52. Business Consulting Basics
The Basics you NEED to know [Everything Business Consulting EP 52]
In this episode, we dive into the basics and most commonly asked questions about business consulting - specifically the way the we do it at ConsultX.
1:00 - Introduction
2:37 - What is Business Consulting?
4:39 - Traditional Business Consulting
11:02 - Is a consultant only a problem solver?
12:36 - Why can't a Business Owner fix their own problems?
15:45 - Approaching a Business Owner without being negative
17:34 - Small & medium Business Consulting vs Corporate Consulting
19:14 - Why long-term relationships win
20:25 - Objectives when working with a Business Owner
24:05 - How to improve profit, growth and business value
29:00 - The background you need to be a Business Consultant
31:52 - Why do people become a Business Consultant
Show Transcript:
Today we're going to be reintroducing the podcast after a long hiatus. I've joined the Everything Business Consulting team and I’ve been a business consultant with ConsultX for the last three years so I do have a bit of experience and some stories to share however I’m here to learn and tease out as much information from David as I can.
What is Everything Business Consulting all about?
It's a weekly podcast that will be released every Wednesday us time and will be packed with really interesting information about anything and Everything Business Consulting there will be interviews with consultants, business owners, and other professionals that can help you to be a better business consultant. We'll look into case histories of business consultants from ConsultX's global network, as well as how they've been able to achieve success for their clients. No stone will be left unturned as we dive into every imaginable area of business consulting. If there's anything you want to hear about business consulting or any ideas/questions that you have, then I suggest you send us a message on Facebook, Instagram, or Twitter, and also tune in to us on youtube where we'll be posting up bonus content including videos and helpful hints.
In today's episode, I'm going to start with some fundamental questions about business consulting. David, are you ready? Yes ready to go! Fantastic, well the first question we're going to start at the absolute start.
What is business consulting?
Well, it's been around for about 150 years and it started in the industrial revolution mainly in the United States, where railroads were going everywhere and trains were being built. It was before the motorcar anyway, people started becoming experts about various things involving railroads and they became a business consultant. That's where it started because that was the biggest before the industrial revolution and motor vehicles coming along and motorbikes and airplanes railroads were the way that people moved, as well as horse and carts around the united states. It was so complex and it was so involved and it was at the technical leading edge like like we talk about an apple watch and what it can do today and how fabulous it is well railroads for their apple watch kind of thing back in those days so it started back there and it got more and more popular and it became a profession way back then 140-150 years ago.
Today, every business of a large scale uses business consultants to help in all sorts of different ways. Some of these business consultants are specialists, some of them are generalists and they work with all sorts of businesses and it's only been in the last few years that that business consultants have started to move down into the smaller businesses where it's an entry-level kind of thing because their skills and their systems and their processes are really useful for business owners to to to use and to help them to build a better business.
Well, I didn't realize how old the profession was. I suppose I’d never thought about it.
What exactly does a traditional or a “normal” business consultant do?
Yeah, traditional is the right word. This is what I found about 15 years ago. I went to Spain to learn how to be a consultant. Well, I was learning to be what they call a consultant - someone who does projects and assignments and that's what they typically do and what that means is that most of the jobs are short-term. It might be I’ve got a big human resources problem in my company, with 500 staff and all these bad things are going on, so a consultant who is an expert in human resources would come in help the business owner scope out the problem, quote them for fixing the problem or providing fixes for the problem, do the assignment, present it to them, get paid and go. That's traditional and we don't do that. We think there is a better way.
Ah so the traditional is hunt and kill as you call it, or almost an in and out the type of methodology.
What's this better way, how do you think consulting should be done?
Well for the first year that I did consult after I’ve been to Spain and being trained to do traditional consulting I spent the first year working with nine clients. They were from about 2 million to about 36 million dollars turnover and I did traditional consulting, where I scoped out what their problems were and teased it out of them. Then I did work with them and the owner and the team and I did a business plan for them with all of the implementation steps that they needed to do to make it work for them, gave it to them I got paid and I left.
Just to stop you there, so you said you solved their problems.
Were you working in a specific area of consulting or everywhere?
Because I’d owned a business before and I’d helped a lot of friends in the 1990s with problems their businesses had, I was able to just about do anything and if I didn't know something, I knew where to look. That's the important thing as a consultant, you can't know everything. They say a good consultant is not a consultant that knows everything but he's a consultant who knows where to look or who to ask. So I discovered after doing all that assignment and project work and I went back to see them six to nine months later. Shock! Horror! I discovered that nobody had implemented all of the implementation steps or tasks that we put together. I felt like a bit of a sham and I tried – I pedaled like hell to get in as their implementation guy and they wouldn't let me in. It was a strange situation.
So you say that they paid you to come in and help them solve problems, but they never did anything?
As a group we solved them. Me, the owner and senior managers. We solved them and then I fashioned a business plan and then distilled it down to many tasks or steps and actions which they had to do. It was the doing of those actions that never got done. So I realized at the end of that year that this was a big problem. I went around and saw them. As I said, they wouldn't let me back in again, so the next year I thought I’m not going to do this again. I don't like this. I feel like a sham so, what I did over Christmas – I wrote the Business Success Program because I discovered in that first 12 months that to be successful in this form of business consulting that ConsultX does, I had to be with them all the way. I had to be the implementation guy and that was written into the program and that's what everybody does now. All the people that we train because you've got to follow it through, you've got to make sure that they implement the decisions, the steps or tasks that everybody's decided that they're going to do. You become a bit of a coach, there's a bit of mentoring, there's a bit of disciplining in some cases to make these things happen because, if those tasks are not achieved or completed, then the business is not going to reach its goal or its vision that it wants to get towards.
So you kind of suggest going from a consultant to an improvement manager or someone that creates the change within the business?
Yes, yes, yes! You help, encourage, mentor, and as I said a little bit of discipline. Let's say we had a business – just give an example and we wanted to increase their revenue 500 percent, five times and it was doing two million dollars, so we want to be 10 million dollars in five years as far as revenue is concerned then excuse me there's probably 300 tasks that need to be done between year one or year zero at the start and the end of the fifth year.
Why do you say the fifth year?
That's what we normally work towards as a vision or a goal when we're talking with clients. We say where do you want to be personally in five years where do you want your business in five years? So it's very easy, we could leave them with a business plan that had 300 tasks in it about this big but that doesn't work. It'd be worse than before, so we pick out the most important tasks and a lot of these tasks are sequential or chronological as well. They've got to be done spaced out in time and they're going to be done in the right sequence, so we would only hand out to the owner and his team maybe 10 tasks at a time, and we wouldn't hand out any more until they complete those tasks. It's like a whole lot of steps to get to the five years and each year it's increasing in revenue by around about two million dollars or something like that
You talked about going into these businesses to solve a problem or a series of problems that they're having.
Is that essentially what a consultant does, they work with a business to solve problems, or do they do other things as well?
Mainly to solve problems and mainly to delegate the tasks of solving these problems to the members of the team and yes we do some things. We do produce reports, we help get the accounts together, we need to have monthly accounts to be able to measure the improvement and things like that, so we probably spend about eight hours a month approximately of our time working on the business. All of the major tasks get delegated to the owner and his team or an outside person. We believe in not plucking the chicken as we call it.
What do you mean by that?
Plucking the chicken is doing a menial task that that is only worth 20 or 30 bucks an hour like if we need a bookkeeper we bring a bookkeeper, so don't pluck the chicken - it's tempting and you get caught in a trap, if you start doing low pay jobs at a 25-30 an hour, then you're going to get stuck in there. Your job is to be the person who does the business plan with the help of the owner and his team and also delegates and hands out the tasks and then manages that, making sure that these tasks are completed.
And why can't the business owner do this himself?
He hasn't been trained. Business owners got a license to run a business from the government for 200 dollars and he's very good at making...
What do you mean by that he gets a license from the government?
Well everywhere around the world, if you want to own a business, you've got to go to the government and get a license to operate, and it costs about 200 dollars.
Like incorporating a business?
That's what you're talking about, and in New Zealand and Australia it takes about 20 minutes on the internet costs 175 dollars. All of a sudden you're in business, now there's no exam and there's no training. Compare that to a driver's license, for example, they don't just give you a driver's license – you're going to do tests and you've got to read a book and you've got a theory and the practice practical. All those sorts of things. But to operate a business and start a business, you don't have to do any of that, you just gotta have dollars in your pocket.
Why don't you have to be trained to start a business?
I don't know, I've never spoken to anybody in government and it's always been that way. I just don't know but, I know that the business marketplace out there worldwide is full of people who don't know how to run a business. They might be able to make a kitchen or they might be a printer. Whatever their business does and they do that very well but they don't know how to run a business and this is why the failure in businesses is sixty percent in the first five years and then another twenty percent in the next five years, which means there's an eighty percent failure rate over ten years.
So you mean eight out of ten businesses don't even make it to the 10-year mark?
Yes, absolutely and in a couple of countries it's worse it's about 85.
Wow, that's just really bad odds and I imagine that's pretty intimidating going into business.
Do these business owners know the failure rate?
No, and they certainly don't understand it and they go into business because they want to do better than they were on wages or a salary. They see family members starting a business and building nice houses and buying nice cars. They see all these sorts of things going on. Friends, family members, other people and they think I want to do this and that's fine, but those people I just mentioned they haven't done any training and haven't done the exams or anything on running a business. They don't know either, so the marketplace, and its millions and millions around the world of business owners who don't know what to do and that's a big problem. But it's a big opportunity for us and that's why our consulting system is built to be able to work with business owners like that. To help them to identify the problems and challenges that they have in their business and then once we know what those problems or challenges are we can help them to solve those because we've got the program to do that and they don't so that's the huge opportunity.
That sounds negative David. There's all of this business failure going on and it sounds like the reason most businesses you work with is because they're having problems.
How do you approach a business owner and start the conversation to work with them if it's such a negative situation?
Well, it's negative, but a lot of them don't see that it's negative. They think it's just normal and it's not how you approach them. We have a system that we use where we had just talk with them just a fireside chat, I've heard it described as and it's kind of like a bit of counseling and a bit of coaching and we just talk to them and find out what's going on because if you can get them to tell the truth, then they'll tell you all sorts of things and they'll even tell you things that you don't want to know.
How do you know they're telling the truth?
It'll start to piece together as you're talking it through. We have a series of questions that we ask them and that encourages them to tell the truth because they're all linked together with these questions and one question leads on to the next one and the next one. We just want them to tell the truth, but you gotta build up their confidence and their trust because if they don't trust you then they won't open up and if they do trust you they will, and if they realize that you're not threatening. They realize that anything they tell you is confidential and all those sorts of things and you're there to help. Then you'll have no trouble getting them to open up and tell you everything that you need to know.
So you've got to build a bit of rapport then. It sounds like the consulting you're talking about is different from the more corporate style consultants that are out there.
Yes, it is because typically they're project or assignment based. That's how that is, and how they are. I'll give an example. I've heard of a consulting job that was Television New Zealand. About 18 years ago, Television New Zealand wanted a charter, because they're a government-owned enterprise and they wanted a charter to improve and increase the Maoripercentage of what was going on around New Zealand television you see.
For our listeners, around the world, that's our indigenous people here in New Zealand.
Yes, that's true, and so they hired a consultant. I won't say what company they were from but it starts with d and he came down from Singapore and he came down here and was down here for three weeks and he worked with them and he did the charter and he gave it to them it's all on one sheet of a4 paper. $750,000 for three weeks of work – that was a project or assignment because he did a project. That's what the big guys and the big companies typically do. Sure, we can do things like that if we want. We prefer to work long-term and we believe in being a part of a five-year consulting project. It could include extra additional services, over and above the normal consulting service that we provide. We can do those sorts of things.
Why do you focus on the long term rather than doing the short term?
The short term is kind of erratic and jagged. If you imagine a graph, you've got a client, you haven't got a client, you haven't that sort of thing. And I think it's more useful. It's more useful working with them over five years or more because you can help them to increase on a nice incremental gradual basis towards – as we said before – five times increase in revenue over a longer period. That's better for us.
Why is it better for us?
Well, from an earning capacity, because every year our fees get a little bit higher. We get to know them very well, their relationship and trust go through the roof and we're able to see in black and white what the improvement of the business is. We have two meetings per month after they become a client where we measure tasks and where we measure the results of the business, the key performance indicators, and the financials. we measured it about two weeks after the end of the month, so it's very gratifying. it's like you're a shareholder, but you're not. it's like you're a partner of the business but you're not. it's really good.
Well, I can see how that would be rewarding when you work with a business owner.
What's your objective when you're working with them? just to fix their problems or you've got other things as well?
Well no, it's bigger than that because one of the things we do in the early days. We organize a personal vision for them because it all starts with personal. After all, owning a business is a personal thing. It's generally the family's biggest asset and generally, that's where all the money comes from to run the family and to improve their wealth. So we start with the personal vision and we look at it for over five years. Where do you want to be in five years? I want to have a house on the river, and I want this, and I want to have the latest Holden Commodore, or whatever it is and we scope all this together and then we come back to today. We put milestones in place. Do you want to build the house in the third year? Get the car in the first year? And lots of other things.
Kind of coming up with a plan or a road map?
Yes, it's a road map. It's a good way to describe it and we do that. It gives us the personal and then that tells us what they need/want over the next five years to be able to deliver the vision that they want in their personal life so that we can do a business vision. We can say well, to buy that million-dollar house on the river, you're going to be able to you need to earn this amount of profitability out of your business, and then we start putting together the business plan of what milestones we need to achieve over the five years to get to the vision at the end, and then we start linking it all together, so what we've done is taken a business that's a personal family asset and we have found out what the owners the husband and wife want to do and linked it back to the business. Then we put the business plan together and that's what makes it so powerful because a business is not just dollars and cents, it's a personal thing. it's a living and breathing entity, a government licensed entity that provides things for the owners of the business, and of course, as they're getting older and it moves towards retirement and things like that it becomes even more important now. Nobody does this with business owners. I never come across anybody that does what we do. We're there for the long term, and like I said we've got some business owners that have been with our consultants for nine years and continuing.
Wow, that's a long time.
At the bottom line of it, like at the bottom line of this, we help businesses to increase their profit, to increase their growth, and if we do those two things and if it works then it will increase the value of the business – which is a calculation of those other two things. Profit, growth, and value are what we're there for.
Wow, you hear that – profit, growth, and value. That's a golden nugget right there.
How do you deliver on this promise to help them improve the profit, growth, then if those two work, then business value?
Well, we've got to find out the problems or the challenges. Then we help them to solve them because you have meetings with the owner and two team members generally, the answer is already in the room and we just facilitate that meeting.
Do you only have two team members?
Oh, it could be four, depends on how big the company is. I had a client that had 13. Well, I think there were too many, but it was okay. Five would have been okay, but anyway we had 13 so it's totally up to you and who needs to be there, and where you think and the owner thinks the answers are going to come from. Your team members know the answers to what the problems are, they're not unique and they know what the problems are and they'll tell you and they'll also tell you what the answers are.
If that's the case, why don't they solve themselves?
Because they're too busy working and nobody ever gets them all together in one room and mines all the information out of their heads. It's all there, you'll be in a meeting and there'll be a 24 or 23-year-old guy there, or girl it doesn't matter – and they'll come up with the most brilliant idea. Like a multi-million dollar idea, but she or he wouldn't have said anything before you facilitating that kind of meeting.
So if I get this correctly, you're talking about working with these businesses and becoming the manager of profit, growth, and business value?
Yes and I’ve been to many many companies over my business career and I’ve never seen a door in a company saying ‘Jimmy Smith, manager of profit, growth and business value’.
I don't think I have either.
No, there's nobody that does that, and that's what we do because they're all busy doing their own thing and they're in their departments and all of that sort of thing. They're working hard and everything, but nobody is ultimately responsible for it, and that's what we're responsible for.
Well, that sounds like a very full-on role.
How busy would someone be, and how many clients would they be able to handle that sort of work?
The highest number of clients in the network has been 22 and the lowest has been about three, but we have semi-retirement people in our network, who only have three or four or five and that's fine.
So you can be the manager of profit, growth, and business value in 22 different businesses?
Yeah, because the system is leveraged and it's been specifically put together to provide as many automated or semi-automated parts to the consulting program, that would maximize your time and the number of clients you want to handle.
Wow, that sounds like you'd be doing a lot of plate spinning there?
Yeah, you would, but the thing is they don't know how many clients you've got. You don't tell them, they think you're their only client. They think that they know it's not true, but that's the effect that we give. We don't have an annual get together. You try to make them feel that way on purpose because it's just the best thing if they ring you. You pick the phone up straight away, and you talk to them every week, or even twice a week with emails and newsletters.
They think that they are your only client, but you might have 20.
Well, that's very interesting.
That sounds like a great earning potential if you're 20 clients?
Yeah but you need a system like ours to be able to manage it, and that was what I found. I had 18 clients at the highest point and I found that I was in constant fear of sitting in a meeting at a cosmetic company and asking how the steak pies were going?
There's a lot's going on in our heads, so you need your system to work on so you know where you are and it's all written down. It's on your laptop and all that sort of thing.
You don't want to say how's the steak and mushroom flavored lipstick going or something.
No, no, no! I never did that, but I understand the sort of situation that can occur if you're not thinking and you don't have your railway line to run on. Right, I’m sitting at the cosmetic company – they've just launched an organic range of products and we spoke about that last month, like before you go into the meeting you sit down in the car and just look at your notes and things like that, so that you're right on it, and rather than making a mistake.
I'm going to change gear a little bit David and I'm going to ask you a question a bit more about the type of person that would like to become a consultant.
What do they typically look like and what sort of skills they normally have they look like?
Everything! They look like everybody! There's no person type. What skills do they have? They come from every walk of life. We have young people like yourself, who was probably the youngest. I was thinking probably the youngest that we've ever had because you joined when you're about 25.
Yeah, that's right.
And we have people that are older, semi-retired and they're in their 70s and early 80s with a lot of wisdom and a lot of ideas and their mind is still as sharp as tack, but they might have a limp you know (joke). It doesn't matter, people who also like people like them. You have to get on well with people. You have to be able to form a relationship and you have to be able to get their trust so you've got to be a person that kind of exudes trust or belief and because they have to trust you, they give you all of their financial information. Like you and the owner have got the steering wheel of the business and things like that, so you have to. I also want to help business owners, that's important. And as I mentioned earlier in the 90s, I used to every two weeks I have breakfast with friends of mine and they're all about five or ten years behind me in business. I used to have mentoring sessions because they had lots of good ideas too, but I was 10 years ahead of them and so I was able to give them a bit more advice than what they could probably give because they hadn't been in business for very long. So yeah, a lot of people that join us have joined us from the mentor society, from all sorts of places. People who are involved with the likes of the Lions (club), the JC's and all those Rotary clubs and things like that, who like helping people and putting back. All sorts of people – I can't give you one avatar and have a model of him or her standing there because you'd be just blown away. There are no professions or anything like that stand out. I've had a vacuum cleaner salesman, accountants, lawyers, real estate, ex-business owners, and on and on. Ex-army generals, policemen.
They'd order you around a little bit?
No, not really. School teachers, school principals, the list goes on! It's from everywhere.
Well, one of the reasons that I wanted to become a consultant was – and you know this – because I like to help people and see people succeed, so that was a driving factor for me.
Were there any other reasons or typical things you hear and why do other people like to become business consultants?
Well, some it's for the money, some it's for helping people, some it's because they want to put back. They might have owned a business and they might have struggled a bit in that business and they've sold it. They want to do something else, some might be accountants and they have seen firsthand lots of business clients in their accounting firm and what does and can go wrong and they want to go further than that. All sorts of reasons Julius. There's no one, and sometimes there are bundles of reasons. Some of those things we just talked about are abundant and some people want to get out of corporate life. Some people hate their boss, some people have been made redundant, some people are not being promoted and they've been stuck in that one place for years and then all of a sudden somebody else gets promoted above them and they know that person to be very inferior to what they are from a knowledge point of view. Bad things happen when you promote somebody in a firm, so you’ve got to be careful. You don't start a domino effect.
No, you wouldn't want that. One of the other reasons that I wanted to become a consultant was for the lifestyle and I’m an avid surfer. Today looks like there's a good wind blowing, but the way that surfing works are it doesn't care whether it's the weekend or not. It only happens when there's the right swell and there are the right weather patterns and the right wind and that sort of thing. I wanted the ability to be able to go to the beach in the middle of the week or something like that if the winds and the weather were in the right situation. That's something that resonated with me.
Well, that brings out the point, going on what I said before – lifestyle is another reason. Some people want to pick the kids up from school and take them to school. Some want to be able to go to a school exercise. They might want to turn up for that or a sports day, all those sorts of things that they can't currently do. Some people are stuck in traffic, like some of the traffic stories that I hear are horrific, especially overseas in Asia and the united states, although Auckland's not much better, where you can be an hour and a half getting to work and if there's traffic if it's an accident it could be two and a half hours getting to work. I couldn't deal with all those sorts of things and it's only going to get worse. My daughter used to live out in the southern suburbs where we are and typically it takes 90 minutes to get to work and then if there's an accident or something goes wrong it could be two hours to get to work two hours to get home that's four hours a day. There are five days in a week! Five fours are twenty – it's 20 hours a week sitting in a car on the motorway. 20 hours times 48 week... I can't work it out!
That sounds like a lot!
It sounds like it's about 500, 600 hours, or 800 hours stuck in the car on the motorway, they want to get out of that so you work as a consultant. You work from your own home, you typically work within about a 10 or 15 kilometers or 10-mile radius of where you live. You do that, you make the appointments when you want to make them. You decide what days you're going to be working on. Your clients don't know what you're doing, they only know what you do for them and then and as I’ve said you're sending them newsletters every week – you might be phoning and the week that you don't see them or you don't meet with them, you'll be sending them stuff, emailing stuff white papers all sorts of things like newspaper articles if it's relevant to their business, and on and on it goes.
So you don't normally work at the client's place of business?
No, no no! You don't. You can have meetings there and things like that, but you can work from home. You might because of the traffic and because of things that go on nowadays, you might have one meeting a month at their place, but people, because of the virus and the lockdowns globally, they're getting used to using zoom and things like that where you can have meetings and the people can be everywhere. Boy, there are so many companies in New Zealand that about half of their staff are now working from home.
Well, I think you know, David, that even before the virus hit I was able to do some remote consulting when I was traveling through Southeast Asia and Europe but that's a long story so we can go into that in perhaps the next episode.