How Do You Grow and Sell a Successful Consulting Firm?

This past month, Raj Aseervatham, published an important resource for consultants titled You're the Boss: Growing and Selling a Successful Consulting Firm. The book is segmented into nine distinct lessons charting the journey of a successful consulting firm—from inception to sale.

I just recently spoke to Raj about the book and asked him: “What are the most common mistakes business owners make when they try to grow and sell a consulting firm?” Here is his complete answer:

Most people are familiar with this statistic -- eight out of ten businesses fail. Paradoxically, most entrepreneurs firmly believe they will be in the 20% that succeed. Do they really know why they believe that? Let’s look at the knowledge that consulting entrepreneurs who actually made the 20% reflect on:

1. Failed consultancies often lack a clear strategy. Having a concept is not the same as having a strategy. Being very specific about your business – what it does, how it’s structured, what maturity looks like, what your sale looks like – help fill in strategy. As the head of your company, no detail is too small for you to contemplate.

2. Failed consultancies often have poor planning discipline. Having a plan is the same as preparing to execute a strategy. Abraham Lincoln Abraham Lincoln once commented that if he had six hours to cut down a tree, he would spend the first four hours sharpening the axe. Invest your time in detailed six-monthly or annual plans, test your assumptions, iterate the plan frequently. Don’t treat it as an administrative chore. Your planning is your preparation and dress rehearsal.

3. Failed consultancies often die of cash starvation. Watch your cash. This is not the same as saying "get your accountant to watch your cash." You are intimately familiar with your strategy and your plan, not your accountant. Cash flow is like the blood flow in your business; you need it to carry out your plan and execute your strategy. You need to know how much you need and when, and you need to know that your business operation will deliver it. So be intimately familiar with your cash flow.

4. Failed consultancies are often inconsistent with their quality. If you promise something, deliver it to the standards expected. Do not compromise the quality your clients pay for. As you hire more consultants into your business, your quality standards might be prone to variation, and to dilution. If this happens, your brand erodes while you grow.

5. Failed consultancies often forget what made them contenders. Don’t let your principles erode with time. The consulting entrepreneur may start with strong ideals – from client service through to cash management, through to the ethical decision making, to how employees are treated. Often, small companies are formed around a core of pride and value, built on principles.  As they grow, that core can become less distinct and the culture can change. Be firm on how you retain and strengthen the principles that allowed you to first break successfully into a market.

6. Failed consultancies forget that their people make up nearly 100% of their tangible assets. Hire slowly and deliberately. Treat every hiring decision like it is your first excruciatingly important one, and you are more likely to build a consulting firm of people who can create lasting value.

7. Failed consultancies do not have a consistent focus on business development. Practice business development even when your business is booming; and especially when your business is booming. The worst time to dust off your business development skills and deploy them into the market is when business is bad. The best time to grow your business is when business is good, so get out there and market in the best of times like it’s the worst of times. In fact, practice business development all the time if you really want to grow.

8. Failed consultancies allow their overheads to get away from them. This is not the same as running your enterprise like Scrooge; you may find that no-one will want to work for you! No, this is about knowing what a manageable overhead structure looks like at every stage of your growth, and ensuring you run your business according to that structure. It’s about considered discipline.

For the consultants reading this post: What do you think of Raj’s points? Does one of these points stand out from the rest? Did he miss any important areas?