70. What does the future of Business Consulting & Coaching look like?
What does the future of Business Consulting & Coaching look like? [Everything Business Consulting Episode 70]
A look at the future of Business Consulting, Coaching, and Advisory.
[Everything Business Consulting Episode 70]
In this episode, we look at:
Business Consulting over the past 20 Years
The current size of the Business Consulting and Coaching Market
Industry size of “Management Consulting” in the USA - 241.6 bn in FY2021.
This took a dip in 2020, thanks to COVID, where it was $236 bn.
Prior to that, the industry was showing consistent year on year growth, peaking at 256 bn in 2019.
Predicted to grow by 2.3% this year (FY2022).
Business Coaching is worth 11.6bn
Statistics provided by IBIS World, industry research
Management Consultancies Association reported that for the first time ever, management consulting’s revenue surpassed the 11 Billion pound mark.
The SME Market is under-served (Growth Potential)
Long-lasting effects of the pandemic
Businesses are generally doing one of two things right now
Struggling
Stress for business owners
Financial issues with customers
Insecurity for staff = low morale
Can’t keep doing what they currently are
Booming
Overwhelm
Growing pains
Plans & strategies out the door
Unsure of how to manage finances & additional cash flow
Lack of supply/labor to keep up
Technological changes
Using the aid of technology to talk to clients
Email, WhatsApp groups, chat groups
Microsoft teams, Google chat
Using technology to manage and keep track of progress
Slack, Monday.com, Trello
Complex MS project, hive, teamwork
Making use of AI to analyze business.
Fathom, Reach Reporting, and others
The accepted ways of doing business are changing
Fundamentals aren't changing
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Transcript:
Julius: Bleak and bright information makes it hard to discern fact from fiction when it comes to looking at the news in this day and age. Today David, we're going to take a look at the facts and the future of business consulting, and we're going to add our opinions.
MC: Welcome to Everything Business Consulting. Whether you are, or you want to become a successful and high-earning business consultant, coach, or adviser, this show is dedicated to help you. Here are our hosts, David Thexton and Julius Bloem.
Julius: So we've got our crystal balls out to look at the future of business consulting on our 70th episode here. David, you've been in business consulting for almost 20 years now. What was it like when you started and how has it changed?
David: Well, prior to those 20 years, business consulting was what is affectionately called hunt and kill in America. What that means is that you go out, you hunt a business, you find a problem and you kill it. Not literally, but you sign them up. That's what it actually means. And what I noticed from about 20 years ago, coming forwards was that coaching became very big and there's a number of big coaching franchises and operations out there.
But coaching kind of, from what I observed over the last 20 years, it's got a lot of drawbacks. It doesn't work very well. Coaches tend to work with the business owner, they find out what their goals are, the business owner's goals. And then they come up with a coaching-type program to encourage them to work towards those goals.
Now, the problem is, and what I've seen over the years, is that those goals are not always the right goals for the business owner. They're his goals, but you don't need to do that. We don't do that, we help to create new goals. So what's changed is that the coaching has come out and being out in the marketplace, but their turnover is horrendous and I'm talking maybe three to six months tops.
Whereas the correct sort of consulting that I've seen come around in the last 10 or so years, 12 years is consulting like the way that we do it, which is long-term, long-lasting and it gets very, very good results. Now it has changed very, very dramatically. And over the last couple of years, there's been those interruptions with the pandemic. But even between 2016 and 2021, there has been a 1.2% per year on average increase in business coaching, and that's been worth about $11.6 billion dollars globally.
Julius: To me, David, that sounds like it's worth a lot of money, but it's kind of stagnant that coaching and maybe that's something to do with the value not really being there like you were talking about. But in my mind that also opens the doors to having something that's a little bit recognized, but offering a better service, like the business consulting we talk about. I want to look at some facts about where we are now in the current size of the management consulting industry. Now that's a little bit more corporate than what we do, but some of the statistics of the type of consulting we do, do get bundled up into that.
So if you look at the management consulting industry in the USA alone, it was worth $241 billion dollars in the financial year of 2021. So you add to that the $11.6 billion dollars of coaching, and you've got $250 billion dollars of market combined. That's a pretty large pool. It did take a little bit of a hit from COVID where it dipped last year by about 4 million, which isn't really that much. At its absolute most in the financial year of 2019, the whole market was worth $256 billion dollars. So it's a pretty large behemoth of an industry, really, when you look at it. So it wouldn't take a lot to get a decent chunk of that pie and make everyone in your family very happy.
With the recovery, hopefully, coming from COVID, there is a prediction that the entire industry is going to grow by about 2.3% this year. IBIS who have provided these statistics for us have cited that this growth will be due to some government spending to increase the turnover in this sector, both directly and indirectly as a flow-on from other spending on projects. But whilst most of those statistics are based on that consulting at the management level, business coaching, as we mentioned, was worth 11.6 billion and has generally outpaced the growth of management consulting.
If we look at the UK, their Management Consultancies Association reports that for the first time ever, this is in the UK, the revenue past the 11 billion pound mark. And there are forecasts and predictions there that it's going to drive to another two and a half percent growth there as well, based on the previous year.
So all around the world, David, it looks like both the consulting and the coaching industries are going to grow. They're very big and they've got future growth there as well. So our recommended clients, David, for the most of the people are now network are small to medium businesses. Can you give us a bit of an insight on where their thinking is right now, given the current situation?
David: Yes, well the challenge is that they still don't know what a business consultant does or how they can help. They know all about lawyers, bank managers, accountants, business brokers, and other specialists like that, but they don't really know what a business consultant does. They think they know, but they don't. So we have to introduce them to how we handle business consultancy, which is a little different.
So an SME business, and that's a small to medium enterprise it isn't aware of the value that business consulting can provide. They still think that they have all the answers, they might be a butcher, a baker, a candlestick maker, but they don't know how to run a business. They're a specialist or they're a technician as the author in the E-Myth describes it.
He says that they're basically a technician. They know what they know, they're very good at what they know, but they don't know how to run a business. They simply don't understand it. So this provides an immense opportunity for business consultants to get into that SME market. There's literally millions and millions of these types of companies around the world. And your local area, there's probably, within a 15-minute drive, there's probably a thousand or something like that. So they're everywhere.
Now we know that the more business owners find out about business consulting, then the more the industry would grow. So just think about the specialization of what we provide. If you had a, let's say you had a sickness, you had a heart problem, and you needed to have an operation. You wouldn't go to the local butcher down the road, you would find the best person possible, the best specialist that you could find, and afford to help you to fix the problems that you've got.
And that's where we are with business consulting like business owners need to find somebody who knows more than they know about being in business and bring them in as a kind of a partner, not a shareholder partner, but a partner into the business to help grow it from there.
Julius: So this sector David, of SMEs and also large businesses, really the world as a whole, is going to be significantly affected by the long-lasting legacy of dare I say, COVID. Now businesses generally are doing one of two things right now, they're struggling or they're booming. What is going to be going on and going through their minds if they're struggling, David?
David: Struggling businesses have immense stress for the business owners and their family, and especially their partners, stress like we've never seen before. Because nobody knows what's around the corner. They've sunk all their investments into various businesses. And along comes the COVID and smashes their business to pieces. And nobody knows what's around the corner, which also leads on to financial issues with their customers who can't pay them because of the pandemic, so that gives them even more stress. And then you get a situation flooding down into the staff or the employees who have low morale and they all think that they're going to come to work tomorrow and there's going to be a big padlock sitting on the gate because the business has shut down and that causes stress as well. Some of these employees have been with the companies for gosh years and years.
And they can't keep doing what they're currently doing. The business marketplace has changed so much for a lot of these businesses that they just can't keep doing it, where they currently are and they need to do something different. There's an old saying, if you keep doing what you've already been doing, you're going to get what you've always got. You're not going to get any improvement and with the pandemic, it's even going to be worse.
Julius: After the pandemic, we've had reports of other businesses that the exact opposite thing is happening there. Absolutely booming, demand is massively up, they're in these industries that are really highly sought after, or they've been an existing business and they've pivoted into a new service or product that is more popular and able to be sold and just compliments the current situation very well. What's going to be going through the business owner's heads in this situation?
David: Well, they're going to be overwhelmed because they are doing more business than they've ever done before, and of course it's going to cause growing pains, isn't it? Because they need to produce more whether by service or whether by production, more widgets, for example. And all previous plans and strategies that they may have had, are thrown out the door because it's a whole new world and they have to do things differently. And this also brings in other issues where they're unsure of how to manage the finances and the additional cash flow.
They gotta be very careful with that because sometimes if you have a booming business, the requirement for capital within the business needs, needs to be watched very closely. Otherwise, it's called overtrading, got to be careful that doesn't happen. And of course, we're hearing every day that there's a lack of supply of labor in order to keep up with these growing pains and all this increased demand for these products and services.
Julius: What I've also heard of David is these businesses that have had huge demand that rocketed up and they've gone and done all these things to be able to fulfill that demand. And then everyone's bought all of the products they want of this particular thing. And all of a sudden they've got a business that has no demand in it anymore, so that also needs to be very strongly considered. Both of these situations, whether they're booming or struggling, gives you the need and the opportunity to provide these owners with help in the form of business consulting.
David: Ever since I've been involved with consulting Julius, I have just, no matter where I went, I have found people that needed, desperately needed a business consultant to help them out. And I wasn't even looking, I go to a restaurant say to a guy, how's your business going? And he'd spend 15 minutes telling me all the issues that he had and so on, so on and so on. So I can only think that going forward from here, whether it's a struggling business or a growing business that they gonna need, the kind of help that business consultants provide.
Julius: What I think, you can also agree with David, is that it's the emotion of the business owner tied to whatever's happening in the business that really triggers their desire and their ability to see that they need a business consultant and with whatever's going on at the moment in the current situation, those emotions are heightened and the cycle that they go through of feeling good or bad is been accelerated.
David: Exactly, yep. That's exactly what's going on because it's the emotional side of owning a business that drives them to want to have somebody come in and help them out. As a consultant always, we call ourselves Business Success Partners.
Julius: Now the next thing I want to look at in terms of how business consulting is changing is technology. Now we can't get away from this, it is all around us and it is speeding up faster than any time in history. The outlook for business consulting in terms of technology is outstanding. Primarily for the small guys, the people that serve the small to medium business owners, that's the zero to a hundred million dollar revenue segment. Because we're able to equip ourselves with the tools and the technologies that previously only the giants would have had access to.
David: That's right, that's exactly right. And this reminds me of the invention of the spreadsheet for accountants. Like I can go back way, way, way back before we never had spreadsheets. And then one day, my father-in-law basically showed me this thing called Visy Calc and it just blew my mind, like what would take me hours and hours and hours of manual work and a calculator to put together, could be done in 10% of the time using spreadsheets and the Visy Calc one was the very, very first one that came along. And then I went to Lotus 1, 2, 3, and then I went to Excel where I am now, but it's gone way, way beyond that. Hasn't that Julius?
Julius: It absolutely has and what happened, David to accountants once the spreadsheet came out. I know they thought it was going to be the end of them, but what it actually happened?
David: Well, they were able to handle more clients and they are able to do more in-depth work with those clients. And they were able to get more information to the clients and as a consequence of all of that, they'd make more money.
Julius: And what happened to the number of accountants and the size of the accountancy industry?
David: Well, it grew, it grew and grew and grew.
Julius: And that is the potential for business consulting, we could see the exact same thing happening here and the type of technology that I am talking about. It's a technology that can aid you to be able to connect with your clients more easily, acquire more clients. What I'm thinking of here is email. You can set up WhatsApp groups with your client businesses, chat groups of any kind, Microsoft teams, Google chats, all of that kind of stuff that gives you the ability to interact with your clients. Make them feel like you're there with them all of the time, every day, all day, but you're not, your only present amongst your entire portfolio of clients, but they feel like they're your only client.
The other technologies that are out there are ones that you can help to manage and track the process of your clients and the progress that they're going through. Think Slack, Monday.com, Trello, these kinds of technology that allow you to again, communicate, but also see what people are working on and manage that.
There's also other software for more complex projects like Microsoft project, Hive, and Teamwork. And finally, you can make use of AI to analyze businesses, which in the past has been something that no small business consultant had access to. Think Fathom, Reach Reporting, and I know there's a whole lot of other tools that you can plug into accounting packages to be able to analyze the data and really support you as a business consultant.
Now, these aren't going to replace you. They're going to enhance the services you can offer and give you the ability, perhaps even to provide more value to more clients, which can only be a good thing. Now you no longer need to be a big player to have access to these sorts of tools, you can help businesses more effectively and more efficiently. So I see this as being a really powerful game-changer in the industry.
David: Yes, yes, Julius. It's really incredible, because as we talked about before that the some of these software programs and some of the services were only really able to be supplied by the big players, like McKinsey and Boston and so on. And now a one-man, one-person operation, using the system that we use for consulting and some of those powerful tools is able to offer the same kind of service to a 2 3, 4, $5 million business that he could never afford because he can't afford to do to work with McKinsey or the big consulting people. So yes, I a hundred percent agree, Julius.
Julius: The way that we do business is also changing both in the face and the aftermath of the pandemic, but also because of technology as well. Now it's more accepted that you don't have to be face to face anymore, you can do this remotely as a business consultant. You've got employees that are working remotely all around the world, contractors, and obviously, as consultants, you can do exactly the same thing. And again, that gives a pretty bright outlook for our profession.
It's going to give you the benefits of less travel time, but also more time that you can spend connecting with your clients, more time you can spend on actually solving their problems, considering what's going on in their business, and figuring out what you're going to recommend to them to do. And also you can reach larger numbers of your clients with absolute ease, never before have you been able to sit in your office and with a $15 a month subscription, talk to an almost unlimited amount of people all day, every day. You can even do it for free using things like Google Hangouts and to call Microsoft teams. So the possibilities really are limitless, but David, I don't believe that the underlying fundamentals of business consulting have changed.
David: Absolutely not, business owners need help as we discussed before whether they're drowning in extra work or whether they've lost all their work, lost all their business. They will always need help, and they'll always need help because they were never trained in how to run a business. Like the government gave out licenses to run a business and you didn't need a degree, you didn't need to do a test, you didn't need to do any training. It was just 150 bucks, and all of a sudden you are David Thexton Limited or LLC or Pty LTD, depending on where you live. So that's the thing they'll always need help of the kind that we provide.
So to acquire clients, the main thing that you need to do is to build trust and to help them solve their problems. Once they trust you, once they realize that you're only there to help them, then you'll have very little difficulty in signing them up as a client. And of course, to improve any business, you're going to need to help them to put a plan together and work towards what their, say a five-year vision is, to help them to get to it.
So, and to develop that plan, you need to do a bit of work with the client, and maybe his partner and find out exactly what they want. And then once you know where they want to go, you can then help them to build the business plan, and then you can help them to be accountable to that business plan to make sure that they get there in the time that they want.
Julius: The fundamentals absolutely haven't changed, but definitely the industry is growing a little bit, and technology is changing. But what this all means, David, as a business consultant is the outlook is really, really bright. We know from our conversations with consultants out there on the ground floor, that nothing has really changed, but there is still a huge opportunity for you to take a bite or a larger slice if you're an existing consultant of that $250 billion industry of business consulting and business coaching.
For all show notes on this episode, please visit consultx.com/episodes/70. And please leave a review on your favorite listening platform, it really helps us to reach more people. Finally don't forget, you can reach out to us to request a topic for a show or have your business consulting questions answered.
David: You've been listening to Everything Business Consulting with David Thexton and Julius Bloem.
MC: Everything Business Consulting is brought to you by ConsultX, a complete training software, and community for business consultants, coaches, and advisors. ConsultX guides you through the entire process to success. To find out more, visit consultx.com.