Good At Consulting: Chapter 1
Good At Consulting: Chapter 1
What Is Consulting? A superior business model.
Explainer
I am writing a new book. It should be done very soon.
As an experiment, I am going to be publishing chapters (as they are edited & ready for publishing) here on the site. When it is complete, you will have all chapters hosted online and I will likely leave it here for free consumption.
Some links may be inactive until the final chapter is written.
Chapter 1: What Is Consulting?
“Knowledge is a store of factual information. If you have enough knowledge you can make correct decisions. Instinct is a store of personal experiences. Instincts can help you make good decisions when you don’t have the knowledge you need. The accumulation of experience takes time and risk. Wisdom is the ability to collect whatever useful knowledge you can before making a decision and sometimes taking risks to expose yourself to experiences that can teach you more.” - Michael Masterson
In this chapter I’ll show you why consulting really is (almost always) a superior business model IF your goals include: more profit, less effort, and more sufficient protection over your financial future.
Consulting has been around for a really long time.
The dictionary definition of the word “consulting” is as follows: the business of giving expert advice to other professionals, typically in financial and business matters. The definition of “wealthy” is as follows: having a great deal of money; resources; or assets; rich.
We want both… the definition of a “wealthy consultant,” therefore, is someone who gives expert advise to other people (sub out professionals) and who also happens to have a great deal of money. Sounds pretty good so far, right?
Of course, you can engineer all of this by having a good plan to follow.
The first consultant, I think ever, was born almost 3,500 years ago. He was very wise and very skilled orator. Legend has it, the Queen of Sheba, in 950 or so B.C. heard about this man named Solomon and had to talk to him. But he didn’t talk to people for “free.” He charged a pretty penny.
So she paid $185M in gold and another ~9-figures in other goods (spices, jewels, etc) to get an audience with the King. And in return? She got to ask him questions and he sat and answered them.
Now this is just the first example that is written, there may have been more. Since then, there has been a constantly growing market of people willing to pay currency to receive instruction, guidance, wisdom, and otherwise “absorb” the lessons of others. This is one of the coolest things in the world, if you think about it.
Humans have the great gift of CHOICE:
To learn from our own trial & error
To learn from someone else’s
The choice we get to make is to choose the currency we pay in, in exchange for the lessons: “time” or in “money.” Simply having the choice is a great benefit that is worth frequent observation. I for one am grateful I was able to go from obscure and poor, in 2013, to outrageously successful (and relatively happy) in a period of years not decades — largely due to the support of other coaches & consultants who gave me guidance.
Consulting is a good model even if only for humanitarian reasons. You will struggle to find models that can compare on a transformational level. But I’m guessing you’re not reading this book because you want to become a missionary. And that’s okay. You want to make money.
One time, my friend Rich Schefren sent me a small report to read through (which I read quickly, upon receipt; if Rich ever sends you something, you sit down and read it as soon as you can find a highlighter). In the first paragraph I read a paragraph that made me so excited I had to write it down and think about it.
Credit where credit’s due, this was from an editorial handbook for Stansbury Research:
“Many years ago, the dean of investment newsletters, Richard Russell wrote a legendary essay titled “The Perfect Business.” In this essay, Russell described the 12 qualities of the “perfect business.”
According to Russell (and most any entrepreneur), anyone looking to build, buy or work in the ideal business should look for a business with as many of the following qualities as possible.
It is able to sell to the world
It offers products or services that can be copyrighted or patented
It offers products that enjoy inelastic demand
It involves low labor requirements
It requires minimal start up investment
It is portable
It enjoys cash billings
It leaves you with free time
It provides intellectual stimulation
It is free of heavy government regulation
It has low overhead
It is not limited by your personal time input
Consulting checks off 100% of the boxes (pending you are in the right market). I’ll go through the list one by one, and explain how each one fits into consulting as a business model.
It Is Portable
You can run your consulting business from literally anywhere in the world. You do not need to check into any place or be anywhere at any particular time (unless you’ve set your own appointment).
It Leaves You With Free Time
If you set up the right frameworks, many of which you’ll learn about in this book, you will enjoy unmatched, incredible time flexibility. Right now, I run my consultancy in 10 or 15 hours a week. Sometimes I’ve put in more time because I love it and want to. But when you set your firm up using our principles and frameworks, it’s not going to all come crashing down if you step out for a week (or a month).
It Can Be Protected (Patent & Copyright)
A great consulting (or coaching) offer, built for the right market, can be protected. You can patent certain phrases or trademarks. You can patent certain pieces of intellectual property.
It Provides Inelasticity
If you build your offers for the right “subset” of the population, you can enjoy what Russell calls “inelasticity.” That means it will sell well in a good economy and a bad economy, because people will figure out how to pay for it.
It Involves Low Labor Requirements
In the chapter about creating a perfect consulting offer, we’ll discuss how to build your tangible and intangible offers to enjoy “leverage.” If something has high leverage, it requires low labor. If something is low leverage, it will require more labor. The first noticeable difference between a “consulting” offer and an “agency” (or services) offer, is the leverage. With agency offers, you’re doing a lot of work to “pay off” the liability of someone giving you money in exchange for a deliverable.
If someone gives you $10,000 and they are expecting a piece of work or service completed, you have a deliverable on your balance sheet that must be paid back as a liability. I’m not talking about a real balance sheet here, I’m talking about time debt and the accrual of labor liabilities if you are not careful.
If you don’t fulfill the deliverable then you have to pay back the fee and get that deliverable off your liabilities sheet. With consulting, people are paying you for your experience, your information, or your guidance. The expected deliverable is going to change based on your market and your experience, but our model will make sure the “liability” on your end is as small as possible with as little time-debt as possible. This creates high leverage and low labor requisites.
It Is Low Overhead
Another perk is the profitability. A great consulting business will spin off some of the most stunning margins you have ever seen. There are problems with this, though. When your start to experience the profits, and you begin to feel it, the temptation will be to buy new stuff. I will take the opportunity right here, right now to caution you against that. I have a method for increasing your lifestyle slowly, while replacing your active income with passive income assets.
It doesn’t matter how profitable your business is, when you’re burning more personally than your business can keep up with. Right now it might seem like a no-brainer. You might be thinking, “Of course I would never do this.” But you do not know because you likely haven’t experienced the kind of speedy results I’m referencing here.
Tuck the nugget away, remember it for a later day. We have clients who are collecting $100,000 to $500,000 in monthly fees, with small 2-3 person staffs.
I’ve personally owned 6 different consulting firms in the last 8 years and built a few thousand extras for clients. Of the 8 firms I’ve personally owned and operated, the average profit percentage has maintained as whopping 55%. That is ridiculously high and that is after backing out all staff, all cost of goods sold, all advertising, and everything else that is required to run the business.
The current consulting firm (that is publishing this book) operates at a 70% profit margin. The better you get, the higher the number will become.
It Allows for Cash Billings
Another benefit is the amortization of the fees. I’ll never forget the first time I tried to get a line of credit from a bank. We had banked with this particular branch for many years, and we had plenty of cash in the bank (multiple 7-figures). They wanted an “aging report.” I said, “What is an aging report?” They needed to see receivables and how much cash was owed to us but not yet received.
I was billing about $10 million per year through this firm and I told them the receivables amount: less than $10k. They said “How is that possible?” Well, again, depending on how you have the business set up, consulting can handle cash billings, which mean as you’re getting paid in cash and mostly up front.
Your payment terms can (and should) be set up to collect a majority of your fees up front, before the work begins. The value of a thing is fully maximized just before the thing is “delivered.” It is in your best interested to charge up front or at least a collect a portion up front before commencing work.
It Requires Low Start Up Investment
What about start up investment? This is a big one. In 2019 I decided to get back into real estate because that’s where I learned business. You can and should watch this short video to view my actual story (including all the embarrassing failures):
We were moderately successful, building up a nice portfolio of assets in the $30-35M range. However, the problem I began to have with the model were the costs. The fixed costs were horrible. The start up costs were even worse.
To get started in most businesses, you need a nice chunk of capital to “bankroll” the project until it’s becomes sustainable. A franchise requires a franchise fee and then you must pay for the people, the leases, the supplies & the product. Here’s the cool part about consulting: you usually need a small fraction of the startup costs that most business models require.
My very first consulting client, in 2015, paid me $3,500 and I didn’t have any costs associated with that deal. No business cards. No offices. Not even a website. Do not rush off buying things you believe you need without consulting us on what you actually need, first. We are all about the fastest (and safest) path straight to the money. A properly constructed consulting business using our materials often funds itself. No outside funding required.
Most of a businesses startup costs will waste your time & money and pay you nothing in return. We have a sizeable group of clients who’ve surpassed an effortless 6-figures annually before even building a website. I’m not saying you will do this, because I do not know you. I’m saying we have clients who have done this and it’s worth considering or examining.
It Is Intellectually Stimulating
If you enjoy the world you do with the people you serve, it will stimulate you in ways that encourage ongoing mastery. This is something most take for granted. You should not do that. When you do things just for the money, you’ll eventually burn out and become exhausted. When you do things that provide mental, emotional, and other “psychic” benefits — the money becomes just a byproduct (albeit a necessary one) but not the main reason you wake up and work.
A few weeks ago I sat in a room at a small client event here in Nashville. We were building out their non-paid, community-based client acquisition systems. Each client left the room with a guaranteed system for 2-3 clients per month, in perpetuity. This system will last a long time for them. It will not need constant updating… it just runs on a core set of principles that require about 20 minutes a day to execute. Talk about an asset. Talk about a wise use of time! But what I realized, while in the room, is how fun this is… for me.
It is intellectually stimulating in a way that makes me want to be the absolute best who has ever lived.
It Is Not Limited to Your Personal Time Input
Lastly, the “time input” can be separated from the business output. Our organization trains consultants & coaches, but we do not do it via traditional methods. In fact, we are so different in how we construct consulting models that people sometimes have to re-learn what consulting even is before they can begin making headway.
Traditionally, consultants and coaches tie themselves to their product. This locks them into the process. There’s nothing wrong with that, especially in the beginning. However as your model evolves and your brand grows larger, it becomes increasingly important to break the connection between “time” and “outcome.” Our average client has their system turned on and producing ~33 days after becoming a client…
The average amount of time from me, personally, for that to happen? …About 28 minutes. Catch this and don’t miss it: if I were stubbornly addicted to being personally involved in EVERY moment of a client’s first traunch of work — the average ~33 days would turn into 75-90 days. If your work is GOOD, and you’re set up on the frameworks that we will lightly teach on today, it is in your client’s best interested that you do not bottleneck them by needing to be involved in every step of the way.
Notice how this knocks out two birds with one stone:
It breaks the “time” to “outcome” connection
It improves the delight & bliss your clients experience as they progress
All in all, consulting is such a beautiful thing. It is versatile & adaptable to any style of life you want to have, any level of income you desire, and any timeline you need to meet to get there. In the next chapter we’re going to delineate between the kinds of products we build for clients and how you can organize your business accordingly.
Three Pronged Assessment
Over the years as I pioneered into new verticals and new industries, I noticed myself having to constantly “prove” to people that consulting was a viable form of long-lasting business. There are absolutely massive consulting companies (Boston Consulting Group does somewhere north of $11 BILLION in revenues) but our style of consulting is a bit different.
We’re not going after huge, corporate client contracts. We’re going after the everyday man or women, helping them get results in an area of life that they desperately crave. There are three practical reasons consulting is a great model for you to explore. And these three reasons form a bit of a blueprint you should use for exploring any business model (whether you’re buying a business, creating a business to sell, or just wanting to create your own side income doing something you’re passionate about):
Effort: how much work, time, etcetera does it take to operate?
Profit: once running, how efficient is monetization of the business?
Durability: how easy or hard is it to be disrupted by competitors, economic recessions, etcetera?
We can use these three criteria when switching from one business model to another, as well. For instance: if you’re a doctor who wants to use your expertise in a new way without being on call every weekend, you can do that. The effort required to replicate $400k to $1M per year of income is likely a 5 on a scale of 1-10 (the scale here coming from the amount of effort a doctor must go through to complete schooling and create a successful career in the industry).
The profitability is going to be much higher than most other styles or types of business because people will be paying you directly to consult with them. And the durability is almost as high as a hospital — in short, people are always going to need you (or at the very least want you).
Let’s say you’re an agency owner who’s wanting to decrease the amount of labor involved in client results and make more money while doing it. Great! Your effort will go from a 9 to a 3 or 4; your profit will likely go from a 3 to a 8 or a 9; your durability will stay relatively stable due to the versatile nature of advertising in general.
One more example then we’ll move on, this one hits close to home. My dad was a VP of sales at Allstate for the longest time. Great income, but not the culture he was interested in fostering with his colleagues. They constantly & chronically cut the incomes of their employees and made it more and more difficult to earn the same money as last year by changing the goal posts.
His true passion?
Fatherhood, leadership, and creating wealth through real estate. A simple shift, and one career is exited for a successful venture into another. Once you get the mechanics down, which is what this book is for, you are in for a world filled to the brim with opportunities to pursue.
Let’s briefly talk about effort before we move on. First, a few definitions:
Leverage comes in two forms: operational & financial
Financial leverage results in getting things you did not pay for; Operational leverage results in getting things you did not work for
It is perfectly okay for a career path to hold healthy challenges. A lot of clients I’ve worked with over the years, after their initial leaps forward, came to me with heavy hearts, complaining that they were “burned out” and “exhausted.”
After the 9th or 10th time I remember thinking, “My goodness, what is wrong with these people! They start making more money and then complain about working ‘too hard’ for it. Would they rather be poor?”
Of course, I did not say this to them, but I thought it. And then I started studying. Finally I had a hypothesis to test, and I patiently waited for the next soul to reach out, complaining of their “burnout.” It happened one summer in August… I texted back to the client: “Call me when you can.”
They called, and I walked out to my car. And I said “Look, you’re not burned out. YOU ARE BORED.” They sat in silence… I think they were stunned. Then they said “Holy cow. I think you are right.” The key was two fold:
Get more vision (boredom comes most often when you’ve accomplished all there is to accomplish; when there is no worthy challenge left to tackle)
Create more clarity (you don’t ‘find’ clarity, you create it; boredom AND burnout both can happen when you have a vision but have no clarity around how to pursue it)
What’s this got to do with leverage? Simple: our frameworks, our processes, our curriculum & our teaching will constantly reinforce the idea of operational & financial leverage. But you must be careful. Too much leverage will leave you bored… which is just as bad as burnout.
The key is to never fully remove yourself from your firm until you are ready for stage 4 in the stages of wealth (which we’ll cover in chapter 8). If you leverage yourself fully out of your business before stage 4, you’re going to call me, crying, confused about your existence, wondering why the world still exists and you’re still in it.
Don’t do that.
Stay in sequence.
Let’s dive into specific consulting models next.
P.S. You’re reading the online version of what will become my new book on Consulting. If you’re a serious go-getter and want behind the scenes access to how to build, grow, and enjoy a profitable consulting business — you’ve got to check out my monthly training memo here.
Use the code “BOOKMEMO” to bring the price down since you’re reading the book.
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