Steady Growth Means Firing Your Computer Consulting Clients

The vast majority of technology consultants fail to grow their businesses because they fail to abandon business. A technology consulting firm is not like an automobile manufacturer who tries to sell as many cars as possible and adjusts production based on demand. If business picks up, more assembly line workers are hired, new plants are opened, dealerships established, and more cars are produced. When business starts to decline, plants are closed, workers are laid off, and production stops.

Technology consulting is profoundly different from this concept.  There are only so many billable hours in a day, and only so many clients in a week you can service.  Remember growth is not just financial. It includes broadening your scope of services, working with higher-level clients, enhancing your reputation, and offering more sophisticated solutions.  For the techie whose lifeblood is sustained by cheap break-fix services, the attitude tends to be “All business is good business and I’ll never turn down a paying client.”

There are a few things wrong with this mentality, but they are all deadly because:

  1. Reputation works in all directions. If you are known as an “inexpensive solution,” your services will be judged accordingly and the average prospect will assume he/she will never have to pay a lot for your work nor receive anything of value that’s above your cheap asking price. Your reputation will build as such and will pigeon hole you into a corner. Imagine McDonald’s trying to break into fine dining. McBottle Service anyone?
  2. Quality, not quantity, is the sole measure of success. A friend of mine, Dan Turner, has built a million-dollar web design business from scratch. A couple years ago we collaborated on a few projects in which he commented that common approaches to direct mail were off base. “Most people look for a response rate of around 2 percent to represent success,” he pointed out, “which is simply a number. If you mail out 5,000 pieces, all you need is one very high quality response.” Dan based his entire business on this concept–find one high paying client and do a great deal of work their rather than find 10 clients and do a little work for each. As a technology consultant you are far better off doing $10,000 in business with one client rather than do $500 in business with 20 clients. You’ll work less, make the same amount of money, and you’ll be working with high paying clients that can get you more high paying clients to do this kind of work for.
  3. Sales effort is equal across all technology price points. From my experience in the IT industry, I’ve discovered that it takes the same amount of time to sell a $200 service as it does to sell a $10,000 service. The amount of advertising, number of calls, number of questions asked, amount of pre-sale research preformed by the prospect, are all surprisingly consistent. The only difference is the attitude of the consultant. So, if you are trying to close business and it takes the same amount of effort to close a $200 client as it does to close a $10,000 client, which would you rather spend your time pursuing? This isn’t rocket science, but do you get my point? The effort it takes to attract, sell, close, deliver, and administer small IT projects is the same for large projects, so you are not making up in volume what you could be doing in size. By continuing to accept anything that comes along, a technology consultant is doomed to poor time management and lack of growth.

So here’s the cold hard truth: Every time you raise your fees or pursue more sophisticated work, you will lose the bottom 15% of your market. Million dollar technology consultants regularly abandon the bottom 15% of their market as a growth strategy to free up time to pursue  the upper reaches of their market.

Every 2 years or so you should be able to look back and identify work that you would no longer accept. If you are accepting the same type of work with the same fees as you did 2 years ago, than you probably have not abandoned your bottom 15% and therefore have not expanded into the top 5% of your market (which is far, far more profitable).

You cannot accept all types of business and expect to grow. Continuing to take on everything means that your expertise and reputation are not expanding.

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