Podcast

Episode: 223 |
Will Bachman:
Consulting Revenue Equation:
Episode
223

HOW TO THRIVE AS AN
INDEPENDENT PROFESSIONAL

Will Bachman

Consulting Revenue Equation

Show Notes

In my conversations with independent consultants, a common question I get is how to generate more business.

There are a lot of things one could POTENTIALLY do to generate more revenue, and some people flail around putting effort into initiatives that may have a low return on investment.

Of course we all want to put our time and energy into areas with a relatively high return on investment, and I’ve found that it is useful to break down all the possible factors into what I call the Consulting Revenue Equation.

Also check out Episode 221, in which I discuss with David A. Fields some ways to increase your conversion rate.

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Will Bachman 00:01
Hey, welcome to Unleashed. I’m your host Will Bachman, and welcome to the first episode of the year and of the decade. In my conversations with independent consultants, a common question I get is how to generate more business, there are a lot of things one could potentially do to generate more revenue. And some people flail around putting effort into initiatives that may have a low return on investment. Of course, we all want to put our time and energy into areas with a relatively high return on investment. And I found that it’s useful to break down all these possible factors into what I call the consulting revenue equation. So here is the consulting revenue equation. total revenue generated equals leads times your conversion rate, that is the percentage of leads that convert into a first time project with a client times follow on work. And that’s defined as the total number of projects with a given client for every first time project times the average dollar value per project. And the average dollar value per project could be further broken down as the number of days or hours that you invest in that project times your effective average, hourly or daily rate. Now, you may be structuring your pricing as a fixed rate, or as some kind of success fee, that depends on results. But you can still back into how much time you put into the project, and divide your total fees by that amount of time to figure out your average billing rate per unit of time. An important part of the consulting revenue equation is the number of leads. And the number of leads equals the number of people who have ever known you times the percent of those who have known you and who also respect you, times the percent of those who like you, times the percent of those who are aware that you are available for consulting projects, times the percent who are either a decision maker with a budget or an influencer, who can introduce you to a decision maker with a budget times the percent who have a need for consulting help times the percent who have your contact information, times the percent, where you are top of mind, one of the first two or three people they think of for a project like this. Now, once you break down your revenue, according to the consulting revenue equation, you can start thinking about what specific thing you could work on that is most likely to move the needle with the least amount of effort. One place is to start as to look at the leads and conversion rate. If you’re getting relatively few leads, but most leads end up turning into a project, then you want to make may want to focus your effort on getting more leads. If however, you’re getting a lot of leads, but you flail around and you convert few of them, then you might want to focus on your conversion rate instead. So let’s say first that you want to focus on generating more leads of some people who are trying to generate more leads, will assume that they just need to reach out to new prospects whom they don’t already know. And so they make a list and start doing cold reach outs. increasing the number of people who know you, and also respect you and like you is difficult, it takes a long time to build up relationships. So that effort may work of cold reach outs, but it also might not be the first place you want to invest, invest effort. If we look at the consulting revenue equation, we can see some other potential steps to take. So for example, number one is everyone who already knows you aware that you are now an independent consultant. If they think that you’re still a vice president of XYZ, somewhere, they may not even think to call you. So if they’re not aware, you need to find a way to let people know. At a minimum, you want to update your LinkedIn profile. So it’s obvious that you are an independent consultant or running your own firm. You don’t want to be spammy and just spray everyone you know with an advertisement for your firm and say, Hey, do you got a project for me? But you do need to get the word out. Maybe you could ask people for feedback on your website or on your firm’s one pager, or on your LinkedIn profile with a personalized email say, Hey, I just started a new consulting firm I set up a website we’d love to get your reaction. People love to give advice. And that’s kind of a backhanded way to let people know that you are now an independent consultant. So you don’t want to ask for project opportunities because that puts people on the spot and then they want us and then they They say no, they feel defensive. And then it’s tough to reach out to that person again. So if you don’t want to ask for help, you could also just let people know, hey, I’ve started my firm, I just completed my couple first couple of projects, what’s up with you, reaching out to them, ask for a phone call, or even just email them and say, Hey, what’s new? Alright, but you want to make people aware that you are now an independent consultant. Number two, the next element, do people have your contact information, someone may have view is top of mind. But if it’s a hassle to reach you, they don’t have your email or your phone number available. And they have two other people that are also Top of Mind, guess what, you’re not going to get the phone call. So update your LinkedIn profile, and consider including your email address right in your profile summary, that might increase the spam you get. But it also might increase the project opportunities you get. Change your LinkedIn settings to allow people to send you a message on LinkedIn without using an inmail. So you can do that if you’re a premium user of LinkedIn, which I recommend. You can also include an email signature on your phone and your email program, so that everyone that you email will have your contact info, including your phone number. You also want to update alumni sites of college grad school and your consulting firm if you’re at a consulting firm and alumni site, with your current contact info, email, and phone. And if you created a website, obviously, you want include your contact info there. Number three, are you top of mind as a person to call on a specific type of problem that you’ve decided to focus on. So this is where thought leadership comes in. If you are creating content on a regular basis, then it gives you a reason to share regularly to remind people that you exist and what they should remember about you. I’ve had some recent podcast episodes where I’ve talked to folks who do a great job of this, listen to the most recent episode with Michael Ryan, where he’s posting every single day about inventory on LinkedIn. So some potential channels or for forums, you could have a blog, podcast, a channel on YouTube, white papers, articles and trade journals. If you’re creating content on some such vehicle, it gives you a reason to post regularly on LinkedIn. Multiple experts have recommended to me that the ideal frequency is about three to five times per week on LinkedIn. And ideally, all these posts would be on a topic that reminds people of your focus area. So you don’t necessarily need to be generating original content for all these posts. It could also be about curating articles on your area of interest. And then adding a few sentences of commentary. I’d also suggest that you consider adding a newsletter to this media mix, and that you send out on some regular schedule to people who have opted in to hear what you have to say. And even if they’re not opening it and reading it every single time. It just gets in their inbox. And that subject line reminds them. Oh, you know, that’s, that’s that person. And then, you know, maybe they get it six times, 12 times 18 times two years. But they’ve been reminded over a couple years. And then when they do have that need, they can search in their email and find you. So maybe you were already getting plenty of leads, but you’re not converting a high percentage of them into confirm projects. You might want to listen to my recent podcast episode with David A. Fields, where we talk about some best practices for increasing conversion rate. And a link for that is in the show notes. And here’s some additional tips. You might want to find an experienced consultant to provide you with some mirror image feedback. There’s a couple areas to focus on. Number one is the quality of your context discussion. And that’s a phrase that I learned from David A. Fields. In his book, The irresistible consultants guide to winning clients, chapters 18 and 19. Before you submit a proposal, you should have a context discussion with your client, where you make sure that you understand six things, namely, number one, the situation number two desired outcomes, number three indicators of success, number four perceived risks and concerns, number five value and number six parameters, which includes things like the desired start date, as well as the all important question of budget. So consider asking an experienced consultant to join you on a context discussion, meeting or call. You can refer to the person as your colleague, person that you could debrief with after such a meeting, to see if you can adequately answer all those questions and give you some feedback. The most common question or the most common mistake that I see consultants make in these initial context discussions is trying too hard to sell themselves in their experience and not enough time just asking questions. In this to truly understand the problem. Remember, once you are in the meeting, you’ve already convinced the client that you may be able to solve their problem. And the most important thing to do is make sure that you understand what they’re trying to solve. Number two, is the written proposal. Consider asking an experienced consultant to review your proposal before you submit it to your client. is a proposal clear? Is it compelling? Do the fees seem reasonable? This is your approach obvious. answer all those questions. Maybe you’re getting enough leads and converting these leads, but you do a lot of one off projects with clients and they don’t call you back for more help. That is not necessarily terrible. Maybe you work on something very specific, and you solve the problem so well that they don’t need your help again. If I hire a roofer, and they do a fantastic job and replacing the roof shingles on my roof, I might not I might be delighted but not need their help for another 30 years. But most cases, if a consultant builds a relationship, and does great work, the client will have other areas where they need help. So consider asking a third party to approach your clients to collect honest feedback on your work. Maybe you’ve rubbed people the wrong way or your impact wasn’t what was promised, or there was some other dissatisfaction that sometimes they’re willing to tell a neutral third party. Or maybe your clients love your work, and they just forget about you. And that could mean you need to do a better job at staying in touch at building relationship. maybe be a little less transactional. You might set yourself a follow up calendar to check in one month, three months, six months after a project to see how things are going. You may decide to focus on increasing the total number of projects you get from existing clients, rather than going out to find new projects with new clients. You can also look at the fees that you set for each project. Using the metaphor of rainmaking, David A. Fields talks about getting bigger raindrops from the same number of drops of rain. So could you scope larger projects? Or could you increase your effective hourly or daily rate subscribers to my weekly email, get access to a PDF that summarizes this whole revenue equation. And if you’d like that bonus feature, then sign up, you can visit umbrex.com Click on Unleashed tab. And there’s a signup form right there. I’d love to hear your feedback on this concept of the consulting revenue equation, including any tips on how I can make this concept more useful to you. Or maybe any stories about how it’s been helpful to you. You can email me at umbrex.com Thanks for listening to this episode of Unleashed. Unleashed is produced by Umbrex the community that connects you with the world’s top independent management consultants.

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