Home > All About ME, Building Business Relationships, higher education, Sales and Marketing in 2010 > Consultants; Why Some Make it…and some CRASH

Consultants; Why Some Make it…and some CRASH


When I stopped working FT a few months ago, I wasn’t sure what direction I was going. Three schools of thought: 1) Start my own company. 2) Be a consultant 3) Get another job.

I knew I didn’t want another FT job (at least not right away) as I’m a ‘start up ‘ junkie. I like to build businesses, departments, strategies, and ideas…and then take from conception to “LIVE”; and make them profitable. So that left me with either my own business or consulting. I realized, the two did not need be mutually exclusive. So, while building a business plan, I’ve been consulting and contracting. As higher education, specifically online higher education, is an incestuous industry; as soon as word got out, the phone calls and requests came in. It seemed that this would be easier than I thought – at first.

I quickly realized that to be successful in consulting, to be referred, and to work with numerous clients, it would take a lot more than a great past track record. It would take patience (something I don’t have much of), discipline to NOT take every job offered, and more so, this was yet another great experience where I was learning to ‘check my ego at the door’. In return, and the reason I love consulting, I was learning just as much from clients as they were learning from me. I quickly took the revenue driving sales and marketing strategies I had employed in higher ed and took them across numerous verticals.

So, why do some consultants make it? Why are there some of us that get repeat business while others may spend weeks or months marketing themselves and get nothing? Very simple answer: PAY PER PERFORMANCE CONSULTING.

So how does that work? Well, it depends on what you’re consulting on. However – there is one thing we can agree on: companies would rather YOU take the risk than them. We can also agree that if a consultant came to me and said, “I’m so confident in the strategy I lay out for you that you only have to pay me if I execute on it and execute well enough to hit the revenue goals you have set forth”. Why would a company EVER say NO? I know I wouldn’t. There are, however, many of us, that do need that “month to month” paycheck. You can look at this in 2 ways: 1) You can map out your beginning projects as if you are in a start up company. So, you map out your consulting KNOWING you will be “in the red” for 3 months; or until your projects start ‘making you money’. Who better to make an investment in than yourself? 2) You can charge a ‘small’ up front fee…maybe “min. wage” per hour…and get most of your money on the back end while still having money to live on the front end. Every project or consulting assignment is different, however by being paid on performance, you are not only showing your confidence, you are also ensuring yourself you will not take on anything you cannot handle OR if you do choose to take on something you cannot handle, you will make certain that you partner up with one of the best in the industry to learn.

It’s very simple in sales / marketing to set goals and only be paid if the goals are obtained, but what about other industries that have a large number of consultants or companies vying for the same business. Broken down below are 5 areas where I see a lot of consulting and how you can structure your pay on a performance basis.

1. Web Design / Development
– May be held accountable for a) web stats b) number of sales on site c) stickiness of site

2. Free lance copyrighting
– May be held accountable for a) Amount of time user spends on page b) Drop off rate c) CTR

3. Career Coaching
– May be held accountable to getting someone the job they can succeed and prosper in

4. SEO mapping / content development
– May be held accountable to page rank in “x” amount of time

I know there are many more, but these are ones I see the most often on the networks that I am on. As with anything else; if you need work, you need to take some risk. If you’re good, you’ll be rewarded. Consulting models such as this are good ol’ capitalism at its finest.

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  1. Michael Dvorscak
    April 19, 2010 at 11:59 am

    While your post is interesting, it does not explain what variables are critical for a successful consulting practice. Instead it provides a potential consulting model or framework.

    While pay for performance is an ideal. It is often not feasible. It also assumes that performance can be measured and agreed upon.

    Also, there is the possibility of intervening variables further confounding the cause of performance. In many cases it is fairly difficult to isolate the causal variables. In this case a performance or training intervention from other factors.

    Regards.

  2. April 19, 2010 at 12:09 pm

    Thank you Michael; great point that it does not explain the variables, I will add that into my next post and you are right; this title should probably be something like, “Consulting Financial Model to Attract More Clients”. Obviously not that ‘exactly’, but something along those lines.

    A couple of questions so I can better understand where you’re coming from: 1) Why would pay for performance not be feasible? Yes, it always assumes something can be measured and agreed upon; however what type of ‘business’ project is not measured OR at least have something one can be held accountable for? I’m going through each of my prior business units and trying to come up with an area that isn’t driven by either accountability or measurements. I know there are probably hundreds of them (I’m blanking), but in going through my past orgs, here is what I’m coming up with:

    1. Training – measurable
    2. Ops / Processes / Projects – all measurable
    3. Sales / Marketing – Measureable
    4. HR – Measurable
    5. Analytics – measurable

    Even when I go into a VC company to hold a due diligence study, if the VC purchases, I can be held accountable for that purchase.

    As I’m writing this down, I realized mid thought that perhaps this post (and my previous organizations / experience) are all in businesses that are driven by sales and marketing. There are likely hundreds of other businesses out there where consultants work that are not and I think this is where you can help me understand better and I always love to learn about different businesses / industries that I haven’t worked in before, so please teach me ( ;

    That being said, I’m writing this blog from personal experience, right? I am in 100% agreement with you that there are extraneous variables, but I believe the more experience you have, the more you can account for those variables and put them into your contract with the company.

    Thank you for your solid points. Much appreciated and thought provoking.

    • Michael Dvorscak
      April 21, 2010 at 4:08 pm

      Thanks for the response. As you know, even the simplest organization can be complex. Although, I will concede some middle ground, I am going to maintain my position on this issue. The problem is intervening variables.
      Let us suppose that A, our independent variable, our intervention is designed to cause a specific outcome. Therefore, “A” will cause “D.” D represents the dependent variable. A is representative of an intervention, be it training or non-training. For example in a “sales situation,” it could be training; it could be the implementation of an incentive program, a job performance aid, etc. D, the outcome of A, could be an increase in sales, margin—whatever.
      A (independent variable) causes D (dependent variable). However, there are two letters between A and D. Those two letters are “B” and “C,” which represent intervening variables. B, C, or both variables could be the cause of outcome D. For example, B could be the poaching of several seasoned sales professionals from rival companies. C could be the implementation of new technology, a change in market conditions, the roll out and demand for new a product, or the decline of an existing competitor.
      So, is D the result of A (the consultant’s intervention), B, or D? Given the complexity of organizations, how does the consultant isolate A to show that it was the cause of D. To be fair, an example was constructed to illustrate my point. I stand by this example. However, it is likely that counter examples can be constructed to bolster your argument.
      For example, pay-for-performance consulting MAY apply in the following situations:
      1. When the consultant is very very familiar with the industry
      2. When the intervention is producing reliable results
      3. Possibly in some cases where the intervention is the computer software
      4. When theory shows overwhelming support for the effectiveness of the intervention.
      In other words, it depends on the situation. Now to talk about measuring training!!! I took a course (last semester) solely on measuring and evaluating interventions, both training and non-training. I would be careful or at least qualify “measuring training.”
      Regards.

      • April 21, 2010 at 4:39 pm

        Thank you Michael, for continuing to make me think. While I see the logical side of your arguments and they all make sense; I’m left with one question…Why is it always the same consultants that attain the most success? Are you insinuating that these consultants don’t have the same intervening variables as everyone else? I would argue that they have learned to work around OR work with the intervening variables (to your point above) which comes from experience.

  3. April 20, 2010 at 3:06 pm

    My consulting ideas are in the broadcast arena. So a good idea would be worth 5 to 6 figures. Because the payout is higher, this kind of consulting requires the consultant have an agent, who in exchange for their ability to connect the consultant to the specific company gets a percentage of the job.

  4. April 20, 2010 at 3:11 pm

    I have no problem with pay per performance. However, once an accepted but unpaid idea is used it could lead to under the table offers to the agent for future work in exchange for accepting a smaller fee for the unpaid idea. That is one problem with pay per performance that can occur if the agent and the consultant are not solidly together.

    • April 20, 2010 at 3:59 pm

      Alex, I agree. Like any business, there is going to be ‘risk’ the parties take; and more so in a pay per performance model. I don’t know your industry well, so I cannot speak to it, but am enjoying learning. Thank you.

  5. Michael Dvorscak
    April 24, 2010 at 7:41 am

    I guess, I don’t know what attributes make-up a successful consulting practice or firm. Of course, I am compelled to ask the obvious question. What does “successful” look like? In practice, there are many possible reasons why a firm is successful. Intuitively, I would guess, that it has many of the same attributes as other professional firms (law, medicine, accountants, etc.).

    The notion of sidestepping or just working around intervening variables is concerning. This is especially the case if we consider ethics in our definition of “success” and consider the professionalization standards and expectations of other firms. We both know that in practices and despite definitions, the idea of ethics and professionalism often takes a holiday. Although, a different argument, I will say it is a good business practice—in my opinion.

    One possibility would be to design the intervention (website redesign, customer service training, and job aid, whatever…) with the idea of measuring and evaluation in mind. If I were consulting based on the performance of my interventions, I would use a modified Kirkpatrick Model (2-4) and a Return on Investment (ROI). I will leave you to find this information if you are not already familiar with it. Jack Philips (and probably others) offers ways to isolate the intervention and show a correlation between the independent (intervention) and the dependent variable (outcome). At the end of the day, to some degree all work is performance based.

    Michael

  6. May 9, 2010 at 7:09 pm

    Even Deming said, “The most important numbers in a business are unknown and unknowable.” Businesses are notorious for axing important programs where the cost was very visible and quantifiable but the benefit was not readily quantifiable. For example, training may be quantifiable but education is not. Those of us who do work which is fundamentally transformational, the outcomes are difficult to predict because 1) the client cannot really grasp the end from the beginning. it will only be in retrospect that he/she will appreciate the changes and 2) there are many players involved in the process over which the consultant has no control. this kind of work doesn’t lend itself to pay for performance.

    The hard reality is that much of what the consulting industry does is put bandaids on systemic diseases that management has no real interest in or commitment to addressing as well as being pawns in the client’s career chess game. that’s the easiest kind of business to sell and build a practice around, but not very satisfying in the long run.

    • May 10, 2010 at 10:16 am

      I agree with most of what you said with the exception of one statement, “The hard reality is that much of what the consulting industry does is put bandaids on systemic diseases that management has no real interest in or commitment to addressing as well as being pawns in the client’s career chess game. that’s the easiest kind of business to sell and build a practice around, but not very satisfying in the long run.”

      I believe this differentiates based on the individual as well as the deal struck. Example; while I get paid on performance, I typically get paid on the OI over “X” amount of time (usually a couple years). In the online marketing / sales world, 2 years is considered a ‘long run’.

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