10 Powerful Insights to Help You Succeed as a Small Business Consultant
In the previous article “Freelance Consulting Online: a Step-By-Step Guide” we shared enough information for you to start your online freelance consulting business to help you replace your income if you lost your job or about to lose your job during current challenging economic times. If you have not read that article, please start there. In this article, we take it a step further and discuss 10 insights you need to succeed as a small business consultant. But first let’s briefly speak about what is happening with the global economy and how it is impacting consulting work and recruitment prospects with major consulting firms.
What is happening with the global economy?
For those of you wondering why you should consider following this online-only freelance consulting path, we will explain what is happening in the world because for many of you you were not yet working during the 2008 recession. You do not know how bad it was.
This recession will likely be much worse. The thing is people are not working. You know this. You walk out, restaurants are shut down. You go anywhere and there is nothing happening. There are a few restaurants that are open but mostly within hotels. Almost everything else is closed.
If people are not working, they are not producing something and they are not serving customers. If you don’t produce something you can’t sell it because you have nothing to sell. If you don’t serve people you can’t get paid, so there is less revenue.
If a company is taking in less revenue it must cut cost and reprioritize. It’s a fact of life. It is going to cut costs and reprioritize by shutting divisions, firing employees, call it whatever you want rightsizing, retrenching, getting rid of people, etc.
Business consultants will be hit very, very hard. Expect a lot of retrenchments at consulting firms. Expect massive hiring freezes. This is a reality. It is not possible for consulting firms to not take a sizable hit.
This is not going to be over fast
So if you think this is going to be over fast, you will apply for a new job, and things will get back to normal… We wish it was the case. When shutdown is over it’s going to be very bad for maybe a year or two. And you have to get ahead of it now and do something that is going to work versus hoping that things going to get better.
It may last for 3 to 5 years for professionals.
Can you find a job as a business consultant at a major firm?
In terms of new jobs, yes consulting firms will be hiring some people. Specifically, in areas like operations, turnarounds, restructurings etc, and will always hire at the elite business schools. But in terms of the percentage they are hiring versus the percentage that is applying that ratio has just gone down significantly. If the ratio before was they hire 5% of those that apply, it now has gone down to 0.5%.
So yes, you always going to hear examples of the firms hiring but the question is what is your probability and your probability is much lower. And the question you have to ask yourself is whether you can be one of those lucky people who gets hired. The net trend is negative.
Dealing with isolation
The second thing you need to know is you are isolated. There is a quarantine to some degree everywhere in the world. You are at home. Almost every one of you reading this, you going to be at home and you going to be at home for a long, long time. The social signals, social cues and the social routines that typify professional services like a handshake, like networking, like traveling, like being able to see a client and come home and not infect your family, being able to meet people, those are all gone.
So a lot of business consultants are just thinking I am going to do freelance consulting by myself. No, you are not. And you have to accept that. You have to accept that there is a different business model required now.
Previously you had a full salary, you had a physical presence with clients whereby you meet clients, you bill clients hourly and you get paid from your employer. But how can you make money when you cannot work at a major firm because no one is hiring?
So the net effect is that you going to be retrenched or see a dramatic salary cut, or feel some kind of financial pain. Little hiring and almost no chance to interview. You are stuck at home. Costs are going to go up and your revenue is going to go down. You literally only have one connection with the world. The internet. So you better pay your electricity bill and pay your internet bill.
Succeeding as an Online-Only Small Business Consultant
So, if you are a business consultant and your previous channel to a client was through the firm, which you lost or about to lose, you have to create your own channel. Play the odds and the odds are completely against you if you decide to apply for almost any full time role during this difficult economic times.
But the good news is you have skills for which there is demand. As a business consultant, as long as you can help businesses create more value than what they pay you, there will be demand for your services.
Hiring consultants online on dedicated online platforms was already taking away sales from traditional in-office professionals (small consulting firms, small marketing firms, small web development firms, etc.). What the COVID-19 has done is to accelerate a change in hiring habits.
And what we want to do in today’s article and part 1 we posted earlier is to show you how to take advantage of this trend and replace, and thereafter surpass, the income you lost or may lose.
Economics of Online Freelance Consulting – 10 Insights that Determine the Success of a Self-Employed Small Business Consultant
So, let’s talk briefly through the economics of on online freelance consulting business and what are the insights that determine the success of a self-employed online-only small business consultant.
Small business consultant success: insight #1 – start winning quickly and keep building
The first thing you need to keep in mind is this is a winner take all economy. Online means that you have to put yourself onto a platform somewhere to promote yourself and show your skills. But when you put yourself onto that platform it’s very easy for prospective buyers to see all other small business consultants on the platform.
And what happens is the small business consultants who have the best profiles, the best ratings, the best reviews, the best write-ups of their profiles, the best photos, they command the majority of the revenue because it’s very easy for customers to fire you and switch to them. This is what we call a winner take all economy.
Where the person who is very successful captures the biggest share of the economy. And we also call it the platform effect.
Whenever you promote yourself on a platform, whenever that platform standardizes the way your profile is presented so it makes it easy for people to shop for the best small business consultant, the most adaptable person, the small business consultant with best reviews, best profile write up, best photo, best completion track record, usually wins.
The “best” person wins and its a snowball effect. So you have to start winning quickly and keep building. That is very important.
Small business consultant success: insight #2 – bite-size niche work for smaller clients
Insight two as it relates to becoming a successful online small business consultant is you want to go for bite-size niche work for smaller clients. If you are thinking, “Let me source a $10,000 or $20,000 contract,” it is always possible, but it is very unlikely. What you want is small pieces of work for niche subjects for smaller clients.
So you want to do something like an excel review in the niche work of financial modeling for a tourism company. It is bite-size because maybe it is two days or 1 day worth of work. It is a niche because you are just doing financial modeling and it’s a smaller client.
If you try going after big pieces of work the issue is not that you will not get it. Because of the way the digital economy works with reviews, that we talk about in the course (see more on that below), you will not be successful in creating a good small business consultant profile for yourself. And if you do not create a good profile for yourself in a winner take all economy where every buyer can compare small business consultants’ profiles, you will lose.
So pursue bite-size niche work. It’s not just because it is easy to do, it’s because of the way internet works that you need to focus here.
Small business consultant success: insight #3 – learn to manage a volume business
If you are thinking you can do 10 projects and earn everything you want, no. This is going to be a volume business which means when you are taking on a lot of volume you have to manage your scope very carefully.
Because if you take on 30 projects and you let scope go wildly out of control, you cannot manage things, you fall behind and you get bad reviews from clients. And when you get bad reviews from a client on a platform where every buyer can compare the reviews of all potential small business consultants, you suffer.
So this is a volume business which means you must control the scope closely. This means you must do work which you know how to do. If you don’t know how to do something and you mess up with the client they may burn you with a bad review.
Even if you do the work correctly there are some bad clients who will say bad things about you. So you have to control the work carefully. Its a volume business. Know what you are doing. Don’t take things you cannot do.
Small business consultant success: insight #4 – be good at managing isolated work
The 4th insight about running an online freelance consulting business, it is isolated work. You work alone, usually in your home office, on a laptop, on a desktop, and you need to expect it. It’s not about meeting clients. You will likely never meet clients. You may never speak to a client physically. You may not even speak to them on the telephone. You need to be prepared for that.
Small business consultant success: insight #5 – understanding the margins
Another important small business consultant success factor is understanding how margins work in this business model. The margins are going to be low, but as a function of geography. Here is what we mean by that. Let’s assume you are bidding with someone from India. Let’s assume you live in New Canaan Connecticut and you are competing with someone in Bangalore India to do an excel model.
Because you are living in New Canaan Connecticut your cost of living is much higher, which means you generally have to charge more to cover your cost. The person living in Bangalore India his cost of living is much less so he has to charge a lot less to cover his cost.
But the reality is that if you do the same quality of work and charge the same price, being based in New Canaan you will make much less money.
Here is the thing you have to understand. Most clients don’t care that you picked to live in New Canaan. They just don’t care. So if you picked an expensive place to live why should they care that they have to pay you extra not because your quality is better but just because it is required to cover your cost of living?
So sometimes you have to be willing to burn yourself in terms of the fee you charge, knowing you are taking a loss, just to do some work and get a review. Because reviews are very important in the online market place. But don’t go out there and say” Well, I am going to charge so much because I live in Massachusetts and I need to cover my cost.” It’s not the client’s problem.
You live in an expensive place. That is the decision you made. But unless you can show the value you bring don’t charge more.
Small business consultant success: insight #6 – managing competition
The 6th insight about running an online-only freelance consulting business is there is going to be excessive competition. How do you differentiate yourself? There are many ways to do it. Once you get a client we find the best way to differentiate yourself is through superior customer service and quality of work. Email when you say you will email, respond when you say you will respond. Be available. Sometimes when you cannot work at a certain time and the client emails, you should respond to the client with something along the lines of, “Thank you for your time. I am busy at the moment. I will respond the next day.”
Be courteous. Keep deadlines. Tell a client if you will miss a deadline.
Try to deliver when you say you will deliver. And go above and beyond to deliver tangible value to clients. Do more than what is expected of you.
So don’t just think you are competing on price. Initially, you are. But once you get a client you can keep a client through superior customer service as well as exceptional work quality and adherence to deadlines. We talk about it in more detail in the course as well (see more details below).
Small business consultant success: insight #7 – be ready for a burning period
Another important small business consultant success factor is being able and ready to manage a burning period. A burning period is what we call a period when you want to get those 10 reviews, or 12 reviews, or 20 reviews. Whatever that number is. But the burning period is you have to do things at a loss at times, knowing you want a review.
And what a lot of people do is they are just not willing to do things for a loss because they think the goal of these 10 projects is to make a profit.
It’s to maybe make a profit but the ultimate goal is to get very good reviews. Because again, as in the first insight, the winner takes all economy exists on a platform, a system where buyers can compare everyone at the platform. So there will be a burning period. Expect that. Don’t worry about profits. Look at it as paying your dues.
Small business consultant success: insight #8 – reviews really matter
Insight number 8th about running an online-only freelance consulting business is it is largely driven by reviews. No matter what happens if someone sees you have 100% 5 star ratings, it means 100% of people gave you the maximum score. It is much more likely someone is going to take a chance in hiring you.
If you have anything below 90 percent, does not matter whose fault it is, it looks bad. People have much less trust to give you their crucial projects since quite a few of your clients are not perfectly happy with the outcome of your work.
So getting reviews is important, keeping reviews is important and getting more reviews is important.
It’s also about taking the work you can do. If you take work you cannot do and you spend a lot of time working, a client going to give you a negative review even if you choose not to bill them. They may say, “You wasted my time. So what if you are not billing me. This was urgent. I asked you to do it. You promised. Now it’s late. I have to find someone else.”
They going to give you a negative review. A lot of people think just because you give someone a refund you fixed it all. No, if the client’s time was wasted, if they lost sales because of you, they will not be happy. Since this is driven by reviews you must focus on reviews.
Small business consultant success: insight #9 – this is price-sensitive
Another important small business consultant success factor is ability to navigate a price-sensitive market. In an online market, it gets vicious fast and you are going to compete on price. Initially, you are going to compete on price to a large degree.
But as you can see with that example of Ranjeev (a case study of a successful small business consultant who more than doubled his income in about 3 weeks after he lost his EY job, covered in more detail in the course), you can very quickly scale up to a point where you have many ongoing clients, you are not competing on price and you are making a very good income that is much more than what you were making before. And you do it on your own terms.
Small business consultant success: insight #10 – don’t overshoot the audience technically
The final insight into running an online-only freelance consulting business, and this is very important if you are a small business consultant, is don’t overshoot the audience technically. The audience that is buying from you online is usually not that sophisticated. They generally don’t understand things like options based pricing strategy or agile strategy, or hypotheses. Maybe they do, but it is very unlikely.
You must know the language your audience is going to speak and speak that language. This is very important. Because if you speak in a language they don’t understand, and your profile is written in a language they don’t understand, they don’t know you are good at what they are looking for. Audience online tends to be less worried about terminology, the latest fads, and the latest trends.
“Replacing income with digital freelance consulting” course
If you found this article helpful, you will benefit from our “Replace your income with an online-only freelance consulting business” course.
In the course, we take you through how to set up your digital freelance consulting business. What to do, step by step.
So for those interested in starting an online-only freelance consulting business, above is the logic and overview to get you started. In the course, we focus more on how to do it, and how to be successful in doing it. We are spending time planning the steps. You are going to get some homework. You are going to go through it and do it. And then we focus on implementing it to get you up and running within a week.
If you do it right, you will work through all the episodes of the course. You spend one day, let’s say Saturday, working through the course. You prepare all your write ups and information on Saturday night and Sunday morning. And we want you to load it and go live by Sunday night.
If you tell us you need a week to do it, you are wasting time. Then its better if you dont even bother starting at all. If you need a week to do this, please stop now. Do it in 2 days. Do it in 1 day if you can. Work through the course in the morning, prepare from 1pm to 4pm, it does not take that long, load it by 6 pm and make your first bid. Its better to get out there and learn form your mistakes.
So what we are trying to do in this program is to show you what you can do, step by step, to rebuild a career that operates online in a knowledge economy. For most of you, whether you are a business consultant at a major firm like McKinsey or BCG, whether you are an executive, whether you are in marketing, whether you are a supply chain manager, when you get to this position in life without a quarantine and recession, you can still go out and try to become a business consultant to earn some money.
What we want to show you is you still can do that but you have to do that online.
And we going to give you practical steps to do this in this program. We don’t want to make you do something where the payoff is 6 months in the future. Where the payoff required building a brand new website costing you $10,000 or the payoff requires you to go do something you cannot do, like attend a conference or an event. We want to give you things that are practical. Below are some areas we address in the course.
Planning critical path
- Developing a critical path to follow.
- Picking a niche that is fairly large, using the language that the market understands.
- Getting reviews.
- Why is the process important? Documenting the process.
- The reason most people fail to start and build an online freelance consulting business?
- Which projects should you bid for?
- What kind of demands online clients have?
- The language you need to use to attract clients. What do clients want to know when they are considering you?
- Which websites/platforms should you use to build your online freelance consulting business? Platforms we recommend to ignore.
- Preparing your responses in a word document. How to quality check your responses.
- How to model your profile.
- Reviewing real profiles of ex-consultants (e.g. McKinsey), MBAs (e.g. Stanford, Yale) and more online. What did they do well and what needs improvement.
- The key thing about your profile.
- Profile photo. Dress code for your profile photo. Background to use.
- Creating your profile together. Picking usernames. Selecting a service area and specialization as well as keywords and expertise level for your profile. What happens when you are picking your level (e.g. entry-level, intermediary, expert) and how it will impact your success on the platform?
- Education, employment sections and languages.
- Picking an hourly rate. What you need to bill to be seen as legitimate but not to lose out on opportunities.
- Creating a portfolio of work.
- Using the app from the platform.
- Creating a system of documents and processes. Mapping everything. Creating templates. Collecting emails.
- Scaling your online freelance consulting business.
- Establishing the right mindset.
- The reality of competing on cost. What should you charge in the beginning.
- Per hour versus fixed-priced projects.
- Creating processes. Documenting everything.
- Managing contracts.
- What should you bid for?
- Following up with clients.
- Two-part strategy.
- Replacing your pre-crisis income.
- Working for yourself.
- Staying in the game. Managing your ego.
- Building an online freelance consulting business that not only replaces your income but gives you a great life.
- How the collapsing economy is impacting consulting work.
- Focusing on a narrow technical skill.
- Committing to the process.
This article reflects our perspective as of April 19, 2020.
Succeeding as a Management Consultant
When people think about the business strategy we often think about the field of strategy consulting/management consulting and firms like McKinsey, BCG, et al. If you are interested in learning how to conduct a management consulting engagement, you will likely enjoy this book. Succeeding as a Management Consultant is a book set in the Brazilian interior. This book follows an engagement team as they assist Goldy, a large Brazilian gold miner, in diagnosing and fixing deep and persistent organizational issues. This book follows an engagement team over an 8-week assignment and explains how they successfully navigate a challenging client environment, develop hypotheses, build the analyses and provide the final recommendations. It is written so the reader may understand, follow and replicate the process. It is the only book laying out a consulting assignment step-by-step. (Published by FIRMSconsulting.) One of the best business books if you are interested in management consulting and strategy. This book will be very useful as well if you are a small business consultant.
Marketing Saves the World, Bill Matassoni’s Memoir
Bill Matassoni’s (Ex-McKinsey and Ex-BCG Senior Partner) Marketing Saves The World is a truly unique book. Never before has a McKinsey partner published his memoir publicly. This book is a rare opportunity – a true exclusive – to see what shapes the thought process of a partner and learn about marketing and strategy. The memoir essentially lays out McKinsey’s competitive advantage and explains how it can be neutralized. (Published by FIRMSconsulting.) One of the best business books if you are interested in marketing, strategy, how McKinsey and BCG operate, and overall in management consulting. This book will be very helpful if you are a small business consultant.
The Mind of The Strategist, by Kenichi Ohmae
Bill Matassoni speaks highly of Kenichi Ohmae in his memoir Marketing Saves the World. He is one of a few people Bill calls “brilliant.” The Mind of The Strategist remains one of a few strategy books we recommend to understand how to think critically. Now you can read Bill’s memoir, a book about Bill’s mentor (Marvin Bower), and a book by one of Bill’s close colleagues at McKinsey (Kenichi Ohmae). Definitely, one of the best business books, especially if you are interested in management consulting and strategy.
The Innovator’s Dilemma, When New Technologies Cause Great Firms to Fail, by Clayton M. Christensen
One of the best business books of all time. The Innovator’s Dilemma – “By the nineties, most books on management were just rhetoric, but this book is the real deal. A well-researched classic,” says Bill Matassoni. Named one of 100 Leadership & Success Books to Read in a Lifetime by Amazon Editors. In his book, Clayton Christensen showcases how even the most outstanding organizations can do everything right and still lose market leadership.
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