Welcome to another episode from the series where we discuss the business of starting and growing a consulting business. This is episode number 5, called, “Starting a consulting business with no experience.”
We have two other podcast channels. One is the Strategy Skills iTunes channel which focuses on problem-solving within an actual strategy engagement. The other is focused on case interviews and management consulting (Case Interviews & Management Consulting iTunes channel).
Now, many of you may say, “Well, I’m not interested in interviewing at McKinsey.” I understand. But we teach basic problem-solving skills there, such as how to make decision trees, how to build frameworks, how to set up objective functions, etc. For many people, we would recommend starting there and focusing on the episodes around problem-solving and the culture of management consulting firms. This is because you would need those skills to learn some of the more complex aspects that we teach.
Today’s episode is going to be a little bit different. I am going to focus on the question which I get often. “How should I approach starting a consulting business with no experience. How do I start my consulting firm if I have never worked at a consulting firm?” So, let us assume you are starting a consulting business with no experience. Does it mean you will fail? The answer is – it should not matter.
In our world, the dominant consulting firms are the strategy firms, but they are not the only type of consulting firms out there. If you think that the only way to run a consulting firm is to do it the way a McKinsey, BCG, Bain, Deloitte or Accenture does, then you are severely limiting yourself because they do not know everything. They are many things that they would do differently if they could and there are many things that they are trying to do differently. They are not even the best at the way they do many things.
They are good at management consulting, but you are starting a consulting business. You can consult either on the management side or on the technical side. It can be anything you want. At one stage, I ran a boutique consulting firm which had about 150 to 250 people, depending on who you spoke to since there were so many contractors there.
My point is a lot of engineering capability has merged with management capability. It does not matter if you are a management consulting firm or an engineering consultancy so long as you are solving a problem that matters to the client.
If you are starting a consulting business with no experience, there is no real barrier. Just focus on the principles of consulting. Do not tell yourself “Well, I have never worked at McKinsey so I can’t do it.” If you know the principles of management consulting, never having worked at a major consulting firm also means that you will not be taking their bad behavior. Every firm, no matter how good it is, has the behavior that it wants to lose. Some of you who revere major consulting and law firms may not understand this. But every firm can do things better. That means that some things they do not want to do, or should stop doing, are their bad practices.
So, if you are starting a consulting business with no experience it means that you do not have other consulting firms’ preconceived notions about what is good and what is “the right way” to do something. You are not straitjacketed by this principle of ego-driven elitism whereby you have to do things a certain way because it’s always been done that way or be associated with people you think are cool. I don’t know who thinks McKinsey and BCG partners are cool but I’m sure somewhere there is a kid who does not want to go to a KPOP concert because he wants to watch a McKinsey partner on YouTube and be one of the four thousand views versus the probably nine hundred million views that watched the KPOP video.
My point is, there are certain advantages of starting a consulting business with no experience. You will not do things the way they have always been done. There are also disadvantages but you have got to play the cards you have and focus on what you know well and what you do well rather than focusing on what you do not know and what you do not have access to.
Consultants solve problems. If you have never worked at a consulting firm that you consider to be elite in your field, but can solve a problem for a client, will you not solve it or be paid just because you do not have the right pedigree? Despite adding measurable, bankable, verifiable value to the client? You would not do that. That is what happens to many of us if we idealize or assume that some brand is so powerful that if we have never been associated with it, we are not worthy of advising someone.
Consulting is a dramatically immature field and strategy consulting is incredibly immature. When I say immature, I mean as an industry, and not the people. Industries that are very mature have certain characteristics that management consulting does not have, especially strategy consulting.
Maybe in another episode, I will talk about why strategy consulting is not a mature field but for now, I want you to remember that it is not.
For FC Insiders who want to see how new concepts develop and how new ideas come out or how to spark a revival in a group of people who may not be doing such a good job, I would recommend listening to “Rebuilding a consulting practice.” There I talk about the turnaround of an emerging markets office within a major international consulting firm, where we increase standards, generate new ideas, and become a center that exports ideas versus one that just consumes ideas from western offices.
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A business consultant advising a five-million-pound catering business on how to optimize workflows is going to be called a management consultant because they are advising the business. An engineering consultant advising one of the world’s largest mining companies on how to improve their throughput rate could also be called a management consultant.
The concept is very fluid. It depends on how you choose to position yourself. No one says you cannot call yourself these things. You can call yourself whatever you want if you make sure that you add value to the client.
The first question you must ask yourself is, “Do you know how to solve a type of problem?”
There are boutique consulting firms aka consulting firms for every type of problem. For instance, in LA there is a consulting firm that helps managers of celebrities identify the best time and location for visiting a restaurant to avoid paparazzi and people coming to look for celebrities. So, you can advise on anything and you should focus on that ability. Traditional consulting firms focus on business, but the field is much wider. For a long-time, consulting firms taught that the technical side, building databases, apps, advertising, data segmentation, organizational design, was not part of their purview. But now it is.
My point is you can advise on anything as a management consultant so long as you are advising the management of that business. If you understand that a consultant solves a problem, the next question is, “Do you know how to solve a type of problem?” It is okay if you do not have the answer. Remember it is not about having the answer but about having an approach to figure out the answer.
For many problems that come my way, I have no clue what to do. But that is what a management consultant is. I do not have confidence in the answer because I do not have the answer. But I have incredible confidence in my ability to figure out the answer. So, do not fall into this trap of thinking that you do not have the answer. You would not have the answer upfront because you do not know the problem as well.
Once you know there is a type of problem, you will be able to solve it because of your ability to think it through. So starting a consulting business with no experience is not an issue, provided you have an approach to figure out the answer to a problem your client is facing.
If a relatively large number of people or businesses have the same problem, then you have a market.
Sometimes the market may use a different term to describe the problem, which is okay. Take the example of Marie Kondo on Netflix. Some people would call her someone who tidies a home. Another way of thinking about her is as a productivity consultant. She allows your home to run to the best of its ability so you can be your best self. So, you have to think about “What am I doing? What do other people call this problem? What does my solving the problem help someone achieve?”
In the 1870s or whenever gas lighting first arrived in London, there would be a guy who would go around with a flame to open the lamp and light the gas. So, it was someone’s job to light all the gas lamps in London. Although a lot of these people would position themselves as gas lamp lighters, but you could also position yourself as a safety coordinator. Not only do you light the gas lamps, you do it at the right time, and you also watch traffic flows, etc. There may be different terms for what you are doing so do not just think “Well, no one’s using the term I’m using so there’s no market for it.”
Beyond using a different term, sometimes the market may not even realize they have a problem and/or need. A lot of times people know they have a pain point, but they do not know that it is something that can be solved or if they can bring in outside help to have it solved. Now, people may ask me, “But Michael, that makes no sense.”
Consider cooking. Today there is a multi-billion-dollar industry around getting people to outsource their cooking. There are companies that deliver cooked food to you or partially cooked food or even chefs along with the food. Just because the client does not know that there is a problem and that they need outside help, it does not mean that there is no market there. It takes some time to educate people and to make them aware that the market exists.
Other times, the market may use the same term as you. They may realize they need help but will not pay for it until you show them that it is worth paying for. For instance, initially, tutors who helped kids get into top MBA programs and good universities were neighbor’s daughter/son who was good at math would teach. Eventually, it became a babysitting gig where they would teach and take care of the kid. Later it became an elite thing whereby teachers in Korea worth millions of dollars were teaching people.
The approach does not have to be perfect. Ask yourself this. “What are the steps you take to solve the problem?” Clients like to see the steps you will take. Map out the steps and know that your approach must improve as you advise more clients. Do not be one of those people trying to come up with a perfect approach before meeting a client. That is not going to happen. In fact, if you come to me and tell me you have the perfect approach then you have a problem because it means you are not learning as you go to each client. So, as you are building up your own firm, this is a very simple process.
If you see the way we operate, the approaches we have developed are very sophisticated. They go much further than what you see at most consulting firms. In fact, some of our approaches are more detailed than any of the consulting firms’ but that is because we know that while it is a detailed approach, we are going to learn more. So, someone looking at our approaches may say that it is perfect, but it is not. We know that it can be better. But we put together that level of thinking so that we can guide our teams and ourselves as we advise clients and, of course, as we advise you as well because many people subscribe to use our programs and our approaches.
So, let us do the self-assessment. “I am a consultant because…” You are a consultant because you have identified a problem that you think many people experience and you have an approach to solve that problem. Whether or not you can articulate the benefit, that is different.
A consultant is someone who can identify a problem and then figure out a way to solve that problem. You do not need to have a solution. It is okay if you start up your consulting business by just focusing on one type of problem. In fact, I would strongly recommend that.
Everyone wants to be a corporate strategy generalist, a strategy person like myself, whereby you know you can go into an operations problem, or a strategy, or a corporate finance problem and solve it. But I have decades of experience to do that and that is my calling card. I am a generalist. People bring me in generally if there is a problem that is very hard to solve. But that does not have to be your calling card and my calling card is not better than yours.
Let us say, you are someone who only works in operations in retail, trying to help retailers reduce out-of-stock items on their shelves. Out-of-stock item is, for example, when you go into a supermarket to buy cereal and that cereal is not available because there is not enough inventory in the warehouse, and they have run out of inventory. That is all you do. I would say, stick to it and I will tell you why.
When you start in a niche, it is much easier to grow.
So, you start in a niche and do a great job. Then you slowly try to branch out from there, but it is going to be very hard unless you are really good. You need to have a very good track record to be a generalist who goes around solving all kinds of problems. Now, many of you may say, “But yeah, Michael, McKinsey does it all the time!” Yes, but you are not McKinsey. McKinsey has a massive brand and, while McKinsey may solve it, the same person at McKinsey is not solving it. You may argue and say, “But Michael, that’s not true. As a business analyst, I worked on four different clients, four times, back-to-back on four different issues. Obviously, I can do retail.” You can do it, but you may not be able to convince the client to do it. A partner did that and you did not have the ability to do it.
What is the number one reason people hire you? You create banked savings. I spoke about this earlier in a previous episode, so I am not going to go through it again. The bottom line is that a consultant who creates ten times or five times the fees is always going to be the one that is hired and is in high demand.
It is not about procrastinating by developing long presentations to understand things. I remember, many years ago, when I was an associate, I had a friend whose family was very prominent in an emerging economy. His father was the minister of oil, his uncle, the head of the revenue service, and so on. We were at university and had just moved into the city together and he came to me and said, “You know Michael, everything’s going well in our country but my family is really interested in figuring out how to get the other industry performing. So, they want to meet you. They have heard a lot of things about you and want to test some ideas with you”. So, I went for the meeting, but I did not build a long presentation. I arrived there and we went to the embassy, in a big meeting room which had 19 people in that room. The ambassador, the economic affairs consul, they were all expecting me to talk them through an approach to how they can increase the dollar earned per worker in one of the most prominent sectors. So, I was not expecting this, but I had to sketch out everything on a whiteboard from first principles.
Here is the thing. When you build long presentations, you are doing it as a defense mechanism. You are saying if I put up this big presentation I am hoping no one is going to ask me tough questions because I spent a week, three weeks, putting together this detailed presentation. If I am asked to speak to it off-the-cuff I would not have two to three weeks. So, a big presentation is a shield but no one’s attacking you. Why do you need a shield? Disney is not running this and turning your meeting into an Avengers installment. You need to go in there and be willing to talk to people. So it went very well. People were quite impressed.
My friend was impressed. I think it is the first time he has ever seen me as a consultant. Although it never led to any work because I was working at another firm so that I could not do any work for them and they could not afford our fees anyway. But they were very happy with it and I know they took all the ideas. I think they hired some local consultant to roll it out and everything went well. So, avoid long presentations.
I hope you enjoyed this episode. Always remember to not be constrained by what you think consulting is. It is a very immature field. Starting a consulting business without experience is possible. There is a lot you can do in it even if it was a mature field. I think that one thing we have learned in business is there is no such thing as a mature field. There are always ways to do things better and I urge you to focus on that.
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