Consulting Business Model | Business Model Math

Consulting Business Model | Business Model Math


– So let’s think about this, what if you were to accept the challenge, simplify your business, and only offer premium
consulting services, how will that math shake out. Well, let’s do the math in this video. (upbeat music) Hey, it’s Alzay Calhoun
with Coveted Consultant, and in this video we want to do some business model math. I made a point in some earlier videos that I believe simple
is better than complex, and premium is better than standard. So when you think of
the core business model of your consulting business you want things to be simple and to be premium. How does that shake out, well I think it boils
down into two main things, having one, clear, stand-out service, and then having one, clear,
long-term partnership offer, so let’s do some math on that, so let’s say that you have
addressed a market problem and you know how to solve for 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’s 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 wanna do that, and so you charge, let’s say, $6,000 for their partnership. Now you can do this annually, you can do it monthly, there’s many ways of organizing
a long-term partnership, but let’s just keep the math simple so we can do this quickly. So 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 twelve, twelve 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 stand-out service, and one long-term partnership offer. 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. So basically, let’s just add a zero. So you got your market problem, 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 gonna 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, and so that creates 60K, which creates 100K a month, which creates 1.2 million a year. So 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 white board, and you can make these
numbers say anything you want them to say, and depending if you’re
focused at the 100K level, you think of things one way, if you’re functioning at
the million dollar level, you can think about things another way, the basic point is this, is that, 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 wanna 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, I’ll see you in the next video. Hey, it’s Alzay again, and I really hope you enjoyed that video, now, I know that things look really clean and neat and easy when
they’re all spelled out on a white board. But, applying these ideas to
your own unique situation, has its own set of challenges, so, what do you do, what
are your next steps. Well if you want to watch
another video, you can, if you want to subscribe
to the channel, you should, but if you’re looking for
specific, actionable support in designing a better consulting business there’s a free training
you can register for also available on this page. So, choose your option, and I will see you soon.

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About the Author: Oren Garnes

16 Comments

  1. I accept the challenge and I see that the main idea of your videos is to educate your audience on offering a simple and clear solution to a clear major problem. This goes back to your older content on transforming their costco service business into a productized service. Brain Casel also talks about this.

    The major content I feel is missing from all of this is that we all think we are already offering a premium service in our heads but it does not match up with the price for our clients. The only solution would be to probably creating a case study of a client to justify the premium cost or make your service business more rare. (specific skill matched with specific niche)

  2. Hello Alzay! Just wanted to say I really appreciate your videos thus far. I've discovered your channel quite recently and I must say you offer a lot of little jems in your videos, you're definitely premium 😉
    Got a question for you though, regarding this video: I'm not really sure what you mean with that partnership model, can you give a practical example (i.e.how could a digital mkt agency do it)? The thing is, when I listened to the video, I kept wondering "but why would clients pay 6k/month (and be hands tied with a partnership) when they can continue to pay 1k/month (no partnership & be free to move on whenever they want to)?" What am I not getting?
    Keep up the great work Alzay!

  3. Wrong! It's 444K year in the first example, if you grow by 6k per month by month 2 not 120k if the partnership agreement is covering 12 month at 0% churn rate. Simplification is definitely a worthy goal. Enjoying your other videos too.

  4. Even the video itself was simple and powerful let alone displaying what type of formula you can use for your business.

  5. Alzay, great video. In fact, I’ve used this exact strategy with my coaching clients who are running consulting businesses. Unfortunately, not everyone can see the value of simplicity in their business model.

  6. This is one of my favorite videos. Thank you for the resources. I have a #management #consulting #startup and this information is valuable…Here's my website: www.egsmanc.com.. 👍

  7. Those who gave thumbsdown are extreme haters! Alzay, your content is so rich and your teaching skills make things very easy to understand.
    Thanks for sharing!

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