Consulting Business Model Math: Template + Projections

You’ve been growing your consulting business, and now you’re ready to streamline and specialize. How do you build a business model that is both simple and effective? The good news is that a consulting business model doesn’t need to be complex in order to bring results. In this video I’ll show you how to build a core business model based on two primary elements. That’s right, just two.

Video Transcription

So let's think about this: what if you were to accept the challenge, simplify your business, and only offer premium consulting services. How would that math shake out? Well, let's do the math in this video.

Hey, it's Alzay Calhoun with Coveted Consultant, and in this video we want to do some business model math. I've made the point in some earlier videos that I believe simple is better than complex, and premium is better than standard. So when you think about the core business model of your consulting business, you want things to be simple and to be premium.

Consulting Business Model Template - $100k per Year

How does that shake out? Well, I think that boils down into two main things: 

  1. having one clear standout service.
  2. having one clear long-term partnership offer.

Let's do some math on that. Let's say that you have addressed a market problem, and you know how to solve it, and you charge $1,000 for that service that aggressively solves a problem that your client is having. And let's say that you close one new client a week, there are four weeks in a month, and so that means you'll close four new clients each month, so that equals $4,000. 

Now, let's say for each of those four clients that you serve, they're all wowed by what you do, and you simply say, "Hey, we can continue our relationship if you want to do that," and so you charge, let's say, $6,000 for that partnership. 

Now you can do this annually, you can do it monthly, there are many ways of organizing a long-term partnership, but let's just keep the math simple so we can do this quickly.

Let's say that, not all four clients are not going to want to accept the partnership offer, so let's just say one of those four clients takes a partnership offer. That means that you'll get $6,000 from that partnership, that new partnership, which creates $10,000 each month, right? 

  • $4,000 from the 1K
  • $6,000 from the one new partnership. 

And if you take that 10K a month, and you multiply it times 12 months in a year, you'll end up with $120,000 a year. So there is a $100,000 consulting business that's built on two main products: one standout service and one long-term partnership offer.

A Consulting Framework for $1M Per Year

For some companies, $100,000 a year is an excellent growth target, but for others, you might be looking for a more aggressive growth target. What do those numbers look like? Basically let's just add a zero.

So you’ve got your market problem and you know exactly how to solve it. You can get them right to the end that they're looking for, and so you charge $10,000 to solve that problem. Let's say you close one new client a week. That's four clients a month, so that creates 40K that happens each month in your business.

Now, you're going to offer a chance for long-term partnership. Everyone won't accept it, but let's say it's a $60,000 arrangement, and you close one client a month from that. So that creates 60K, which creates 100K a month, which creates a 1.2 million a year.

Now we've got a million dollar business that's built off of two main services: a problem that you know how to solve for and an opportunity for long term engagements. Okay?

Now, sanity check. Here's what we both know: these are numbers on a whiteboard, and you can make these numbers say anything you want them to say. Depending on if you're focused at the 100K level, you think about things one way, and if you're functioning at the million dollar level, you can think about things another way.

Keep Integrity in Your Consulting Business Model Projections

The basic point is this: simple is better than complex, and premium is better than standard. It's not about creating these fancy projections so you can impress yourself with how much money you can make. It's about clearly identifying a market problem and aggressively solving it for your client.

And for those happy, wonderful clients of yours, some of them will want to continue in that long-term relationship and you can build one heck of a reputation just off that simplicity. If you'll accept the challenge, there's your opportunity.

Wait, Isn't This Math TOO Simple?

Some of you may be thinking this is too simple. We haven’t factored in things like churn rate (clients not retained), capacity (how many clients you can actually take on), overhead costs, and all the non-billable hours it takes to manage a business. 

Let me clarify that we’re not trying to make formal projections here. These are simply "back of the napkin" numbers, simple and straight-forward math, to get a sense of what is possible. The point is that selling fewer services and pricing them appropriately is a simpler way to do business and still maintain a healthy profit margin.

I'll see you in the next video.

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