Many CLOs and other learning professionals who become fed up with the bureaucracies of the corporate environment pursue independent consulting. Consulting seems like an attractive alternative as it represents the opportunity to share with others the knowledge and experience gained through years of surviving a corporate setting. Former CLOs and others take the plunge in droves as new external consultants pop up faster than Donald Trump can fire an apprentice.Unfortunately, many of these leaps into consulting are marginally successful or fail altogether. Building a successful consulting practice is not as easy as it looks. With hundreds of consultants from which to choose, many organizations carefully select their consultants, and in return they expect great things from them.
A few years ago, the ROI Institute developed a book of case studies about successful consulting practices for the American Society for Training and Development. ASTD had found that “how to set up a consulting practice” was the number-one issue its members requested. Yet, of the many books available on consulting, few offered successful case studies. We framed some criteria for successful studies and published a dozen success stories. We required that the consulting practice: 1) had been in place for at least two years, and 2) had met some predetermined success criteria—no easy challenge.
Although most experts suggest the number of consultants will continue to grow—particularly small, niche consultants—the field has perhaps the highest failure rate of any professional occupation.
So what can be done to prevent failure? For those considering the leap to consulting, here are some success factors we’ve found in our research of successful consulting practices.
Prepare for the Leap
Making the leap to consulting is one of the most critical success factors to address. Preparation is essential and involves several issues:
- Establishing the credentials necessary to build a high-quality consulting service and documenting your experience with speeches, case studies and articles to make your expertise known to others.
- Filling a niche not already served.
- Accumulating sufficient start-up funds and cash flow to keep the business afloat during its first few months or even years.
- Fine tuning management and organizational skills needed during the early stages of the practice.
- Obtaining the support of friends and family because of the stress connected with a new venture.
- Identifying a triggering event to launch the consulting such as early retirement, unexpected job loss or reaching a specific financial milestone.
Adjust to a Different Work Life
Moving to a consulting practice often means tremendous adjustments. For many, the transition is from a safe and secure larger organization where there is a routine, support and often stability. As Table 1 shows, the shift to consulting represents a dramatic change in culture and work life. The hours are long, the clients are demanding, the support is sparse and disappointments are common.
Develop a Strategy and a Business Plan
New businesses small and large need a business plan. Every organization must have a strategy with objectives. Three strategic objectives are crucial to developing a successful consulting business:
1. Define the region of operation (local, national or global).
2. Determine the type of consulting and related services the practice will offer.
3. Determine the kinds of organizations the practice will target.
Developing a business plan begins with a mission, vision and values, and it identifies what must happen to make the consulting business successful, including:
- Stating the strategic objectives.
- Detailing tactical objectives related to short-term implementation.
- Defining resource requirements for sustaining and growing the business.
- Measuring progress and performance since the last review of the business plan.
- Outlining the realistic prospects of the business and what can be accomplished in the future under different scenarios.
Attract and Retain Clients
An essential ingredient for success is attracting and retaining the right clients. Along with selling personal services, a consulting practice must focus on marketing processes and concepts. This involves several key elements:
- A marketing plan detailing the types of marketing and the appropriate mix.
- The image of the principal owner.
- Marketing materials.
- Appropriate use of the the Internet.
- Proposals and contracting process.
- Building client relationships that strengthen existing business relationships and expand into new opportunities.
Create the Right Structure
The structure of a consulting firm involves several issues that must be addressed early in the process. Among these is the basic type of legal entity planned such as a sole proprietorship, corporation or partnership. The extent to which other associates or employees will be involved is another issue, as is the decision to have formal office space or to conduct business in a home office.
Address the Financial Issues
No topic is more important than the finances of a consulting practice. The initial funding is often the first step in developing the business. The appropriate budgeting process is needed to take the organization through startup. Fees and pricing structures must be appropriate, fair and equitable. Financial reporting must be in place so that operational results will be known and cash flow can be monitored.
Manage the Business Effectively
For some consultants, the most unpleasant aspect of consulting is managing the business itself. Because most entrepreneurs are not good managers, one classic reason for failure is that they neglect this important issue. Even a one-person practice must be managed. As the practice grows, it might be necessary to employ a business manager, operations manager or administrative manager. One of the key issues here is not only finding the appropriate person, but also willingly letting go of operational control of the organization.
Develop a Unique Approach
Every consultant uses a process that clearly defines the practice, usually an expertise developed over several years. The process might include accepted principles with defined and articulated techniques, models and methods. That process usually determines the niche opportunity and enhances the uniqueness of the practice.
Develop Products and Support Tools
Some consultants find an advantage in developing other products and tools. Without them, the only source of revenue for the practice is the consultant’s time. When the consultant does not work (e.g. vacation or illness), no revenue is generated. Additional products and services generate revenue while serving as excellent tools for clients and patrons to understand and use the processes.
Create Effective Proposals and Reports
A well-written proposal can make the difference between attracting and losing a new client. Some consultants prefer to document as little as possible in a proposal, attempting to describe the project in conversations and to bind the consultation commitment with a handshake. Such an informal approach inevitably creates problems. Written proposals avert misunderstandings and miscommunications. More importantly, a well-crafted document showcases the organization and sells the consulting firm.
Use a Results-Based Process
A pivotal concern for the consultant is focusing on the clients’ desired results. Without the proper focus on results, consulting assignments can easily go astray and lead to client dissatisfaction, which might translate into lost business. A well-defined philosophy of delivering results can prevent this. A results-based approach to consulting consists of several elements:
- Ultimate outcomes, expressed as deliverables, are clearly defined.
- Consulting projects are initiated, planned, developed and implemented with the end in mind.
- A measurement and evaluation system is in place for each consulting project.
- Several approaches are used to measure consulting success, representing a balanced profile of data, with occasional use of ROI.
- Stakeholders understand their responsibilities in making the consultation engagement successful.
- Consulting results are routinely reported to a variety of target audiences.
- Satisfaction is guaranteed.
Table 2 shows the traditional view of consulting compared to the emerging view. As this table reveals, the traditional view of consulting is activity, an undirected and almost unnecessary process. An emerging view is based on value, and it is measured and productive.
Operate in an Ethical Way
Ethical issues surface in many ways. In the professional arena, the consultant might be asked to deliver results completely different from those that were planned. In the personal sphere, the client might require that the work be completed on an unrealistic or impossible schedule. The consultant must establish appropriate ethical standards and communicate them clearly.
Measure Success and Communicate Routinely
The success of individual consulting projects is directly linked to the overall success of the firm. Success is measured in different ways. Positive financial results are usually the first definition of success. The primary measure involves profits or the reduction of losses extending over an initial period. It also might include other financial goals, such as the profit per assignment, office expense and revenue per consultant. Without financial success, at least in the long term, the consulting firm will not survive.
Check Your Skills
Consulting requires a specific set of skills that might be different from those demanded in other types of work. Although almost everyone consults, regardless of the job description, full-time consulting demands distinct skills. Although other skills can be helpful, the following are among the most important of those needed for the successful consulting practitioner.
- Communication skills—oral and written.
- Observation and feedback skills.
- Problem-solving and analytical skills.
- Working independently.
- Organizational skills.
- Understanding feelings and relationships.
- Relationship building.
Patience is a cornerstone to consulting success. Consulting practices are not developed in three months or six months. They often take years to achieve success. For most consulting firms, it takes at least two years to reach an initial index of success—breaking even financially and maybe even turning a profit, if they are lucky. An impatient person will not be a successful consultant.
Jack J. Phillips, Ph.D., chairman of the ROI Institute, developed and pioneered the ROI process and has written more than 15 books on the subject. He can be reached at firstname.lastname@example.org.
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