picking a niche is another good way to focus.

  3. Proactively build relationships with target clients. Passively waiting for transactions only makes you a commodity. Clients need to see you as a trusted value add, rather than just a service provider. Use your knowledge of evolving needs and technology to add more value than competitors, and introduce clients to each other to build partnerships.

  4. Use visibility and social media to pull clients in. The days of a hardworking introvert hiding in the back room are gone. In addition to relationships, today’s clients want to see you and your expertise on videos online, industry conferences, and social media to feel the trust for differentiation. They expect reviews and testimonials from other clients.

  5. Set pricing to assure both revenue and profit. Unless you have deep pockets, you won’t survive without an adequate margin, including all the costs of running a business and staying current with technologies and market changes. Flexible business models, including value-based pricing, bundling, and custom proposals are the places to begin.

  6. Be targeted in marketing and lead generation. Just like product marketing, professional services requires a clear profile and demographics of your ideal client. To check your return on marketing investment, you need to define metrics and a formal process to evaluate progress and cost tradeoffs. Don’t forget seminars and events.

  7. Raise the conversion rate with effective follow-up. Successful professionals today know they can’t work only from memory. They use customer relationship management systems (CRM) for more effective tracking and data. They match individual customer preferences, whether it be voice, email, texting, or social media, to close deals.

  8. Maximize repeat business with existing clients. Just as with product marketing, it can cost five times as much to attract a new customer, compared to getting more business from current ones. It pays big dividends to make realistic promises and over-deliver the first time, and then follow-up to check for follow-on opportunities every three months.

Even with all these done right, don’t expect your professional services business to match the triple-digit growth targets of billion-dollar product startups. Your service is not a product that can be replicated by a machine, and sold at night while you sleep. As a result, you won’t attract the investors who could fuel that kind of growth, or scale as quickly as they may demand.

Yet, I find the delivery of professional services to be one of the most satisfying and fulfilling types of entrepreneurship, where you can actually build relationships with customers, see directly your impact on the world, and have some fun at the same time. For me, that’s the definition of success.

Marty Zwilling

*** First published on Inc.com on 02/09/2017 ***

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4 comments:

  1. As someone who has been consulting for eight years, I'm always interested in ways to become more profitable. :) By the way, I wrote a post recently about the realities of being a consultant after getting approached by people who were curious about what's involved - http://www.markevans.ca/2017/02/21/consultant-2/

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  3. Hi Martin - Great advice - spot on! I even retweeted it, even though that is a mere drop in the bucket compared to you :-)

    BTW, finally launched my newsletter, as I continue to ramp up the JumpToConsulting project in semi-retirement. (Check it all out at www.jumptoconsulting.com)

    We should do coffee again.

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  4. I really appreciate this tips for more profitable consulting business. I am also running a business consulting firm so I always try to learn about new things that can help my business to grow.

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