The Economics of Self-Employed Consultants Work


#1

A typical consultant has quite a predictable life [^1]. There is a customer that has a problem, and believes that the problem will go away after is dealt with once. Sometimes, it might be as simple as establishing a company QA department, reviewing the impact of a recent legislation on the company, or something as complex as adapting the company to the digital age.

The common trait of all those problems is that they are mostly in the uncharted space. Each of them is quite unique, and while some knowledge can be reused, with each iteration something new is uncovered.


Blue Rectangle - a place for a typical problem suitable for consulting. Orange one - problem solution in this space should be a subject to different types of agreement, as it looks like a standard part of providing value to customer customers.

If you look at the map above, you will notice that solving a problem is not a single user need. The nature of every contract is such that there must some mutual trust in place, and belief that both parties will do everything what is reasonably possible to achieve a positive output. That trust is not something that is established during problem solving, but before it.

Customer journey can be represented by a diagram below:
ConsultancyValue
The customer needs to get aware of the problem and of the consultant first, then he needs to be absolutely convinced that he can trust the consultant, and finally, the contract may happen. Naturally, the perspective of the consultant is a bit different. The user journey (funnel) of the customer consultant looks like this:

ConsultancyValue1

And if that journey is represented in a form of a map, we get:


Note flows. To solve a problem for a customer, you need to build a reputation, and for that you have to invest your own resources. After the first customer pays you, you may reuse that payment to get more customers. The important bit is that money flows f.e. to conferences in the reverse direction - you need to go to conferences to establish reputation, but it is not something the customer pays you for.

The most important aspect in this scenario, for me, is how much effort should be put into initiatives that do not bring money, such as f.e. tweeting, writing blog posts or speaking at conferences. That the value of those activities diminishes very fast. Tweeting now and then may be useful for increasing your (consultant) reach and awareness amongst potential customers, but tweeting too much may detract you from other goals. Your customer funnel may take f.e. this shape:

ConsultancyValue2
If you are a consultant, your day has only 24 hours. Focusing too much on one aspect means others are neglected, and the overall efficiency, the flow of money from contract is smaller.

Such analysis allows you to track value of your individual activities, at least theoretically. Doing less (or more) of a given activity has a measurable financial impact, and if you measure your time spent on the activity, you may be able to say exactly what value you are creating by f.e. being on Faceboook.

Said all of that, what I would like to attempt is to break down the funnel in better detail. My thoughts, currently, are that:

  • Social media are only for building awareness and familiarity. By being on social media, and by delivering valuable content, your exposure will be growing. BUT. You cannot flood your customers, because if they will think you are too familiar, they will mute/ignore you. There is only a limited presence you can manifest.
  • Conferences are useful in that sense that you have exclusive access to the lead attention, especially if they are already familiar with you. Which basically means that you should show a case study, and give your attendees something they could talk about in their environment (which builds familiarity and trust).
  • Controversial topics build familiarity but not trust, especially if expressed opinions are far from being commonly accepted.
  • The more intimate is the event, the easier it is to build trust with the customer, and the easier it is to figure out which skills might be expected in the future.

How do you deal with sharing your day amongst different activities? What are your thoughts on this subject?


[^1]: The life of a consultant is predictable in that sense that it is a series of unpredictable contracts.


#2

Love this, Chris!
First, love the map, helped me have a better landscape understanding. Thank you for that!

Sharing the day is definitely not pleasant. Conferences seem to bring most value, and giving a talk on a problem people encounter on a day-to-day basis or are about to encounter is bringing even more value. Workshops are quite important as well, where a small successful workshop can provide even more value than a case-study talk.

I also like how you didn’t go too deep on the matter of solving a problem - its just an activity. Which is great, helping us focus on the more important things. Though on the other hand, defining the evolution state of a problem might be more critical when defining the activities that matter to it. So solving a problem is an activity, which might be in the phase before the actual problem.

Also, there is one quite important element -> partners / fellow speakers. Don’t know how to define their term. But there is a huge chunk of building trust that comes from recommendations of partners that recommend us for work / other conferences / workshops.

Hope some of this feedback was useful!


#3

With automation and machine intelligence coming down the line, dedicating more time to personal development will become a crucial part of the economics of self-employment.

On the one hand, there is a need to embrace lifelong learning to become the norm rather than the exception. On the other hand, with technology evolving at such a rapid pace, there are the dangers of occupational burnout.

Getting the balance right between self-promotion and personal development will become an important skill too. For this to scale, we will probably need to seek out new ways of acquiring skills and updating existing skills. We will probably also need to find more economical ways of showcasing our skill set and capabilities as part of building trust with customers. For many, social media marketing and speaking or networking at conferences is either too expensive or too time-consuming.


#4

I trust consultants are exposed to a whole spectrum of problems, and I do not want to go into details of paid work here. What I am really interested in is how to value things that are a cost (such as speaking at conferences). Before those maps, I knew those things were important, but only after mapping them (and thinking about user needs in the first place), I got onto something that might, in the future, be transformed into a framework (or set of practices) to find the sweet spot of time allocation.

Spot on. Networking as a trust building activity. I definitely need to explore this a bit more!

It might be a chicken and egg problem, I do not know, I am trying to understand this. Everyone has a different environment, and I am sure there might be people for whom the marketing activities are not worth it, but I also think that some people may underestimate their importance. I am trying to figure out generic approach to the matter.


#5

I think that the wrong assumption here is that social media are only for building a trust. It might be actually a way to scale for consultant:

  1. Use automation tools to manage this presence (spend less time, get better reach to the users)
  2. Use social media to deliver content, which at the end will build a funnel to source customers
  3. Use social media to scale on some common/simpler service and build a user audience where you can target customers for more complex and customized services.

So for self-employed consultant social media are actually probably the best way to reach out to its prospect/potential customers (of course it might depend on the nature of services, probably in some areas it will not work in this way) and is not a wasted time but actually it is part of finding customers/delivering services cycle which generates more work and income and even sell services directly.


#6

Social media tools can automate publication and provide marketing insights in a sustained marketing campaign. However, the majority of time and cost will be spent manually generating useful and insightful content.

For engineers and designers, their GitHub profile could remove some of this burden and offer an effective alternative for building trust and reputation. For some, the best way to reach out to potential customers will be working in collaboration with others on open projects.


#7

@t.onyszko, @john.grant I think you are both right :slight_smile: .

@t.onyszko - I am not sure if it is possible to build reach and trust using 3rd party content. You can build audience, but will you become their go-to consultant? I agree about automation tools, yet @john.grant has a very valid point here - at least some important content has to be created by you, and that is expensive.

For developers and designers, yes, their portfolio can act as a reputation/skill indicator, so it would be important to keep one. But what about all the other self-employed people?


#8

I am not so sure on social media generating business to be honest, or maybe I am just rubbish at it. Most of the buyers I know have very little to do on Social Media (including Linked in that is becoming worse than Facebook). Twitter is like Marmite. Some will do it (very few) many others won’t read it. So I think that the most effective remains word of mouth / partnerships… and I don’t even get on to the difficult job of getting self on a supplier list of a corporate.

Back to the map.
I think that it would be interesting to map the decaying / commoditisation of knowledge of the said consultant.
Even better showing how knowledge / practices / methods tends to commodotise. While skills can build up from experience until a new paradigm comes along (currently switching from Traditional Management to new Systemic Management).

I also think that in a more Complex world, skills matter more than methods, because you need to be able to decide what best course of action based on the context.
Unfortunately the world (especially Agile) has confused Skills with Methods, which leads to commodity rather than ability to operate in complexity.