How to Define Your Business Model as a Consultant
Your business model can be the difference between working crazy hours and making very little money and making great money in an efficient and scalable way. Last week, I covered key business models for coaches – this week I look at business models for consultants. Here I demonstrate how you can take your skills from a corporate job and make money as a consultant.
As a consultant (aka strategist or expert), you offer advice and recommendations to solve a particular problem for your clients. Unlike coaching – where clients gain insights into their desires, beliefs and behaviour and come up with their own solutions – a consultant gets paid for their opinion, based on their analysis and expertise.
Making the transition from being an internal or external consultant as an employee to your own business as a consultant can give you the freedom to be your own boss, use your skills with a variety of different clients and choose who you want to work with. It is a great way to monetise your existing skills gained in corporate.
You can decide whether you want to work with individuals (e.g. an image or design consultant), small and medium sized business owners or corporate clients (depending on what lights you up and how close you want to stay to the corporate world). Currently there is a big influx of ex-corporate marketing strategists selling their services to entrepreneurs, giving them the freedom to create a brand and tone of voice that is more personal than what is valued in the corporate culture.
At the same time, if you don’t have the right business model, and you aren’t willing to sell and market yourself, you may end up not making enough money to cover your expenses. Here are some of the common business models for consultants and their pros and cons to get you started.
BUSINESS MODELS FOR CONSULTANTS
Fee for service models
If you have a client where you are working for weeks or months at a time, and you are charging (as you should) a premium above the salary hourly rate, this business model can work. For example, if you were making $100K previously as an employee (approx. $50 per hour) and you charge $100 per hour, you need to work 20 billable hours per week to replace your salary.
The higher rate takes into account that you no longer have benefits such as a pension or health care and you need to spend up to 50% of your time selling and marketing your services (unpaid). And the client has the benefit of flexibility in deploying you.
If, however, work is less regular and you have more clients, you will need to spend more time selling and marketing yourself and you may end up not getting enough billable hours to make the money you desire.
Preferable over an hourly rate, a day rate helps you work in ½ day or 1 day chunks, to prevent you from short appointments that fragment your schedule, increase travel time etc.
This allows you to price based on what it will take to achieve a particular outcome. You can factor in for assessment and design time, client meetings, thinking time and other activities required. Clients often prefer this because they have a set budget.
Make sure you specify what your assumptions are in your pricing so that if the scope increases, you have the opportunity to negotiate an extended proposal.
By getting clients to pay for your services over a monthly basis, you still get paid even if they don’t use the full amount, which gives you greater predictability in your hours and income. You are being paid for your availability, rather than just the service rendered.
You sell a fixed ‘product’ such as an assessment tool or package to solve a particular problem, to complement your services or offer a lower price point.
You design a program and charge a royalty fee for a client or partner to use your IP. This could include slide packs, implementation guides, check lists, templates etc. You can offer this to partners who sell it on to their clients, or direct to clients to utilise internally in their organisations.
The plus side is that you receive revenue for IP you have already developed so it gives you scale and passive income. The downside is that it increases the cost of the service, so you’ll need to make sure that your partners don’t rule it out on the basis of margins or that your clients (or the clients of your partners) are willing to pay a premium for it.
You offer resources or content online for free with limited access, and then subscribers or members pay a premium to access premium content or special benefits. This is a great way of providing passive income.
Another option is designing software that can be used to complement your consulting services, for example an online assessments portal or project management software to implement your program. You can sell this on a subscription or flat fee basis.
For example, you publish an ebook or book. While self publishing gives the opportunity for higher margins than through a publishing company, generally books are not a high revenue generator (unless you are a best seller) and are most helpful for building your brand and establishing yourself as an expert.
Now that you have an overview of the different business models, ask yourself:
- Which business models appeal to your the most and why?
- What do you see yourself enjoying the most?
- What fits best with your existing skills and talents?
- Which business model is easiest for you to implement right away?
- Which business models could you adopt in the medium term/long term?
- If you could split between the various business models, what would be your ideal split to work towards and why? E.g. 50% one on one/50% group / ecourses etc.
If you don’t have experience in the business model you have chosen, find a mentor or peer with experience and find out how you can maximise your success in that area.
If you are still in a job or in the early stages of shaping your business idea, my ebook can help you explore how you can make money out of your existing skills and talents and plan your exit strategy. Download your copy at www.louisetaylorcoaching.com/ebook.
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