In my work with numerous solo consultants, there's one thing that differentiates the wildly successful and wealthy ones from the struggling and broke.
Struggling consultants will spend time to save money. Successful ones will spend money to save time. The distinction is not as trivial as it sounds.
Leverage is the name of the game. You can always get more money, but you can never get more time. So if you want to create (and capture) more value, you need to ensure the activities you spend your time on make the highest possible impact.
There are several areas of your business where you can look for leverage points. Let's say you considering going through a course to improve your negotiation skills. If you negotiate twice as better as you do now, you can expect an increase in your average fee during your entire career.
In this example, you are making an incremental improvement to your bottom line. Good, but not what we're talking about here. Professionals look for exponential improvement - maintaining a healthy pipeline with enough qualified opportunities so that you never need to negotiate again.
Looking At Your Consulting Business As A System
When looking for leverage points, you need to adopt a systematic mindset. The Goal, from Eli Goldratt, is a great starting point that instantly comes to my mind. The book lays out his Theory of Constraints, one of the best mental models to think about complex systems such as a consulting firm.
The Theory of Constraints states that any system with a goal has one limit and worrying about anything other than that limit is a waste of resources.
Nearly any system can be improved by asking two questions:
- What's the current limit?
- What's the obvious way to improve the limit?
If your business is struggling or doesn't grow as quickly as you expect, it's not due to a lack of effort. Most likely than not, it's one of these two things:
- You are investing and directing your efforts at the wrong limit: When one limit is removed, doing more of the same thing doesn't help. What got your consulting practice off the ground is not what will make it long-term profitable.
- A lack of systems to maintain throughput: The other common issue is directing resources at the correct limit, but seeing previously solved limits collapse. For a new consulting firm, this typically looks like alternating between generating new business opportunities and delivering projects for existing clients without being able to balance the two.
The result is that founders and partners get stuck in a cycle, without being able to generate consistent growth for the business.
Common Limits And Leverage Points
To escape the cycle, you must identify the limit and solve it. Each business has its own bottleneck, but here are the common ones:
- Personal operations: If you're missing meetings, feeling overwhelmed by simple tasks, or feel like your priorities are always changing, you are the limit. Improve the way you manage your tasks, knowledge, and priorities.
- Marketing/Sales: This is the case if you're struggling to reach your clients, win new projects, and build a healthy sales pipeline. You need to create demand and transform that demand into clients. And find a way to do this profitably and consistently.
- Business operations: If you're full of business but are struggling to scale, the quality of your work will suffer and client satisfaction will go down. You will need to outsource or automate tasks, document and optimize internal processes, or productize some of your offerings.
- Hiring/Management: Once you automated and outsourced as much as you could, the next stage is to bring more people to deliver work. It's only at this point that your leverage points will be hiring or subcontracting, and improving internal culture and management practices.
Ask yourself today: What's the current limit of your consulting firm?