Summary

The content provides strategic insights for running and growing an independent consultancy, emphasizing the importance of focus, expertise, balanced lead generation, and enjoying the entrepreneurial journey.

Abstract

The article "4 Tips on Running (and Growing) an Independent Consultancy" shares valuable advice from experts at Vixul, a consulting accelerator. It advises consultancy founders against diverting their attention to product development, as it can detract from their core service business and not significantly impact valuation. Instead, focusing on gaining vertical expertise in a specific industry is recommended, despite initial inexperience. A balanced lead generation strategy combining short-term and long-term tactics is crucial for immediate and sustained business growth. Additionally, the piece addresses the myth that reaching certain financial milestones solves all problems, advocating for embracing the entrepreneurial journey. The article concludes by summarizing the key advice and inviting readers to join a newsletter for ongoing insights into growing a consultancy.

Opinions

Building a product while running a consultancy is discouraged as it can dilute focus and resources, and the developed IP may not significantly affect the company's valuation.
Specialization in a specific industry, or vertical positioning, is advised for focused lead generation, reputation building, and operational efficiency, even if the founder lacks initial expertise.
A mix of short-term and long-term lead generation strategies is endorsed to ensure a steady flow of business while long-term strategies mature.
Entrepreneurs are cautioned that achieving financial success does not resolve all issues and that the goal of a CEO is continuous growth and enjoyment of the entrepreneurial process.
Embracing and enjoying the journey of building a consultancy is emphasized, likening it to a unique mountain climb experience that should be appreciated at each stage.

4 Tips on Running (and Growing) an Independent Consultancy

Expert advice from my advisors at Vixul

Building a consultancy is like climbing a mountain. You only go through each path once.

My favorite part of Vixul, a tech consulting accelerator I’m in, has been connecting with all the other founders in their network.

As a member, I get access to a directory of their alumni and advisors, and it has been relatively easy to get intros to anyone in the community.

They have all been incredibly generous with their time and advice, and I’ve learned so much from these meetings.

So today, I wanted to share the top 4 most memorable pieces of advice they’ve given me including:

Why consulting founders shouldn’t get distracted building products
How to gain vertical expertise in an industry
Their advice on my lead generation strategy
Whether “making it” as an entrepreneur solves all your problems or not (hint: it doesn’t)

Don’t Get Distracted Building Products

This advice has been unanimous across multiple advisors.

Although tempting, they all warned me to not get distracted trying to build a product while also building a consultancy.

Here’s why.

First, they said that they’ve seen many consultancies try to shift into becoming product companies, and it has never worked in their experience.

What happens is that building products siphons resources away from their successful services business that got them to where they are.

It splits their company’s attention, and requires a different culture to run a product company vs. a services business well. When they try to build a product themselves, both their services business and their product suffer.

Second, the IP that services companies develop tends to not affect valuations that much anyways.

In an article by Vixul co-founder Ali Hussain, he discussed the 10 factors that go into consulting valuations. The top 3 contributors that make up 70% of a consultancy’s valuations are:

Gross margins
Trailing 12-month revenues
EBITDA
and Year over Year growth rates.

And noticeably the IP a consultancy develops is not a major contributor to its valuation.

So if your consultancy ever takes off, make sure to stay focused on what got you there and not get tempted to build a product!

Vertical Expertise Takes Time

Another topic I’ve discussed with my advisors at Vixul was how to gain the expertise needed to vertically position a consultancy.

For context, vertical positioning means focusing on a specific industry, like the government or healthcare companies only.

Verticalizing helps you focus your lead generation efforts as you know which companies to target, build your reputation in an industry, and reduce your operations as you focus on solving the same problem over and over again.

However, the problem is that most consulting founders don’t have experience in the vertical that they want to specialize in.

Several advisors told me was that they also didn’t have vertical expertise before choosing a vertical.

They picked up the experience on the job through client engagements, reading, podcasts, and connecting with folks in the industry over LinkedIn.

And they encouraged me to lean in to specialization anyways because “you’d be surprised by how much expertise you can pick up in just one year of focus.”

So if you’re afraid that you lack the expertise to vertically position yourself, know that this is normal.

Even if you don’t know much about an industry now, trust that if you focus on gaining expertise in that industry, you too can become an expert quickly.

Their Advice on My Lead Generation Strategy

I talked to a few advisors on a lead generation strategy I’m planning for 2024 where my goal was to combine both short-term and long-term strategies together.

My thinking was that long-term strategies like SEO or newsletters are great but take time to kick-off.

So I need to mix that with some shorter-term strategies to fill the pipeline now while the longer-term strategies develop.

There was unanimous approval of this strategy, so this is something for you to keep in mind as well.

Make sure whatever lead generation strategy you have, that you aren’t too biased towards either short-term or long-term strategies.

Below are some examples of short and long-term strategies — so try to pick a few from each bucket as you grow your consultancy!

Make sure to have a good mix of lead generation channels from each bucket.

Does Making It as an Entrepreneur Solve All Your Problems?

Lastly, I asked if making it as an entrepreneur actually solves all your problems.

Clearly it doesn’t.

One advisor said that they thought they would’ve been elated if they just made it to the $250k mark.

Then they thought they’d make it if they hit $500k, and now they are well past the million mark, and the goal posts continue shifting.

More money, more problems…I guess.

They said that, “The job of a CEO is not to run the company but to grow it.”

So in that regard, they said that they can never be fully satisfied.

But they reminded me to embrace the journey.

They compared building a consultancy to climbing a mountain. As you climb, you will only ever go through a particular route once, so make sure to enjoy the journey as you go!

Final Thoughts

If you’re trying to build a consultancy, remember my advisors’ advice:

Don’t get distracted with product-building
A lack of experience when verticalizing is normal
Combine short-term and long-term lead generation strategies

And most importantly, enjoy the journey as you go! :)

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