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Getting started in consulting can be a tricky prospect. How much should you charge? What type of language should exist in the contract? How can you find clients? Written by a veteran consultant with hundreds of consulting engagements to his credit, How to Make it Big as a Consultant is filled with detailed advice on every aspect of starting up and maintaining a highly lucrative consulting career. The book helps readers:
• get a handle on the legal, tax, and insurance issues involved in setting up and running the business
• understand what clients really need
• create the structure for an assignment (proposals, pricing, contracts, scheduling)
• market the business
• solve clients’ problems using the Harvard Case Study Method
Completely updated and revised throughout, the fourth edition features new chapters on developing strategies for clients, leading consulting teams, and more. This trusted guidebook will help any aspiring reader become the kind of outstanding consultant that clients will turn to again and again.
THE WORLD’S FOREMOST CONSULTANT
AND HIS IMPACT ON THIS BOOK
IT HAS BEEN ONLY LAST YEAR that my book A Class with
Drucker: The Lost Lessons of the World’s Greatest Management
Teacher (AMACOM, 2008) was published. I had the very great honor of being Peter Drucker’s first executive PhD student and of maintaining a relationship with him over a 30-year period.
This is significant because Peter Drucker was not only the greatest management teacher, but was also known as The Father of Modern Management. Moreover, he was also the most celebrated management consultant worldwide. Drucker Societies have sprung up all over the world to continue his ideas and his legacy. And no wonder: His ideas were not just fluff. Consider just one of his clients and one engagement.
Jack Welch, the legendary former General Electric CEO, sat down with management consultant Drucker shortly after
01-HMBC-FM-2 3/4/09 2:32 PM Page xiii becoming CEO of GE. Drucker posed only two questions, but they changed the course of GE’s future.Those two questions were worth billions of dollars over the course of Welch’s tenure as CEO. The first question was, “If GE weren’t already in a business, would you enter it today?” Then he followed up with, “If the answer is no, what are you going to do about it?”Welch decided that if GE could not be number one or number two in a market, the business would have to be fixed a sold, or closed. According to Welch, that strategy, which was based on his consultation with Drucker and the questions Drucker asked, was at the core of GE’s success.1
Yet Drucker did not consult for just large corporations. He consulted for small businesses, nonprofits, governments all over the world a the military, and churches.Yet he had no giant consulting firm to back him up. He was a sole practitioner who even answered his own phone.
He did not even have a secretary.
Many of the techniques and concepts in this book originated with
Peter Drucker. I just did not realize their origins until I sat down with my notes from my time as his student and reflected on what he taught.
So I am doubly enthusiastic about updating this book. Its errors, if any a are mine. But the debt I owe Peter—and that’s what he asked all of his students to call him—for pushing me in the right direction and showering me with his wisdom, ideas, and friendship is significant.The incubation of many of the concepts and techniques contained in this book are surely his, and I am happy not only to acknowledge this, but to dedicate this edition, the fourth since 1985, to him.
HOW CONSULTANTS GET STARTED
Before we get into the nitty-gritty of consulting, you need to understand one thing. Like many others, I did not start out in life with a burning desire to become a consultant. I know that I am not alone in this regard, for I have talked to hundreds of other consultants, both full and part time, and very few started out with that intention. Most of them must have had an early experience like mine. Because my entrance into the consulting field was unplanned, the first time I performed consulting services I had no one to ask for advice.
This is true even of Peter Drucker. Drucker did not plan on becoming a consultant. I know this because Peter said that his first experience in consulting started not long after arriving in this country.
Previously, he had been a newspaper correspondent and journalist as well as an economic analyst for a bank and an insurance company.
However, because he had a doctorate (in international law, not in management),
Peter’s services were mobilized for World War II. Peter was told that he was to serve as a management consultant. Drucker said that he had no idea what a management consultant was. He checked a dictionary but could not find the term. He said he went to the library and the bookstore. “Today,” he told us, “you will find shelves of titles. In those days, there was almost nothing.”The few books on management did not include the term, much less explain it. He asked several colleagues and had no better luck.They did not know either.
On the appointed time and date, Drucker proceeded to the colonel’s office, wondering all the way exactly what he was getting into. A receptionist asked him to wait, and an unsmiling sergeant came to escort him to the colonel.This must have been a little intimidating for a young immigrant who not too many years earlier had fled from the military dictatorship of Nazi Germany, most of whose party members wore one sort of uniform or another.
Peter was led into the office by yet another stern-faced assistant.
The colonel glanced at Peter’s orders and invited him to be seated. He
asked Peter to tell him about himself. He questioned Drucker at some length about his background and education. But though they seemed to talk on and on, Drucker did not learn what the colonel’s office was responsible for, nor was he given any understanding of what he would be doing for the colonel as a management consultant. It seemed as if they were talking round and round to no purpose.
Drucker was more than a little uncomfortable in dealing with the colonel. He hoped that the officer would soon get to the point and tell him exactly what kind of work he would be doing. He was growing increasingly frustrated. Finally, Drucker could take it no longer.“Please sir, can you tell me what a management consultant does?” he asked respectfully.
The colonel glared at him for what seemed like a long time and then responded: “Young man, don’t be impertinent.” “By which,”
Drucker told us,“I knew that he didn’t know what a management consultant did either.”
Drucker knew that someone who did know what was expected of a management consultant had made this assignment. Having lived in
England and having read Arthur Conan Doyle’s Sherlock Holmes,
Drucker knew what a consulting detective did.With that knowledge and the insight that the colonel did not know anything about management consulting, Drucker asked direct questions about the colonel’s responsibilities and problems. Peter then laid out some options about what should be done and the work that he, Drucker, should do. The colonel was interested and clearly relieved. He accepted Peter’s proposals in their entirety.This proved to be Drucker’s first successful consulting engagement. So Peter Drucker was not only the father of modern management; he may have been the father of modern management consulting as well.
MY INITIAL IGNORANCE ABOUT CONSULTING
Experience in other fields had taught me that whenever I lacked knowledge about something,my first step should be to find a book on the subject. Like Peter, I did just that. I visited several bookstores, and a checked with the libraries. But I found no books with the information a needed in 1973 when I became a consultant for the first time.The few books on consulting were all about consulting by the large consulting firms.They contained none of the specifics on what to do. It was only slightly better than when Drucker became a consultant.At least I knew what a consultant did.
But there was much I did not know. How much should I charge?
Was a contract absolutely necessary? Did I need a business license or some other kind of license? What could I do as a part-time consultant without running into a conflict of interest with my full-time employer?
How much could I make if I decided to devote myself full time to consulting? Also, if I consulted full time, how much time would I need to spend marketing my services versus actually consulting, and how should I go about marketing my services anyway? These and numerous other questions plagued me, but I had no single volume to turn to for answers.
Eventually I learned, but mainly it was the hard way: through experience. a made numerous mistakes, which in some cases cost me a lot of money and in all cases wasted time and brought frustration. However, a did finally learn what to do and how to do it, and I began to make money. I consulted for Fortune 500 companies, for small businesses, for start-up companies, and for the government.
Then in 1979, I received my doctorate and became a full-time university professor. (By the way, becoming a successful business consultant in most specialties does not require a PhD, an MBA, or in fact any business degree at all. More about that later.) In any case, becoming a business professor did not curtail my consulting activities. If anything, it intensified them.
AN ACADEMIC COURSE IN CONSULTING
At my university, I noticed that many students had a tremendous interest in business consulting—and not just business students. I was persuaded to develop an interdisciplinary course at California State
University at Los Angeles on the subject of consulting for business. As
the course developed, we did not stop at theory; every quarter I invited practicing consultants from many fields to share their experiences.
The speakers ranged from those in small, one-person operations to staff consultants employed by multimillion-dollar corporations. My speakers included full- and part-time consultants, and both men and women.
So popular did this course become that it attracted not only business students from all disciplines but also psychologists, chemists, anthropologists a attorneys, and English majors. Many of those who took the course were older students from outside the university, including engineers a pilots, and many company executives and professionals who wanted to leave their corporate jobs or to consult part time.We even attracted a number of professors, who sat in on these lectures at various times to pick up what they could and some students from the prestigious graduate schools in the Los Angeles area.
Partially due to the success of the business consulting course, anoth-er program for which I had responsibility also prospered.This was the
Small Business Institute at the university, for which I became the director.
The Small Business Institute program, conducted at universities around the country under the sponsorship of the U.S. Small Business
Administration, furnished consulting services to small businesses.
Business students, supervised by professors, did the consulting. Over a period of years, we developed one of the largest Small Business
Institutes in the country and several times won district, regional, and national awards for the top performance among all participating universities.
The Small Business Institute program allowed students in the consulting course to do hands-on projects as a part of their education.
Unfortunately, this fine program fell victim to budget cuts in the federal government in 1994. However, many universities continue it, asking small business clients to pay for the consulting work accomplished. a have to say, even when small businesses must pay, the program is still a bargain for the businesses that choose to participate.
Meanwhile, the success of our program led to many requests for help from outside the university. To make this program mobile, we developed a consulting seminar that I gave several times a year. These seminars were attended not only by neophyte and would-be consultants but also by many consultants with considerable experience in their professions. They generously shared their experiences and knowledge with other seminar students and with me. Eventually I taught the consulting course at other well-known universities, including the
University of California, Los Angeles, and Drucker’s School, Claremont
Graduate University. Sometimes I taught the course as part of an MBA
program and at other times in seminar form for the general public. a left my first university to become president of a small graduate school, and eventually I decided to go full time to devote myself to the
Institute of Leader Arts (www.stuffofheroes.com), into which my original consulting practice has evolved.
THE INFORMATION IN THIS BOOK
As a result, this book is based not only on my own experience but also on that of many others, including numerous guest lecturers, professors a and students who have accomplished more than 500 different consulting engagements for many different small businesses. It is also based on the face-to-face interchange of ideas from consultants in many different fields and geographic locations, and many consulting clients all over the world, some of whom are in the government or military.
Had I had this book in my hands when I first started out, I would have saved myself thousands of wasted hours and much frustration. a would have avoided countless blunders, including journeys down blind alleys, while I struggled to learn how to promote my practice, develop long-term client relationships, and, in one case, get paid for services already performed. This book contains the collective experiences of hundreds who have endeavored to earn their livelihood through the practice, either full or part time, of business consulting as well as ideas that I developed based on Drucker’s concepts. Its aim is to help you to build a successful and rewarding business consultancy.
But the book is practical, not theoretical. If I have done it right, you should have all the tools necessary and know how to apply them to start and build a successful management consulting practice. I don’t know whether you will make it big. As Peter said,“Without action, nothing gets done,” and the action part is up to you. But in the almost 30 years since the first edition has appeared, literally thousands have used it to help build a successful practice—and you can, too. So let’s get started!
1. John A. Byrne,“The Man Who Invented Management,” BusinessWeek (November 28, 2005), accessed at http://www.businessweek.com
/magazine/content/05_48/b3961001.htm on November 19, 2007.
Excerpted from HOW TO MAKE IT BIG AS A CONSULTANT, FOURTH EDITION by William A.
Cohen. Copyright © 2009 William A. Cohen. Published by AMACOM Books, a division of
American Management Association, New York, NY. Used with permission. All rights reserved.
Preface: The World’s Foremost Consultant and His Impact on This Book
Drucker’s Consulting—How Consultants Get Started—My Initial
Ignorance about Consulting—An Academic Course in Consulting—
The Information in This Book
1 The Business of Consulting
What Is Consulting?—How Big Is the Consulting Industry?—Types of Consulting Firms—Why Does Anyone Need a Consultant?—
Signals Indicating the Need for a Consultant—How Do Potential
Clients Analyze Consultants for Hire?—What Makes an Outstanding
Consultant?—How Much Money Can You Make as a Consultant?—
How Do People Become Consultants?—Summing Up
2 How to Get Clients: Direct Marketing Methods
Direct Methods of Marketing—Direct Mail—Cold Calls—Direct
Response Space Advertising—Directory Listings—Yellow Pages
Listings—Approaching Former Employers—Brochures—Designing
Your Brochure—Summing Up
3 How to Get Clients: Indirect Marketing Methods
The Basic Indirect Methods—Speaking before Groups—Sending out Newsletters—Joining Professional Associations—Joining Social
Organizations—Writing Articles—Writing a Book—Writing Letters to the Editor—Teaching a Course—Giving Seminars—Distributing
Publicity Releases—Exchanging Information with Noncompeting
4 Marketing Consultant Services to the Public Sector
The Government Requires All Sorts of Consulting Services—
Consulting for the Government—How Do You Get on the
Government Bandwagon?—Federal and State Bidding Portals—
Small Business Administration—The Buying Process—The
Importance of Preproposal Marketing—The Marketing Sequence for
Government Consulting—Locating Potential Clients—Screening—
Visiting and Making the Initial Presentation—Maintaining Contact and Gathering Intelligence—Preparing the Proposal—Negotiating the Contract—Summing Up
5 Making the Initial Interview a Success
Looking and Acting Like a Professional—How to Build Empathy with Your Potential Client—Seven Essential Questions—Taking
Notes—Holding off on Giving Advice—Interpreting Body
Language—Making Use of Listening Techniques—Identifying
Emotions from Facial Expressions—What to Do When the
Interview Is Over—The Company Audit—Identification of Facial Expressions in Figure 5-1—Summing Up
6 How to Write a Proposal
Why a Written Proposal Is Necessary—How to Write a Good
Proposal—The Structure of a Letter Proposal—Opening—
Background—Objectives—Study Methods—Potential Problems—
Data Flow Charts and Product Development Schedules—The
Finished Product—Cost and Payment Information—Converting a Proposal Into a Contract—Summing Up
7 Pricing Your Services
Price Strategies and Some Other Considerations—Three Price
Strategies—Other Considerations—Investigate the Marketplace—
01-HMBC-FM-2 3/4/09 2:32 PM Page viii
Methods of Billing—Daily or Hourly Billing—Working on
Retainer—Performance Billing—Fixed-Price Billing—Disclosing the Fee—Summing Up
8 What You Must Know About Consulting Contracts
Why a Contract is Necessary—Developing Your Own Contract—
If Your Client Has a Standard Contract—Methods of Incurring a
Contractual Obligation—Formal Contracts—Letter Contracts—
Order Agreements—Purchase Orders—Verbal Contracts—Types of Contracts—The Fixed-Price Contract—The Cost Contract—The
Performance Contract—The Incentive Contract—Elements of a
Contract—A Sample Contract—Summing Up
9 Planning and Scheduling the Consulting Project
The Project Development Schedule—Developing a PERT Chart—
Events and Activities—Earliest Expected Date—Latest Allowable
Date—Slack—The Usefulness of PERT—Summing Up
10 Negotiating with Your Client
Six Steps in Contract Negotiation, as Seen by Uncle Sam—
Appreciating the Goals and Objectives of the Counterparty—
Preparation:The Key to All Contract Negotiations—Be Wary of Telephone Negotiations—The Negotiation Plan—Negotiation
Gamesmanship—Making the Other Party Appear Unreasonable—
Placing the Other Party on the Defensive—Blaming a Third Party—
The Good-guy, Bad-guy Technique—Giving up on Straw Issues—
The Walkout—The Recess—The Time Squeeze—More Negotiation
Tactics—Some General Negotiating Hints—Summing Up
11 How to Easily Solve Your Client’s Problems
Peter Drucker’s Method of Solving Problems with His Ignorance—
Defining the Central Problem—Listing Relevant Factors—
Listing Alternative Courses of Action—Discussing and
Analyzing the Alternatives—Listing Your Conclusions—Making
Recommendations—The Charles Benson Problem: A Case Study—
The Charles Benson Problem—Solution to the Charles Benson
Problem—The Central Problem—The Relevant Factors—
Alternative Courses of Action—Discussion and Analysis—
Conclusions—Recommendations—Psychological Techniques for
Problem Solving—Why the Subconscious Mind Can Help You—
How to Help Your Subconscious Solve Your Consulting Problems—
12 How to Research
The Two Basic Kinds of Research—Sources of Secondary
Research—The Library: Still a Good Bet as a Starting Point—
Examples of Simple Primary Research—More Complex Research
Problems, and How to Do Them—Personal Interview Surveys—
Mail Surveys—Telephone Surveys—Electronic Surveys—You Can
Research Anything—Summing Up
13 The Importance of Ethics in Consulting
Business Ethics: Sometimes Not Clear-cut—Ethics versus Jobs:
The Lockheed Case—The Ethics of Marketing Research—What
Washington Researchers Discovered by Surveying Their Seminar
Attendees—An Executive Recruiting Story—A Japanese View of Duty—Ethics and the Law are Not the Same thing—Typical
Problems Pertaining to Ethics in Consulting—The Institute of Management Consultants (IMC) Code of Ethics—Summing Up
14 Making Professional Presentations
Objectives of Presentations—Five Keys to a Successful
Practice— Visual Aids—Overcoming Stage Fright—Answering
15 How the Computer Has Changed Consulting
Proposals and Desktop Publishing—Need Overhead Transparencies?
No Problem!—Managing Your Practice—Direct Marketing—
Correcting Your Writing—Naming Products and Services—Making
Forecasts and Plans—Evaluating Potential Employees—Marketing
Research—Voice-Activated Word Processing Is Here!—Scanning
Documents and Photographs into Your Presentations—Instant
Communication—Some Reading Suggestions—Summing Up
16 The Internet and Consulting
What Is the Internet?—What Do You Need To Get Online?—
Preloaded Connection, Browser, and Portal Services—Internet
Connections—Researching on the Internet—How to Use Search
Engines—Evaluating and Using Your Results—Marketing on the
Internet—The World Wide Web—Once You Have Your Site
Developed,Then What?—Selecting an ISP—Selecting a Name—
Why Not a Cybermall?—How Should You Market on the World
Wide Web?—Publicity:The Number One Secret for Marketing on the Web—Using Banners—Cyberlinks—Giving Information
Away—Why Not an E-mail Newsletter?—Books on Internet
17 How to Run Your Consulting Business
Selecting the Legal Structure for Your Consulting Firm—The Sole
Proprietorship—The Partnership—The Corporation—Other Legal
Necessities—Obtaining a Business License—The Resale Permit—
Fictitious Name Registration—Clients’ Use of Credit Cards—
Stationery and Business Cards—Insurance and Personal Liability—
Keeping Overhead Low—The Telephone—Fax Machines—
Anticipating Expenses—Necessary Records and Their
Maintenance—Tax Obligations—Income Taxes—Excise Taxes—
Unemployment Taxes—State and Local Taxes—Minimizing Tax
Paperwork—Sources of Additional Information—Summing Up
18 Developing Strategies for Your Client
Why My Recommended Approach to Strategy is Different—
Principles, Resources, and Situational Variables—Example: Attacking a Market Leader’s Top Product—How Lever Bros. Did It—
Integrating the Principles—Looking at Resources—Lever Bros.’
Secret Weapon—Enter the Great Depression—The Launch—Apply the Principles Scientifically—Summing Up
19 How to Lead Consulting Teams
Why Teams Work—How Should You Lead a Team of Consultants?—
Recognizing Team Stages—Stage 1: Getting Organized—Stage 2:
Getting Together—Stage 3: Fighting It Out—Stage 4: Getting the
Job Done—Summing Up
20 Personal Consulting: Counseling and Coaching
What Exactly Is Coaching?—Different Kinds of Coaching—How
Coaching Got Started—How is Coaching Done?—Learning to
Be a Coach—Coaching Fees—Marketing Coaching Services—
Appendix A References Useful to Consultants
Appendix B Sample Consultant’s Brochure
Appendix C The Consultant’s Questionnaire and Audit
Appendix D Associations of Consultants
Posted November 3, 2010
No text was provided for this review.