64. Types of Business Consulting Clients

Types of Businesses you can successfully Consult to [Everything Business Consulting EP 64]

Go straight to the information you're looking for:

1:00 - Start/Introduction

2:10 - Business Consulting based on size

2:20 - Working with Startups

7:45 - Working with a Small Business

13:40 - Working with an SME (Small to Medium Enterprise)

19:20 - Working with a large business 20:50 - Working with a Corporate Business

23:25 - Business Consulting based on Industry

27:10 - Business Consulting based on the need for help

Click here for our blog on Business Consulting Client.

Show Notes:

1. See Dunning-Kruger Effect on wikipedia.

2. Podcast on ConsultX Fee System

Transcript:

David Welcome to Everything Business Consulting, a podcast dedicated to business consultant's success, it's for those of you who already are a business consultant and you want to improve your skills, are an accountant, and want to offer consulting services. Or you may be an ex-corporate who wants to get out of the rat race and become a self-employed business consultant. Or you may have owned a business before and you now want to use the skills that you've learned to help others in business. I'm David Thexton. 

Julius  And I'm Julius Bloem.  

David Everything Business Consulting is brought to you by ConsultX It's a global business consulting company that has everything you require to become a successful business consultant or offer consulting services in your existing professional firm. If you'd like to find out more, visit consultx.com. 

Julius Diving into today's topic, David, we're going to talk about the types of clients you can successfully work with as a business consultant. Now, you should use this, I guess, the information in this podcast as a bit of a guide to finding the best and the easiest types of clients when you're starting out in your consulting business. And there will be some hints in there as to where you might want to go in the long term. We're going to break this down into three different areas to cover off today. First, we're going to look at businesses you can consult to by their size, then businesses you could consult to broken down into their different industry types, and finally consulting by the need for help of the businesses you're working with. And just to clarify, when we work with a business, we typically work as a business consultant across the entire business, not specifically in one particular area. Isn't that right, David? 

David  That's correct. Yes, we do. We do. 

Julius  All right. Now, starting at business consulting based on size. David, do you want to tell us the pros and cons and what we would look at, starting with the smallest business, a startup? 

David  Well, a startup is generally a business that is brand spanking new. And the owners of that business, they have a desire to go into business and they want to get all of the things, all of the benefits that you get out of owning a business. They've seen other people do it and they've saved some money up or they can borrow some money or something like that, and they decide they're going to change their lifestyle completely from working for somebody else into owning their own business. So the problem is that they don't know how to run a business. So they had the money, they have an idea of what industry they're going to go into and whether they're going to be a retailer or manufacturer. And they get going. But they have way more confidence than what they've got an ability essentially. 

Julius  The Dunning Kruger effect. 

David  Yes. Yes, yes. 

Julius If you haven't heard of that, look up the Dunning Kruger effect. 

David  Yeah, well, there's a primitive version of that, which is called battleship ambitions and rowboat ability, which is a lot of fun there. But anyway, that's what it is. And they really, really want to do well. But the government has given them a license. They have no tests, no training. They just jump straight into it and generally good at what they do. If they're involved in manufacturing furniture, for example, they're good at doing that or if they're involved in running a garden center, they're good at doing that. They know all about plants and things, but they don't know about running a business. 

Julius  So they're good at the technician role or the technical aspect of what they do, but not so much generally in running a business itself. 

David  Yes, yeah. Yeah. I believe in a few books, they've been called technicians and I'm just trying to think of the guy's name. But yeah, yeah, they call them technicians because they're good at what they do, but they don't know how to run a business. So that's where start-ups are, quite often if a start-up was doing the best thing that they could possibly do, they would take on a business consultant because of the fact that they don't know how to run a business. But you're fighting with a startup. You're fighting against that bravado and that ability that Belsham ambition. And they are so positive and they're so passionate. They think they can jump tall buildings, but they actually can't. 

Julius  So they're at a point where they've just started. They don't know yet what they don't know. 

David Yes, exactly. Yes. And yet this is the time that somebody should be in helping them, they might have a few hundred thousand dollars. And they need somebody to come in and sort it and help them sort their business out and everything before they lose it. Like I'd rather help a business that's still got the equity intact than it's all gone. 

Julius  It'll be easier. So would you suggest as a business consultant, you go out and hunt these start-up types of businesses? 

David  Well, you don't need to hunt them. You'll just find them, you'll just come across them and it's up to you to make the decision. They tend to be a little bit more difficult to sign up as clients, as I said because they think they know everything. And as compared to a business who's been going for a few years, and they had a few ups and downs and having challenges, they're easier to sign up as a client because they are having problems. 

Julius  And is it feasible to sign up a small new business who wasn't perhaps turning over a lot of money. Could they afford your fees? 

David  Well, that's another issue. You don't want to go too small because although they may need you, what you cost may be way more than what they can afford and they may need to grow a bit bigger. It's a bit of a catch 22. Isn't that really? Yeah. You need to wait a few years for them to be big enough to be able to afford your fees, but yet they need you there, right there, and then so. Yeah, it's a bit of a catch 22. 

Julius So how would you approach it then if you stumbled upon a small start-up type business who perhaps weren't ready, they didn't see the necessity for bringing on someone like you or they couldn't afford it. How would you attack that and how would you sort of keep in touch with them so that when they are ready or they can see the value in it, you can start to consult to them 

David  Just by doing that, exactly what you said, by taking accurate notes and marking in my diary in six months time to give them a call and just see how things are progressing. And you have a general discussion with them like it's only going to be five or 10 minutes 

Julius  to just keep that relationship going and don't discount it by any means. But don't try and get them on straight away. 

David  Yeah, well, in our consulting program, we say that you should always keep around about 10 percent of your time put aside for just keeping the pot, the prospect pot simmering along because you never know when you might need another client. 

Julius  Of course, now the next level of business up from a start-up as a small business. And we've started to talk about that. Can you just go into the details of the difference between a start-up and a small business? 

David  Startup? A small business is a start-up, has been going for a few years and they have survived and they have around about a million dollars in revenue, something like that. And it's basically run by the owner themselves and maybe a couple of staff or something like that. Yeah, it's been going for a while. It's been going for long enough for the cracks to show. And when you have your first meeting, we call a discovery meeting, you'll find out what's actually going on and where the challenges and where the problems are. 

Julius  Okay. Now, do these make better prospects to become clients? 

David  Yes, because they have challenges and no business owner is going to take you on unless they believe that you're able to help them. 

Julius  Okay, and can they afford the fees better, whereas a startup couldn't? 

David  Yes, definitely. Yes, yeah. And the beauty of our system, our ConsultX system is that we work on a percentage of monthly revenue. So as the business gets bigger and bigger, our fees come up. So we might start with small fees right at the very start. And you've got a very good example of that with a client that you're working with. And then as it gets bigger and bigger, you start to get your income, your fee starts to get larger to repay you for the work that you've done. 

Julius  If you're not familiar with the way that we like to structure our contracts and agreements with the growing fee structure I'll put a link in the podcast show notes to the podcast that actually goes into that in greater detail. 

David  That's good, yeah. 

Julius  Now, I will also mention that you want to be a little bit careful with the smaller end of small businesses, especially when you're starting out. A pitfall can be to sign up because they're relatively easy to sign up a whole raft of small businesses. And if they, although the revenue and your income might grow over time, you don't want to have the problem where starting out as a consultant, you're actually not earning that much because they're too small. So definitely, we typically say around or above the million-dollar mark as kind of the base. But you could have a couple a little bit smaller than that. But you don't want to have too many definitely. 

David  No, you'd need to personally believe that you can grow them very quickly. That's important. And also some consultants that join us do take on some smaller clients just for practice, more like 600, seven thousand dollars just for practice. And they don't charge as much as they normally do, but mostly they take on smaller clients if they've got a belief in what they're doing is got some pretty big potential growth in them. 

Julius  I had a conversation with one of our consultants. We actually took on quite a large portfolio of clients, I think he was approaching 18 or 20 and he took on just two, they were either start-ups or very small businesses, that he both had an interest in. And he thought that they had a lot of growth potential. He took them on for a pretty minimal fee, but just to help them grow and give back a little bit and the rest of his clients were giving him the bulk of his income. Now, David, we talked or I mentioned before that small businesses are pretty easy to sign. Why is it that small businesses are easy to get in there and sign up the business owner? 

David Well, because you're actually talking to the owner of the business and like, 

Julius  No gatekeepers, so to speak, 

David  No and a gatekeeper shouldn't be a problem anyway. A gatekeeper shouldn't prevent a business owner from being getting good advice from a consultant. That's the opposite of what they need to do anyway. So, yes. So why are they easier to sign as a client? That's because they are the owner and they are personally joined at the hip to the business and both join together and they can't separate the business from their personal life. So when you go and talk to them and you find that the business is causing personal issues or issues in their personal life with their partner, their family, probably, then it's fairly easy to offer your services and get in there and get them to agree to becoming a client of yours, to work towards a common objective, which they'll tell you all about. 

Julius I've found as well that in that small size of business, typically the business owners really stuck in the role of doing and acting as a technician. And they know that's not the right way. But because they're in that role, they've experienced all of the highs and lows and they lack the, you know, all sorts of things, the time to deal with their staffing issues and other more working on the business type tasks. And they feel like they're being torn between their technical role and these other responsibilities. So their pain threshold, I guess, is ready for them to be consulted to and get someone in with a bit more business knowledge. The next level of business, David, would be a more small to medium or medium-sized business. Now, how does that differ from a small business? 

David  An SME? Well, it's been going for a few years. It stands for small to medium enterprise. It's been going for a few years. It hasn't gone broke, it's survived ups and downs and things like that. And it's like if you'd compared it to a person it's kind of like, oh, I suppose about a 12-year-old and one way it's compared to a small business, which is only a baby or a toddler. 

Julius  How big, just in size approximately, would you call that? 

David  Oh, one to five million. One to four million. Yeah, yeah, yeah. It's starting to turn over a bit of money, but also too, the bigger it gets, the worse it gets because you can't use the same methods that you used when it was a little tiny company, when it was a start-up, to run an SME, you've got to have a lot of new systems and processes that are in there that are measuring things, that are making sure that things are on track because it becomes a one to five million dollar business. A five-million-dollar business is, actually sounds little, I know, but it's actually quite complex. A lot of moving parts in it, and there's a lot of people there's a lot of stuff going on and there's a lot of opportunity for things to go wrong. And that's when the owners of these businesses need our help. 

Julius  It doesn't take many things to go wrong and compound on one another to put a lot of stress on the business and the business owner. 

David  No, no, and a lot of business owners don't realize that a business is actually a living entity. Well, it's a combination of a living entity and a machine. Actually, the living part of it is the people as your employees, and the machine part is all the systems and processes that need to be operating to their best for the business to be successful. 

Julius  And talking about the fees you could charge to an SME sized business, how do they compare to a smaller business? 

David They're better, they're better. What tends to happen, and I found this when I was consulting back in the early days, was that you tend to start off with a few smaller customers or clients, and then as they got bigger, you kept them. But every year you get a little bit of churning goes on like you might lose one client for any particular reason it could be and you might let one client go. And this gives you a bit of freedom and your time to be able to get another client that's perhaps a bigger client with bigger fees and things like that. Because the name of the game is what you're trying to do is you're trying to get for your 40, 50 hours a week. You're trying to get the maximum income that you possibly can for that amount of time that you put in. So that's why the churning is good. Losing an occasional client, hopefully not a good one, is okay. And letting one go is okay, too. 

Julius  Okay. And what about the ease of getting into an SME size business? 

David  SME or larger even maybe. SMEs you can still get to the owner of the business and they're not a public company and they don't have boards of directors as a general rule, and they don't have chairmen and things like that. It's quite easy to get into them. You think you can get to the owner and you can talk to him or her. 

Julius  Would the SME, would that be kind of the pinnacle of where it's fairly easy to get in and fairly fast still and you can still earn a good income off them, fairly good income. Is that kind of the I guess the meeting point? 

David  Yeah, yeah. If you saw a bell curve of this, like the SME, would be right at the top. It'd be three to five million, maybe 10 if you're in America or something like that, but say three to five million. And that will be when the majority is because of the ease of getting to the owner, the ease of the owner making a decision the size of their income, being able to pay your fees, and all of those things surrounding it. That's whether, in fact, I think our average client averages somewhere around about three point one million. We've got a handful down at 500000. We've got a whole lot that are up about 80, 90 million. So, but it averages at about three. So that tells us that most of our people are under, most of our clients, are under five million. But that's a good, you don't have to have a 100 million dollar client. Five million is very, very good because if you earn 30 to 50000 out of that, five million doesn't even make a dent. 

Julius  No. 

David  On the five million. And yet that's good income for you when you add them all up. 

Julius  Particularly when you're starting out as a business consultant and you just want to get into a business as fast as possible. And earn a pretty significant sum of money, that's a nice size to target because you can get in there and sign them up, whereas with the large companies which we are about to talk about it differently takes a lot longer. And if your focus is to replace your previous income, that's something of great importance. To talking about the larger businesses, David, do you want to run us through large business and then through to corporate-sized entities? 

David  Okay, well, a larger business, we'll say five to 10 million upwards, more difficult to sign up. You still get to the owner, owner of the business and it takes maybe a little bit more time if they're larger than they've probably been in business longer, which means that they've survived a number of ups and downs. And they're successful because they're still in existence. They've still got challenges and problems, but there's a little bit more difficult to get into yet, to work a bit harder. You might have to have a set of three meetings with them, maybe four or five. You might have to bend and twist a bit in your proposal of what you're offering to do for them. But yeah, but they're worth getting, obviously, and they take a bit longer. Obviously, some of the smaller ones, the SMEs under your consulting management will end up becoming large businesses anyway. So you'll grow them yourself. And that's where you get the kudos or the praise from the owner of those businesses, the large business. And of course, going on to corporate, what you've just mentioned before, corporate is where they do have a board of directors. They probably do have a chairman, quite often external chairmen, and some external directors. And they're getting in the sort of 30 million up, could be any size. And that's probably the most difficult to get into because you can't get to the owner,  between you and the owner as an external chairman and a board of directors. And they would probably consider that they've got enough brains on the job there, and they would probably not entertain an approach, although I got through to a couple. 

Julius  We've had a few people within the network do so as well. 

David  Yes, we have, we have, we have. But was our people, too, who have said, David, I'm going to spend all my time working on corporate and they've spent a year and ended up with one or two. And I'm saying, no, it's not top of the bell curve. Like, it's the bottom of the bell curve on the other side, you know? And so between large business and SME is where I think you should where you should aim your prospecting activities. 

Julius  For the amount of time invested into a corporate versus what you're going to get back. You're going to get good returns, but you have to put a lot of effort and be prepared to take some losses to be able to get to a corporate level. 

David  You might never get there is what I'm saying. You might never get there. These people I'm talking about, I did counsel them and I did say you have to, I think you need to go down a peg and just at sort of five million dollar area because you're going to find that you'll be fighting all of these egos. And I'm not being rude and I say ego, is what I'm saying is there are directors and there's an external chairman and everything they have been brought in to offer assistance to the owner/owners of the business or the shareholders of the business. And that's what they are perceived to be there for. With the good or bad is another question, but yeah, so I would if I went out Monday morning, I'd be going straight for those five million dollar-ish businesses because I can get a quick decision. 

Julius  Okay, very good. Now, the next segment or the next type of way that we're going to break down businesses we could consult to is by industry. David, now we want to look at retail, wholesale, and manufacturing. Can you take us through the pros and cons of consulting to these types overall? And then we'll start with retail. 

David  Firstly, those are the three types that we've got there. You could be an expert in retail, you could be an expert in wholesale, you could be an expert in manufacturing. And some people have decided, some of our consultants have decided that they're really, really good at manufacturing. They came from manufacturing. There might be time and motion study. There might be really good quality. There might be really good at environmental, all these sorts of things. And they've decided that they're going to become a business consultant who specializes in that. 

Julius  In that particular area. 

David  And that's fine. That is absolutely fine. And taking the ConsultX system and marrying it to their experience in manufacturing, they will go out and talk to manufacturing companies. They might be more comfortable, it might just given that extra pep in their step, you know, to basically go out and do that. The same with wholesaling. Wholesaling, just for those of you that want an exact definition of it, you manufacture a manufacturer, manufacture something, generally sells it to a wholesale who buys pallet loads or truckloads of something. The wholesaler breaks it up into units and sells it to retail like the corner store doesn't want to buy a pallet load of heaters. He wants to buy two or something like that. So, yeah. So somebody might be really good at wholesaling, come from the wholesaling industry and specialize in that. They might be really good at retail. Take our program, put it together with their experience, and go out and specialized in retailers. But you can drill down even, even finer than that, you could, I know consultants who are experts in restaurants. I met a consultant a couple of years ago who was an expert in dancing schools. Like you can go as focused down as much as you want to. I met a person who is an expert in pens, fountain pen, he owned a fountain pen business, and he consulted to people all around the world through the Internet on pens, people that collect pens and things like that, he runs a business doing that. And watches, I've heard of a watch guy, I haven't met one. But, yeah, but so as a consultant, you can consult in any type of business that you want to if you want to feel comfortable. But what does happen, though, those people that have done that quite often have found out that they've started off being an expert in manufacturing and two years later you talk to them and find out who their clients are and they find that they've been referred from the manufacturers off to a wholesaler or to a retailer or to something else, a different type of manufacturing. So they end up becoming broad-spectrum consultants anyway. 

Julius  Okay, and is there a better industry? 

David  Nope, nope, none. 

Julius  None at all. So there's no area you'd recommend starting in terms of industry that they come from.

David  Start where your expertize is, maybe. But you'll find the referrals will send you outside of that. 

Julius  Okay, now we're going to look at the last and perhaps the most, David, important way to look for a business to consult to, and that is their need for help. Do you want to run us through what we need to look for and the businesses need for help? 

David  Well, overall the years we've discovered that it kind of breaks down like the business owners. If you got them all together and you were able to measure them all, you'd find that out of all the business owners, five percent of them get a generous salary. Generous means that they're being paid more than what they would being be paid if they were working for somebody else doing the same job. That's what we call a generous salary. However, it's a very profitable business and they are able at the end of the year to pay themselves a large dividend because it's leftover and that money is not needed in the business. So that's five percent. 

Julius  So that's the top, the very top 

David  of the triangle. Yes, it is, yeah. Then there's 20 percent of owners, the next level down who get the same generous salary, but they clean the company out and there are no dividends, there's not enough there. If the company's profitable and they're doing very, very well, but there are no dividends. They're working in the business as opposed to on it. And it's really a low-value business. If you look at the, go back to the five percent, the first business we talked about, that's very valuable because somebody can buy that business and do not need to work in it. They can put a manager in there and they can just be that, can be the chairman of the board or something like that, or the CEO and work two days a week or something like that. It's going back to the second level, the 20 percent they get that salary, but there are no dividends. They're working in the business and that tends to lower the value of the business down compared to the first one. The next level down, which approximately makes up about 40 percent of owners. They get a low paid salary and by low paid, I mean, they're getting paid lower than what they would get if they're doing the same job working for somebody else. 

Julius  40 percent of businesses fall onto that. 

David  Yes, they do. Yeah, that's right in the heart of our potential clients. 

Julius  And this is mostly in that range of businesses that we talked about before to target the SME sort of sector. 

David  Yes, yeah, it's in there. Yep, definitely. And of course, because their salaries are is so low there isn't going to be any dividend. They've got a high mortgage as the business continually needs cash. 

Julius  So they're feeding cash into the business. 

David  Yes, they are, yeah. It's a cycle that is all the wrong way, unfortunately. And the business really has got no value, although somebody may buy the business just to get the customer list or the assets or something like that, then you get down to the bottom of the triangle right at the very base, and that's approximately 35 percent. They get no salary or dividend because the business doesn't make any money and they tend to live off the equity growth in their home. What I mean by that is houses are going up quite rapidly in value at the moment. So every couple of years, they get the house revalued and they go borrow some more money and they live off that. The business has no value, it's losing money and failure is imminent. It could fail, it could fail, it probably will. But sometimes they just limp on and limp on. I've worked with a few companies like that and we've actually save them. I've also worked with somewhere we just couldn't save them and I've helped them to go, not bankrupt. Actually, I've saved them both from bankruptcy. But I helped them to close the business down without going bankrupt, which was a bit of an accomplishment in itself. 

Julius  Well, so that means that something like 75 percent of businesses are really in quite a poor shape and in a massive need for help. 

David  Yes, of course, yeah. 

Julius  Okay, so of those businesses, David, that we just talked about, the five percent, they were doing really, really well, the 20 percent that are doing fairly well and in the 40 that are doing not good and the 35 percent that are doing really quite poorly. Where would you start to look for clients? 

David  Well, you don't know until you start talking to them, straight away. Where would I start looking? I would look everywhere. Even now I don't have clients now, but I drive down the road and I see trucks and cars and vans and billboards and I hear ads on the radio and I get stuff in my mailbox. And that's where you find it. You find the clients and business associations and chambers of commerce and places like that. They're everywhere, they're everywhere. 

Julius  In those different segments we discussed, is there any of them that you'd particularly target to being with?

David  No because you don't know where they are. You might have an idea on the five percent when you start, and when you have your first discussion and they flash their Rolex watch at you and they've got a brand new half-million-dollar Mercedes sitting out in the driveway, you get a bit of an idea, but although that's not a total idea either, it could be all under lease, or hired purchase or something. You can lease watches now, by the way. 

Julius  Can you? 

David  Yes. When I was consulting in Australia, I had a client who owned a body-building company and he had a Rolex watch that was just covered in diamonds and gold and everything you could think of. And I said what's that watch worth? And he said 600000 dollars. 

Julius  What??? 

David  I know that's what I said what? And he said, don't you know you can lease them? I said you're having me on because he had a Ferrari. I told you about the Ferrari, the Ferrari as well. I think the Ferrari cost him twelve thousand a month, on the watch was something like about, it must have been about, thinking I'm sure he said about five to six thousand dollars a month. So, so yeah, yeah. Like a watch is a watch. 

Julius  Yeah, I imagine a motor car would depreciate at a far greater rate than a watch. 

David  Oh. Watches go up. Yeah. Yeah. They're about the same as houses actually thinking about it. 

Julius  Yeah that's not bad. 

David  So, yeah. You find them everywhere and the name of the game is you're not going to find them if you don't talk to them and if you don't have activity, you're not out there and you're not looking and your ears and eyes aren't open and those sorts of things. Yeah. 

Julius  All right. Well, then when you're looking for them and you start to consult to them, do you break them down into any particular way?

David  You can break down to rescue, improve and grow, which is how you find them. The grow businesses are typically those five percenters where they're not, certainly not in rescue and they are a little bit of an improve. It's probably a combination of improve and grow when the five percenters because they can always grow and they can always improve. They don't think they can improve, but they can. But you typically find people in that improve in that center and their center position, I suppose you'd call it. And that's where many, many things can be improved. And once you've improved it, you can grow. If you can imagine that even some clients that you take on there and rescue, your job is to get them from rescue to improve and then get them from improved to grow. So get them out of the fire, basically, and 

Julius  Start to improve them and 

David  Save them essentially and then improve them. 

Julius  So that's how you when you're working with the business, how you look at it, you want to make sure that they don't need to be rescued. And if they do, you rescue them and then look at improving them, improving all aspects of the business, I guess. 

David  Yeah, yeah. 

Julius  Once everything's running smoothly, really try and grow it. 

David  Yes, of course. 

Julius  Wonderful, well, that's been a very informative discussion, David, and I think I've got a much better idea of the types of businesses you consult to, and where to start looking for them, and what you could even do when you start working with them, the rescuing, and the improving, and the growing. So I hope that our listeners today have gained some valuable insights because I know that I certainly have. We would also like to make it known that you can really help business owners by becoming a business consultant with ConsultX. And we go on to much greater depth about the kinds of discussions that we've had today. We've got a really in-depth training package and all of the tools that you can ever want. We've got a bit of a special now, a launch package that we're offering, so jump over to our website, consultx.com to find out more about that, and we'll send you through some information. Thank you very much, David. We will catch you with the next podcast. 

David  Thank you. And thank you, everyone, for watching and listening. Everything Business Consulting is brought to you by ConsultX. It's a global business consulting company that has everything that you require to become a successful business consultant or to offer consulting services in your existing professional firm. If you'd like to find out more come visit us at consultx.com.