In my last post on consulting, Isn’t Consulting Risky?, I contended that in many respects, when done with sufficient forethought and planning, consulting may be even less risky than a traditional full-time job. I know that sounds counter intuitive and I hope to elaborate and clarify that a bit in this post. But before I do, if you haven’t read the prior post, I’d encourage you to do so; it really lays the groundwork for how consulting affords you the ability to mitigate risks.
Diversity Is Good
With few exceptions, diversity is widely acknowledged to be a good trait in most cases. Ecosystems with a wide range of plants and animals tend to do better and be more resilient in the long term than large monoculture farms or environments. The same is true for retirement accounts; financial advisors recommend a diversified portfolio because it tends to outperform, on average, an account with just a few stocks or bonds. And in business, a well functioning team composed of people from many different backgrounds usually provides much a greater insight and a broader perspective that produces better results than a very homogeneously composed team. Simply put, diversity is good.
And what’s true for nature, finance, and management teams is true for your consulting business, too. A consulting practice with multiple clients and sources of revenue tends to weather economic storms better than those businesses whose sole focus is one client or one type of revenue.
Diversity Doesn’t Just Happen
Diversity usually doesn’t just happen. It’s not something that tends to naturally occur in businesses. Diversity must be planned. It must be intentional. And it must be nurtured.
Left alone, businesses naturally tend to gravitate toward those one or two things where success is found. It’s the path of least resistance. But as renowned management consultant and author Tom Peters once quipped “Success begets failure.” His point is that when we succeed in one area, we tend to stop innovating and begin to try to reproduce that success over and over again.
I think the same can be said for consulting. When we find a niche that works, we tend stay in that niche and ignore other opportunities. And I think we do this at great risk to the longevity of our business. But what happens when that niche is no longer a safe and sure bet? There are plenty of examples; all you have to do is look for them.
A Risky Business
Think back a few years when technical training companies were thriving. There were scores of them in every major market in the U.S. They were offering training to IT Professionals and to Career Changers. It was a great time to be a Microsoft Certified Trainer (MCT). MCT’s were in high demand. Basic economics teaches us that high demand plus low supply equals high prices. Many consultants became MCTs and focused their business exclusively on the highly profitable training business.
Unfortunately, the economic phenomenon known as the dot-com bubble burst. Many training companies went belly up as the demand for training evaporated. And those MCTs that were bringing in the big bucks all of a sudden found themselves to be a commodity as their colleagues where willing to take less and less for their services.
A similar story can be told about all of the COBAL programmers in the lead up to the Y2K. And there are other examples.
So this begs the question, “How can I, being a sole practitioner, add diversity to my consulting practice?”
How Can I Diversify?
Fortunately, diversifying your consulting practice can be done without taking a huge departure from your core business. Diversifying involves looking at your core business from different perspectives and identifying areas where you can implement relatively minor changes to your approach or offerings to broaden your surface area. That way if any one aspect of your business is adversely affected for whatever reason, there are other areas already in place to help you absorb the impact.
Consider some of the following ways to diversify your consulting practice.
- Work with Multiple Clients. Many consultants work with one client at a time. And that’s fine. However, juggling multiple clients simultaneously provides you with a buffer should any one client default on their invoices, unexpectedly cancel your agreement, or otherwise give you the old heave-ho with little advanced notice.
- Vary the Types of Projects. Establishing good and long term relationships with a handful of clients and mixing in a string of new, shorter term projects or engagements from new or former clients allows you to maintain a good mix of projects. Some may want you to come in and diagnose a performance problem, others may want you to provide ongoing support and/or maintenance of their systems, while still others may have a long list of things for you to do when you have the time.
- Offer Complementary Services. Consider broadening your offerings to include technical training, development, mentoring, and technical auditing. These give clients different ways to leverage your core competencies.
Now it’s your turn.
- Do you agree with the premise of diversifying your consulting practice?
- In what ways have you mitigated some of the risks associated with consulting?
- How have you broadened the offerings of your consulting practice?