Several readers and listeners of the podcast have reached out to me recently, asking for advice on how to start a consultancy. After over two decades with my global Customer Experience consultancy, it occurred to me that I have a lot of advice on the topic, which I boiled down into the 10 rules for building a successful consultancy.
So, let’s look at the rules first and then dive deeper into what I mean by them.
10 Rules for Building a Successful Consultancy
- Be brave and be committed.
- Have the right mindset.
- Prepare for hard work.
- Understand and complement your weaknesses.
- Make some long-term decisions and long-term bets.
- Have an original thought.
- Provide value to your customers or your audience.
- Remember, cash is king.
- Experiment and adapt.
- Be focused.
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Rule #1: Be brave and committed.
First, I suggest reading an old book by Ken Blanchard called Who Moved My Cheese? The book has a lot of superior wisdom, but, in particular, I liked Blanchard’s question at one point: What would you do if you weren’t scared?
For anyone standing on the precipice of starting a consultancy, you are no doubt thinking…a lot. You weigh the pros and cons, deliberate about the timing, consider the risks, etc. However, the danger is that Loss Aversion—our natural tendency to hate losses more than we enjoy gains—will get in the way of progress.
To be clear, I am not advocating jumping in with two feet without weighing the options and planning. However, there are things that you need to be realistic about at this time.
I am saying that it is effortless to come up with reasons not to do things. However, if you start a consultancy, you need to think more broadly than that.
Rule #2: Have the right mindset.
Starting a consultancy is lonely. It is difficult to go from working with a team at a large company, as I did, to have no one but myself for company at work.
Being the only employee also means only I could fix the copier or take the proposal to the post. So I went from commanding a team of 3,500 people to googling how to unjam the printer in a few short weeks. I am not saying that it was beneath me, but it was a lesson in practicality, I assure you.
Also, it would help if you were committed in your mindset. In other words, don’t give up. It’s not easy to get a consultancy going. If you are counting on your business taking off immediately, think again. Often, “sure things” become less sure when they go from ideas you bounce off colleagues to asking colleagues for business. Hang in there and do the (lonely) work. Believing in yourself is an essential part of the mindset.
Remember, you are the expert in your area, but people might not know it yet. Therefore, it’s up to you to let them know you are an expert. Back at the turn of the millennium, there weren’t a lot of ways to do this, so I wrote a book and did PR about it through TV and radio. However, there are numerous ways to get there today, including social media, blogging, podcasts, etc. Whichever way you establish yourself, ensure you demonstrate your expertise so people feel comfortable giving you their hard-earned money for your services.
Rule #3: Be prepared for hard work.
I don’t think I had ever worked as hard as I did when I started Beyond Philosophy. I worked evenings, weekends, and into the wee hours of the morning. It’s a lot of hard work. If you aren’t up for this activity level, it might not be the time to start your consultancy.
Rule #4: Understand and complement your weaknesses.
When I started my consultancy, I understood sizeable corporate business models. I knew how to work with them and how to sell to them. Moreover, I had years of experience doing just that. However, I knew very little about running a small business.
Therefore, I partnered with someone who had retired from my company a few years before I started Beyond Philosophy. He knew all about running a business and had been a serial entrepreneur. In other words, he knew everything about running a consultancy I didn’t, and I couldn’t have done it without him.
Now, you might be different, and your weakness might be something else. That’s okay. The idea is that whatever your weaknesses are, get some help in that area. Very few people can do it all and do it all well. Getting help is critical.
Rule #5: Make some long-term decisions and long-term bets.
One of the great things about starting your own company is that you can make all the decisions. However, that means you have to make some decisions, not just what color you want the logo for your consultancy to be. Some of the decisions you make right away should be long-term decisions, or if you prefer, long-term bets.
For example, when we started the podcast a few years ago, we deliberated a lot about what the podcast should be, how often we would post, and so on. At the time, we didn’t even know if it would work. However, today we get 15,000 downloads every month. Now, if we had known that would be our result back then, it would have been easy to invest time and money in the podcast, but we didn’t. So, it would be best to make a long-term decision, even if it feels like gambling with your resources.
The fact is it takes a long time to get to profitability. One mistake entrepreneurs often make is not planning long enough for the lean years. Twenty percent of new businesses fail in the first two years, one in five businesses fail within the first five years, and 65 percent fail in the first ten. (Sourced from Top 6 Reasons New Businesses Fail (2023). Accessed: 3 March 2023). So, assuming you will be profitable right away is foolish. Instead, plan for some lean years, not weeks or months.
Rule #6: Have an original thought.
For me, it’s about zigging when everybody else is zagging. Why would anyone hire you if you offer what everyone else is offering?
For example, there were other Customer Experience consultants when I started. Our differentiating thought was emphasizing the emotion of customer behavior. Over the years, that has evolved into using behavioral sciences to drive our intellectual property.
Part of this rule is the idea of continuous improvement. You need to pursue personal development and growth. If I were discussing the same things I did 20 years ago, my originality would be all used up now.
Your value is your expertise and insights. So, you need to ensure that you always have new ideas to sell. So, if you aren’t producing those, you are undercutting the value you offer.
Rule #7: Provide value to your customers or your audience.
So, building on rule six’s originality theme, rule seven focuses on your offering. You should provide value to your customers.
Think about how you can provide value to your customers. For us, it’s the practical applications to the lessons in customer behavior that we publish here in the newsletter and the ideas we share on the podcast. We know that it is valuable because we track our subscribers, which increase every month. You might also see value manifesting as repeat business from clients that move organizations or referrals of their friends and colleagues in many consultancies.
Getting over a concept to many people is a valuable skill. I know because people much cleverer than me have lovely ideas, some better than mine. However, while these brilliant people have a gift for concepts, they don’t know how to communicate with people.
Your job as a consultant is to share your expertise practically. Therefore, it would be best to communicate it in a way people understand.
Rule #8: Remember, cash is king.
One of the hardest things about starting a consultancy is cash flow. With a recession looming, every business is hyper about its cash flow, and you should be no different.
Small businesses are particularly at risk of swinging between feast and famine. You constantly fluctuate between having too much work or not quite enough. Therefore, keeping track of your receivables is essential. When you work with large corporations, staying on top of your payments is crucial. Large companies often drag their feet, to the chagrin of your contacts.
Moreover, as a consultant, it’s hard to leverage anything. Once you have consulted, it’s done. They have your intellectual property whether they pay you or not. Therefore, take care of yourself and ensure you get what an organization owes you for your services.
Rule #9: Experiment and adapt.
You must constantly come up with new ideas and experiment with your offerings. For example, one of our best-selling services is the Emotional Signature, which measures your emotional engagement with customers and what drives value for them. We developed this product with the help of the London Business School a few years into the consultancy.
If we had stuck with our original offering, we never would have had our best product. Therefore, I advise you to experiment with your offering constantly and, if it doesn’t work, adapt. Not everything will work. But everything that works usually has some adaptation involved with it.
Rule #10: Be focused.
This one might contradict the last rule, but hear me out. There is always something that people want that you don’t do. However, that doesn’t mean you should do it.
You might have heard the phrase, “Keep to your knitting.” It is a cute way of saying do what you’re good at, whatever that might be. A newer version could be, “Stay in your lane.”
It’s easy to get distracted by shiny objects, like big-money projects that aren’t what you do. You might feel tempted to move over to that area and try your hand at it to bag that project. All it would take is moving away from your focused area of expertise…but don’t. Distracting yourself from your area of expertise to pursue something you aren’t an expert in and delivering an inferior product, as a result, will not do good things for your fledgling business.
Focus on what you do best and how you deliver customer value. Picking up extra work is excellent in the short term but dilutes your brand, which can be dangerous to your market position as an expert.
There you have it, my ten rules for building a successful consultancy. However, it isn’t without challenges. Even following all ten rules, having a successful consultancy will still be difficult. Moreover, it involves a lot of hard work. But if you believe in it, and yourself, you can do it.
If you have questions, have hit a roadblock, or want advice, don’t hesitate to contact me here on LinkedIn. I would love to advise you.
Or should I say consult?
Colin has conducted numerous educational workshops to inspire and motivate your team. He prides himself on making this fun, humorous, and practical. Speak to Colin and find out more. Click here!