Guerrilla Marketing for Consultants

Another Independence Issue Brewing

According to a recent study by the US Congress, consultants who recommend compensation packages for corporate clients have "pervasive" conflicts of interest that appear to be inflating executive compensation.

The study found that at least 113 of the nation's 250 largest companies rely on compensation consultants who also do other, more lucrative work for them. On the surface, this fact isn't problematic given that multi-service firms often provide an array of services to big organizations.

What troubles some legislators is that, on average, median CEO pay in 2006 was 67 percent higher at companies whose consultants had the most potential for such conflicts, compared with those whose consultants didn't have such conflicts.

The implication is that consultants sweeten their recommended pay packages in an effort to win other work from their clients. It may be easy for some people to believe that consulting firms try to line their own pockets by stuffing their clients' wallets, but it's probably time to take a deep breath and fully explore the issue--and the study's methodology and results.

Maybe the executive pay that some compensation consultants recommend is in the stratosphere. But as soon as the market comes to believe that a quid pro quo exists that trades executive compensation for future consulting work, the firms involved could lose some or all of their work with clients.

Most firms won't sell their integrity, or future, even if the price runs into the millions. Still, the issue has grabbed the attention of legislators, so stay tuned.

The last time we heard this type of concern, the US Congress passed the Sarbanes-Oxley Act.

Sniping at the Big Firms

If you listen to critics who grouse about the big professional services firms, you might be tempted to conclude that large firms succeed because of their substantial "advantages" in the market. But too many critics discount the success of large firms and lose sight of the valuable lessons any consultant can learn from the big players.

Look at many of their balance sheets and you'll find a solid base of capital, few liabilities, and enviable cash flow. By most other performance measures, too, large firms are thriving. Revenue and profit per employee are strong, gross margins are holding steady, and the backlog of sold work is to die for. They must be doing something right.

This month in the Guerrilla Consultant, we look beyond the stereotypes and discuss how and why large firms manage to turn in consistently strong business performance.

Read this month's issue.

How Much Do Consultants Earn?

As a new year rolls around, you may wonder how your earnings stack up against those of others in the industry. To get a handle on comparative earnings, we took a look at salary ranges for consultants from several different sources.

Naturally, there are problems with any reported averages, but the data should give you a sense of where salaries are headed. For purposes of deriving average salaries, a consultant’s role was defined as encompassing all aspects of the consulting process, from problem definition to solution implementation.

The average annual salary, excluding benefits, for US-based consultants is reported as $146,000. The high point in the salary range is $219,000.

As you would expect, the average salary shifts when you target specific geographic areas. For instance, in the San Francisco Bay Area, half of the consultants earn between $127,000 and $271,000, with average salaries reaching $180,000 annually.

Keep in mind these salaries are for employees, not business owners or partners.

What Clients Like

In a 2007 survey, researchers for Global Services Media wanted to know the answers to these questions: What services are most highly used by clients? And what is their corresponding level of satisfaction?

The study focused on the 25 most popular management trends and tools, including Six Sigma, outsourcing, strategic planning, benchmarking, customer relationship management (CRM), growth strategy tools, and knowledge management, to name a few.

The services with the highest rate of use and client satisfaction turned out to be: strategic planning, CRM, and customer segmentation. According to the 1,221 survey respondents, services that haven't really caught on include corporate blogs and RFID.

Clients have tested the waters and used outside service providers to help with knowledge management and balanced scorecard initiatives, but client satisfaction remains low for those services.

A Rising Tide Won't Float All Boats

Over the last couple of years, the advice business has been on a tear. Many consulting firms are enjoying double-digit revenue growth and client demand is showing no signs of cooling off, at least in the near term.

Isn't this a problem we want to have?

But a surging market, like a falling one, has its challenges. In a previous growth spurt, some firms became mere order takers and let their investments in marketing wither. Landing new work was as simple as it ever gets in the consulting business. When the tide eventually turned and clients reined in spending, those order takers were left with little new work in the pipeline.

No matter how strong demand seems, do not let up on your marketing efforts. Instead, consider ratcheting up your marketing initiatives to help you gain new, profitable clients and prevail over competitors.

For some consulting firms, a strong market encourages risk-taking. So don't be surprised to see new, well-financed competitors entering your market. These new entrants may not last long, but they can wreak havoc in the short term.

Making a strong marketing push, particularly if it's focused on growing your important client relationships, is a winning strategy to protect your market as demand grows.

Yuk-it-up Clients

In his latest WSJ Startup Journal column on launching and managing a consulting practice, Rob  Levinson writes about his rules for screening potential new clients. In addition to what you'd expect (Are they serious about the project? Will doing this project help my career?) he asks himself if the prospect has a sense of humor. In fact, it's at the top of his list.

He writes that people with a sense of humor are usually smart enough to understand irony and don't take themselves too seriously. They "are rewarding to work with because they can put their challenges into perspective."

I'd like to add that humor helps pave the way for more fluid communication over the course of a consultant-client relationship, even if you're not discussing something funny. It builds a foundation that makes everything -- even the inevitable unpleasant stuff -- easier. And a lot more enjoyable.

Humor doesn't cost anything, and it doesn't add more work. Sure, we can't always pick and choose using this criteria. But when we can, we're lucky indeed.

-Andrea Harris-

Put Clients Second

It's axiomatic that your firm puts the client's needs first, right? Promotional material, Web sites, and mission statements certainly proclaim that clients are the highest priority. But the way to achieve consistently profitable results is to put your consultants first and clients second. Whether your practice has two consultants or two hundred, their talents and skills are more critical to your long-term success than your roster of clients. It is, after all, great consultants who drive the profitability of your practice.

Consultants must be responsive to their client's needs, even to the point of working long, crazy hours. Realistically, though, good consultants are tougher to replace than clients.

If you lose a client, it may produce an immediate financial impact. If you lose a great consultant, you lose a lot more than money. You lose a portion of your ability to sell and deliver work; you lose your investment in training; and you lose the client relationships that the consultant built. And don't forget the high cost of recruiting and breaking in a replacement.

What is worse, a departing consultant can create a cascade effect that causes others to leave the firm, compounding your losses. Or your ex-colleague can become your competitor, and steal your secrets, clients, and staff.

Turnover is inevitable in professional services firms. Minimize the brain drain and take the sting out of a very demanding business by providing a collegial and supportive work environment, offering challenging opportunities and paying people what they are worth.

Make sure your consultants know that they come first in the practice and they, in turn, will make sure clients are their first priority.

Has Your Paradigm Shifted Today?

Last Thursday, my friends at 800-CEO-READ let me host their blog for a day. Here are links to seven of my posts.

Has Your Paradigm Shifted Today?

Nine Books Every Consultant Must Read

What’s the Brain Got to Do with Business?

Should You Fire a Client?

Make It an Even Ten

Standing Out in the Crowd

Management of the Absurd

 

Get Ready--Here Comes 2005

It's that time again…time to reflect on the past year and resolve to do better in the next. If you're thinking about resolutions for your consulting business, here are a few thoughts, in no particular order, to kick-start your brain.

1. Dust off your marketing plan. Go back through your marketing plan and review what's working and what's not. Should you consider adding new services to your practice? Should you discontinue others? Is your target market right? Are your marketing tactics working? Is there something new and different about your business you'd like to highlight in the market?

2. Raise your rates? Evidence that the consulting market is picking up steam makes this a good time to consider if your rates are aligned with the market. Take a fresh look at your services and fees. You may find an opportunity to raise your fees, particularly for new clients.

3. Prune your client list. Consider which clients you'd rather refer to others this year, instead of serving them yourself. Are there client relationships that aren't working for you, either professionally or financially? Examine your existing client list and decide if you would be better off not working for any client on the list.

4. Strengthen ten relationships. With client relationships-current and past-fresh in your mind, find ways to renew and strengthen the relationships you want to keep. You're likely to end up with more business if you do.

5. Revisit your Web site. Is it time to refresh some or all of your Web site? Does your site reflect your current capabilities, differentiators and service offerings?

6. Contribute to your industry. Whether you practice in financial services or information technology, find a way to contribute some of your time and consulting expertise to solving issues your industry is facing. Make a difference.

7. Market your practice daily. Find a way to do one thing, even something small, each day to promote your practice. It will pay off.

8. Fill a gap. Is there a gap in some part of your business or consulting knowledge? Devote time to identifying an area for professional development, and then head to that conference, or read a few books. Whatever gap you spot, plan a way to fill it in the coming year.

May 2005 be your best year yet!

The Art of the Start

Consultants are always starting something, whether it's a new project, a new line of business or a new relationship with a client.

To help you start whatever, we asked Guy Kawasaki, the managing director of Garage Technology Ventures, and former chief evangelist of Apple Computer, Inc. to share his ideas on getting just about anything going.

See the recent issue of Management Consulting News for our interview with Guy Kawasaki.