The Business of Consulting: The Basics and Beyond

By Elaine Biech

Designed as the go-to reference for managing a consulting business, The Business of Consulting is candid, practical, and eminently useful. Fine-tuned to address the changes in today’s business environment, this vital resource outlines the basics for managing a consulting practice and shows how to:

• Develop a business plan
• Market your business
• Charge for your services
• Build a client relationship
• Grow the business
• Ensure your continued professional growth
• Make money in the profession

• Language: English
• Publisher: Wiley
• Release date: Jan 13, 2011
• ISBN: 9781118047491

Elaine Biech

Elaine Biech is president and managing principal of ebb associates inc, an organizational and leadership development firm that helps organizations work through large-scale change. Her 30 years in the training and consulting field includes support to private industry, government, and non-profit organizations. She’s written 86 books with 14 publishers, including the Washington Post number 1 bestseller, The Art & Science of Training. Elaine lives in Virginia Beach, VA.

Book preview

PREFACE

Winter 1987

Dear Peter,

For the last year I have been working harder but making less money. I have searched the library for a book, an article—anything that will provide me with a benchmark against which to compare my business. I want to know what the average consulting firm spends on marketing. How can I determine how much my employees should be billing? What is considered a good profit margin in the business of consulting? I will call you next week to find out whether you can recommend a book.

Thank you.

Elaine

Peter Block read my note. When I called him, he said, I’m going to do much more than recommend a book. I want you to pull all your records together, such as your expenses for this year, your taxes from last year, your income summaries for the past three years, and your projected cash flow and income for the next year. After you have everything together, call me back. Plan to talk to me for two hours! And by the way, there isn’t a book to read about this stuff!

I couldn’t believe my ears! Peter Block was going to consult with me on my consulting business! We had a great conversation. He provided me with sound business advice—you might say it was flawless consulting!

Peter’s advice encouraged me to examine marketing dollars wisely, study business numbers and data carefully, and explore the advantages and disadvantages of hiring employees and forming partnerships. This second edition of The Business of Consulting covers the same topics and is written in the same spirit—giving you sound advice and practical suggestions.

For example, Chapter Five, ... And Staying in Business, provides 113 marketing ideas to ensure that you spend your marketing dollars wisely.

Chapter Six, The Cost of Doing Business, describes forms and processes that I use to ensure that all the data I need for making decisions are always at my fingertips.

And Chapter Eight, Growing Pains, will help you weigh the advantages and disadvantages of hiring employees, creating a partnership, and otherwise growing your business.

Peter’s mentoring helped me make better business decisions for my consulting company, ebb associates inc. Being a successful consultant (like Peter) means that you not only provide excellent advice for your clients’ businesses but also implement excellent advice for your own business.

The Business of Consulting, Second Edition, has been written for several kinds of people: the individual who is considering a consulting profession and wonders how to start; the new consultant who may have mastered consulting and now realizes that there is also a business to run; and the experienced consultant who is continuing a lifelong learning journey and is looking for a few practical tips.

IN THE SECOND EDITION

This edition has been updated, renewed, and enhanced. Resources and recommendations are updated to reflect the current world of business. Some of the examples are renewed to present the changes that have occurred in my career and my life. The book has been enhanced with examples and additional content. More than fifty e-Ideas have been added. These technology-based tips will help you better utilize the technology resources around you and add content and information beyond The Business of Consulting.

Consulting is a most rewarding career. You are no doubt a very fine consultant, but being good at consulting is not enough to keep you profitable. You also must manage your business.

This book focuses on the business side of consulting: how to develop a business plan, market your business, charge for your services, build a client relationship, grow the business, ensure your continued professional growth, and, of course, make money in the profession. To assist you, all the forms presented in the book have been put on a CD-ROM. Pop the CD in your computer, personalize the forms with your company name, and print them out to project cash flow, plan marketing campaigns, track your time, or identify your aptitude for starting a business.

My goal in writing this book was to give you as many practical tools and sound ideas as possible. I learned most of them through trial and error. Perhaps this book will prevent you from making some of the same errors.

The Business of Consulting is written in the first person—singular and plural. Although I’m the author of the book, the employees of ebb associates inc have played a big part in shaping the content, and it isn’t right to use I when we did it.

ACKNOWLEDGMENTS

Many wise and wonderful people were the authors of The Business of Consulting. It is a delight to thank everyone who wrote this book:

Consultants who led the way and taught me all that I know: Geoff Bellman, Ken and Margie Blanchard, Peter Block, Warner Burke, Richard Chang, Marlys Hanson, Ann Herrmann-Nehdi, Mat Juechter, Bev Kaye, Don Kirkpatrick, Jim Kouzes, Pat McLagan, Julie O’Mara, Bob Pike, Dana Gaines and Jim Robinson, Mel Silberman, Thiagi, and Jack Zenger.

Matt Davis, editor, for pushing me to complete this second edition.

Cedric Crocker, publisher, for continuing to provide me with challenging and exciting opportunities.

Kathleen Dolan Davies, editor and friend, for trusting me with your deadline.

Susan Rachmeler, developmental editor, for cheerfully accepting yet another of my books—you make me look great!

Nina Kreiden, production editor, who gives every book special treatment.

Brian Grimm, marketing manager, who will ensure that The Business of Consulting reaches every aspiring consultant.

Lorraine Kohart, my assistant, who entered content and enhanced its meaning.

Dan Greene, for keeping the world at bay while I wrote.

Mentors and friends who believe in what I do: Kristin Arnold, L. A. Burke, Vicki Chvala, Linda Growney, Maggie Hutchison, Shirley Krsinich, Robin Lucas, Mindy Meads, Celia Rocks, Pam Schmidt, Marianne Scott, Judye Talbot, Kathy Talton, and Renee Yuengling.

Clients, for allowing me to practice the business of consulting with you.

And especially Peter Block, for responding to a plea for help in 1987 with flawless consulting.

March 2007

elaine biech

ebb associates inc

Norfolk, Virginia

005_r1

chapter ONE

So You Want to Be a Consultant

A person who never made a mistake never tried anything new.

Albert Einstein

Have you ever admired consultants who zip into your company, capture everyone’s attention, accomplish in days what you’ve been struggling with for months, and waltz out with a big check?

Ever thought you might like to be a part of that glamorous profession? This book will help you determine whether you have what it takes to be a consultant, as well as whether the consulting profession offers what you desire as an individual.

WHAT IS CONSULTING?

Consulting is the process by which an individual or firm assists a client to achieve a stated outcome. The assistance can come in the form of information, recommendations, or actual hands-on work. A consultant is a specialist within a professional area who completes the work necessary to achieve the client’s desired outcome.

Whether companies need help downsizing, installing a new computer system, building an executive team, or breaking into the Chinese market, they can call a consultant to assist with the effort. The organization requesting the assistance is usually called the client. The term can refer to the entire organization or to the person who actually made the call.

Consulting is not a descriptor that identifies a profession in itself. Unlike doctors or accountants, highly skilled consultants come from very different backgrounds. A qualifying adjective is required to identify the form of service or the area of expertise—for example, management consultant, engineering consultant, or performance consultant. Although consulting is not a profession by definition, it is often referred to as the consulting profession. For the sake of convention, I will refer to the profession in this book.

The actual work of a consultant can vary quite a bit, depending on the area of expertise offered. Every consultant must be a subject-matter expert in some area. The expertise might be in the form of general content, such as management development, organization development, leadership, or family business. Expertise might be in a specific profession, such as computers, security, writing, or marketing. Expertise might also be in the form of how the consultant delivers services, such as facilitation, training, strategic planning, or team building.

Even after you determine an area of expertise, you will want to select the actual work method you wish to use. For example, if you decide to focus on the training and workplace performance field, you could develop and deliver your own material or subcontract material development to another person while you deliver it. You could develop material for others, or you could deliver others’ materials. You could even be certified to deliver others’ courses, especially for the large training supplier firms.

If you are a generalist, such as a management consultant, you will need to determine whether you will focus on a specific industry, such as manufacturing, banking, aerospace, or one of hundreds of other industries.

FOUR WAYS TO GET STARTED

Taking risks. Embracing ambiguity. Practicing flexibility. Balancing both process and people issues. Managing multiple responsibilities. Tolerating extensive travel. Communicating effectively. Learning continually. Proving your worth again and again. Does this describe you? If you responded with a resounding Yes! consulting may be an ideal career move for you.

Let’s assume that you’ve decided consulting is right for you. What opportunities exist? Think about your ultimate goal. Do you want to be a partner in one of the Big Four? Will you eventually own your own firm? Do you think you will always want to consult as a sole practitioner? Do you want to teach part-time at a small university and consult on the side? There are at least four ways you can enter the field: as an employee, as a subcontractor, as a part-time consultant, or as a self-employed independent consultant.

As an Employee

Numerous employment opportunities exist for you. You could join a large national consulting firm or a small firm. Another alternative would be to partner with someone in an even smaller firm.

Large Firm. If you have just graduated from college, this is your best bet. You will need to get experience. As an employee in a large firm you will be an extra pair of hands on large projects—a great way to get experience. The summer 2006 Salary Survey of the National Association of Colleges and Employers (NACE) lists consulting as one of the fifteen highest-paying jobs. The average salary offer for undergraduates was $50,657, with some starting offers as high as $65,000.

NACE publishes a quarterly Salary Survey Report of offers to new college graduates in seventy disciplines at the bachelor’s degree level. The data are compiled from college and university career services offices across the United States. If you are a recent or soon-to-be graduate, check for the most recent report for starting consultant salaries, among others, at www.naceweb.org.

If you stay in school longer, the rewards are greater. According to WetFeet (2006), a leading career research firm and top career website, M.B.A.s from top schools can expect to be offered a base salary of $100,000 to $130,000 as new consultants with some firms. In addition, about 75 percent of all consultants are eligible for bonus awards on top of their salary. Recognize that high starting salaries and the demand for consultants have led to strong competition for talent.

As a consultant for a large national firm, you would be able to focus solely on delivering consulting services and generating business. Someone else would complete tax forms, hire secretarial support, and pay the rent. You would have instant name recognition and a clear career path. Although this may sound advantageous at first blush, the greatest drawback is that you might become so comfortable with your job that you would never experience the world of the independent consultant. These jobs also generally come with a great deal of pressure. Usually you are expected to generate (sell) a certain amount of consulting services. A great deal of travel is another drawback.

If you choose this route, learn more about these large firms, who they are, and what they do. I’ve identified several arbitrary segments. The same firm may be represented in more than one of these segments:

The Big Four international accounting firms also offer professional services. They handle the vast majority of audits for publicly traded and private companies. Members of the Big Four are PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young, and KPMG.

Large national strategy firms, such as Accenture, Booz Allen Hamilton, the Boston Consulting Group, or McKinsey & Co., provide strategic or operational advice to top executive officers in Fortune 500 companies.

Boutique strategy firms that specialize in a specific industry or along a functional line, such as Cornerstone Research (litigation support) or the Gartner Group (high-tech research), are smaller, and many have excellent reputations.

Firms that focus on human resources issues, such as change management, design of compensation systems, mergers, or employee satisfaction surveys, include the Hay Group, Hewitt Associates, and Watson Wyatt & Company.

Technology firms that design, implement, and manage information and computer systems are involved in time-intensive work that requires large teams and usually takes place behind the scenes. These firms are less prestigious, but offer more opportunities for undergraduates. A sample of firms includes EDS, HP Technology, Oracle, SAP, and Synopsis. Note that it is not always necessary to have a technology degree, as many of the jobs in these firms require other skills.

Go to www.WetFeet.com to learn more about the current outlook of the industry and profiles of some of the top consulting companies. Next go to the websites of these companies to learn more about them, the kind of consulting they conduct, and what to expect.

Small Firm. As a consultant in a small, local firm, you would experience similar advantages to those of a large, national firm. One added benefit might be that you would probably experience a wider variety of tasks and be given more responsibility sooner. If you want to travel, a drawback may be that you are often limited to working with businesses in your locality. Although your salary would be only half what it could be with one of the Big Four, you would have less pressure, more opportunity for a variety of projects, and more involvement in the entire consulting process.

Find these companies by location. Check the chapter of your local industry-specific association in the city where you live. Don’t depend on the Yellow Pages. Many small firms do not find value in advertising that way. Your local librarian or Chamber of Commerce can help you also. Ask for a listing of local businesses broken down by industry.

Partnership. As a partner with one or more other consultants who are already in the business, you would be able to share the burden of expenses, marketing, and the workload. The biggest drawback is the potential for conflict around communication, decision making, unbalanced work loads, and numerous other business and personal preferences.

How do you find a partnership? Well, more often than not, they find you. You may be able to join a partnership that is already formed (expect to buy in with cash or reduced pay for a specified time period) or identify other individuals who, like you, want to get into the consulting profession. Read more about partnerships in Chapters Four and Eight.

As a Subcontractor

Rather than becoming an employee, you could subcontract with a firm. Many businesses and consulting firms are looking for subcontractors who will fill in the gaps left as a result of downsizing or launching new initiatives. As a subcontractor you may have a less secure position, but you will have flexibility while gaining rich experience and developing a sense of the market. The work will most likely not be full-time, but this allows you time to develop your own