Customer Development for a Consulting Practice in a Downturn

What follows are some real questions I have answered either face to face or in e-mail over the last 90 days in response to the current downturn in Silicon Valley.

Customer Development for a Consultants in a Downturn

Q: I just completed my first two years of consulting–which were spectacular–after 20+ years of full time work. But long term clients have just dropped me, and after a rather frantic couple months of chasing every lead I could, and exhausting my list, I am facing the imminent need to shut down my operation and go back to getting a job somewhere. What can I do?

A: One book you might read is “Rainmaking” by Ford Harding (an excerpt from page 22, emphasis added)

For your own business you must gain a feel for two variables. The first is the typical gestation period from the time you first make contact with a prospect to the time you actually sign him as a client. Depending upon your business this can range from a couple of months to over a year. The second variable is the typical conversion rate from prospect from client. This may have several subsidiary rates. […]

Understanding them will help you complete the following sentence, which underlies one of the key principles of marketing:

I need x prospects today to have a reasonable assurance that I will have a new client in y months.

Professionals do not often think enough about the implications of this sentence. They become focused on the pursuit of two or three hot prospects, and once these projects are either won or lost, find that they have too few others in the early stages of development to generate the business they will need in the months to come. This is one of the major causes of “porpoising,” the radical and repeated swing from too much work to too little that  so many organizations face. To avoid porpoising you must market and not just sell. To minimize porpoising you will need to generate a continuing flow of new leads.

Q: Is there anything that a professional organization offers in aiding members to get more leads?

A: One of the principles of lead flow is that you have to give to get. Professional communities are not a lead generation service. One of the key points in the “Creating a Consultancy Out of What You Practice” article Theresa referred to in “Two Professional Groups for Consultants” was this one:

Consultants often refer one another to clients they can’t satisfy. “Some get more jobs than they can handle or they get a job that’s not quite right for their expertise,” says Mr. Maclay. They may recommend you to a client, and you should reciprocate when it makes sense, he explains.

As you are out there “frantic..chasing every lead” carry others folks cards and website addresses with you so that even thought it’s not a fit for you it may be a good fit for someone else. I refer business to other consultants frequently. You have to see yourself as part of a larger system or community that will prosper together (or not). See also my “Networking in Silicon Valley” from July of 2007 where I observed:

One of the secrets to navigating Silicon Valley, is that it’s actually a very small place with many connections: some that can take a while to discover are nonetheless quite potent. That being said the single most important thing to avoid is wasting people’s time. Time is more scarce than capital, technology, or knowledge.

Q: I’ve read all the books and really don’t see the merits of all the standard tricks about having a sexy website, publishing a regular newsletter, teaching seminars, etc. I’m sure it’d all help, but it seems like foolish advise for someone starting out. If you don’t have a personal inside referral, or unless the market is so hot and they’re so desperate that they are Googling for you, all the rest is just noise that they’d rather do without.

A: A website, a regular newsletter, seminars are all good ideas for marketing your expertise.  They are not noise. Talk to folks who have been consulting  five or ten years not just two. If you don’t have a website you don’t exist. I apologize if this sounds too judgmental, it’s certainly challenging times, but establishing a consulting practice that can survive a full business cycle is not easy. It may take longer to succeed than you have runway, in which case finding a part time regular job may allow you to ease into it or a full time job may be more of a fit with your nature. Here are some rules of thumb we have tried to follow over the last five years at SKMurphy, Inc.

  1. Once you let one client get to be more than a third of your revenue, certainly if they are more than half, you may have inadvertently let them become your employer because you become afraid to tell them “No.”
  2. As a consultant your job security is your ability to get new work. You need to be continually marketing yourself to avoid “porpoising” or going deep on one or two clients and then going idle until you can find your next big client.
  3. It’s almost always easier to look for new clients when you have existing client work: it increases your confidence and improves your negotiating position.
  4. One good book on consulting is Gerald Weinberg’s “Secrets of Consulting” (he also blogs at ). He advises that in a week you spend two days doing work, two days marketing yourself, and one day getting better at what you do. If you are working on a product to complement your consulting you might modify that to three days doing work, 1 day marketing yourself, and one day developing your product. As work slacks off divide your time between additional marketing efforts and working on your product.

Update February 19, 2009: Ford Harding E-mailed me a reminder to link to his second addition of Rainmaking, called “Rainmaking Attracting New Clients No Matter What Your Field” which has 40% new material in preference to his older addition of “Rainmaking.” The page/quote cited in this blog post are from his first edition.

5 thoughts on “Customer Development for a Consulting Practice in a Downturn”

  1. Sean:

    Rain Making–2nd Edition—Attract New Clients No Matter What Your Field is just out this year and has fresh material not found in t he edition you cite.

    This post indirectly makes t he point that a sole practitioner will have a hard time billing more than half his time. Most people starting a firm don’t realize that. Good post.

    Ford Harding

  2. Good post Sean. I think too few consultants and sole practitioners understand how to create ongoing, effective lead generation and nurturing processes.

    As indicated by one of your questioners, the ideas of websites, newsletters, and seminars can seem disconnected and ineffectual unless they are viewed as pieces of a larger whole – a whole that is supported by effective lead management and follow-up practices.

    Those who do recognize this need often don’t know how. These processes must be automated if they’re going to last. As Ford notes in his comment, a sole practitioner can, at best, expect to bill 50% of her time. If follow-up and nurturing processes (on leads that may never convert) take up too much of the remaining 50% she’ll never stick with them.

    The tools are available now for small operators to do this, but the effort required to get the processes in place and “prime the pump” is still far from easy. Yet if sole practitioners and small shops are going to survive it’s imperative that they figure it out.

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