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?
