The Need for Human Psychology in Business Consultancy
The classic approach to business consultancy goes like this:
Gaining a new consultancy project
Business owner describes what s/he needs to achieve, admitting the inability to do so alone.
Consultant asks many questions, endeavouring to understand the state of the business today and reaching a definition of the state in which the owner wishes it to be when an assumed project has been completed.
Consultant then tries to define the budget that the owner has in mind to work out how thorough a job will be possible, whilst the owner resists naming a figure for fear it would have been cheaper otherwise. Ultimately, the two reach a ballpark figure like “OK so you reckon you can get me to this xyz position for £K?”
“Yes” says the consultant, “provided that we can agree xxxx” making conditions that will give an escape route if things prove to be more difficult once inside. Typically, this will be around two or three stage payments each of which is a potential break point.
This is a sparring process during which the consultant is trying to get enough information out of the owner to assess the potential project and budget whilst the owner is testing the consultant to see whether s/he is clever enough to be trusted with the work.
The consultant must give enough ideas to prove his /her skills but not so much that the owner then sees how to solve the problem without engaging the consultant.
This is a deeply psychological process which runs counter to the way in which accountants work with business owners where the need for compliance work is clear and the accountant can spell out the service menu for delivering it, with the authority of a qualified expert.
But for a consultant the sales transaction is a far more complex and uncertain affair, requiring a personality profile very different to that of the classic accountant.
That is why the accountants we train in consultancy skills spend more than half the time practising relationship development. They learn how to engage with any personality type, extract key information from them subtly using sophisticated conversational and trust building skills. These generate a powerful mental picture of where the owner wishes to be and the confidence that they can take them there.
The true measure of skilful selling is when the prospect then asks, “OK so what shall we do then?”
The first stage of the consultancy project
According to how keen the consultant is for the work (and mostly they are) a deal is struck in which s/he will do as follows:
Opinion surveys from employees, customers, suppliers.
Study of statistics and research data for marketing, operations, people, and finance activities.
Benchmarking these against industry norms
SWOT analysis with the team
Situation report for the owner, summarising the above into a series of issues that need attention, the gains to be made from doing so, and suggested strategies to implement.
The owner can now see what needs to be done and may wish to limit further consultancy costs, having grown nervous at the £10K bill for this initial stage. But if the consultant has emotionally bonded with him/her there will be a second stage.
The second stage of the consultancy project
This provides the owner with an essential map of what needs to be done, how and by whom.
So, the consultant takes feedback from the owner, modifies the Situation Report accordingly and from it builds an implementation plan. The classic model looks like this:
Vision statement
What the desired standing of business will be at a perfect point in the future, resulting from the project.
Mission statement
What the business will do, for whom, and to what standards.
Objectives
What specific, measurable goals must be achieved
Strategies
The approach to take in achieving each objective
Action steps
The detailed day to day activities that will execute the strategies
Which gives the owner a clear roadmap to solve his / her problem and a bill for £5K.
Most owners will now decide to self-implement even if the client / consultant bond is strong because the cost already means that a lot of new profit must now be generated to pay for this investment.
The third stage of the consultancy project
Some clients, where the consultant bond is strong, and having experienced some early wins from the work so far, will buy an implementation project that commits the consultant to making the plan come true.
Some consultants baulk at this where they lack real management experience or are not confident about what they have created and don’t wish to be accountable for the outcome.
Assuming they proceed (most do, for the money) the classic approach will be to:
Train everyone in how to implement their part of the plan
Install reporting systems to track progress
Run regular review meetings to correct any actions that aren’t working
Coach individuals to stay on track
The bill for this will be £2000 per month for at least 6 months
Project overall
To make permanent improvements to a small / medium business costs around £30K over 12 months.
At every stage, the consultant will be exercising relationship skills to maintain trust and the visibility of a payback for what they are doing.
Only 6% of businesses spend that much annually on consultancy. The other 94% spend £2K-£3K per annum, firefighting.
So, the market for real business consultancy is very small and highly competitive.
Conclusion
Business consultancy is very unlike accountancy although it is a logical diversification, which is why accountants need to retrain before carrying out consultancy work.
It’s not what gets wrongly described to accountants as ‘business advisory’, which is something very lightweight that doesn’t deal with fundamental problems.
And it’s not just about gaining the technical skills to fix client issues as diverse as marketing; product development; customer service; operating efficiency; people productivity; financial management and business value.
It is also about having the interpersonal skills to develop and sustain client relationships.
And it’s about having an effective process that identifies the problem, forecasts the potential from fixing it, makes a plan to do so and then implements it.
But £30K?
No, Runagood® has cracked it by developing technology that takes out 90% of the cost and time for all 3 stages, opening the market to the 94% of smaller businesses for the first time.
Humanity + Technology + Marketing = The Consultancy Practice Of The Future
By Duncan Collins
Founder of Runagood.com Ltd