Engineers as Consultants Pt 5: Finding the Best Client Mix

The past articles in this series have been largely about making sales, which is the most important aspect of any business. There comes a point, however, where there is enough potential work and the consultant needs to manage the limited amount of time that exists. To help define the stages of a consulting firm that reaches this point, we will define 'Young', 'Growing', and 'Mature' companies:

Young

An engineering consultant that is just getting started won't have many (or any) clients, and even worse, probably doesn't know what is going on beyond the strict tech. There are very few clients that a young consultant can afford to not pursue, let alone jobs that he or she can pass on. The chance at any money or experience is front and center.

Growing

A consultant who enjoys seeing his or her client base grow exchanges the past sales challenges for business challenges. It is no longer just about selling and delivering on any job that comes up since it is possible to take on too much work or charge too little. Passing on poor-fitting or poor-paying jobs and ignoring some possible sales channels is OK thanks to the time demands and revenue security of a client base.

Mature

I define a mature consultancy as having a solely passive sales effort. Maintaining a website, chasing down leads as they come, and casual networking is enough to keep the list of potential clients more than full. It is common to get requests for jobs that aren't a good fit for the firm, and passing the potential client onto a better fitting colleague is easy thanks to the availability of other work. Mature consultancies may also elect to hire employees to meet the market's demand for work.

This article will focus on a late-growth and mature consultancies since young and early-growth outfits should only be thinking one thing: MORE SALES.

A person operating a 'Growing' consultancy may assume that the right balance of clients is struck any time there is enough work to keep billable hours at 20 or 30 hours per week. While that is true in the strictest sense, a mature consultant will know that billable hours is a short-term indication of good client balance. For instance, if one client is consuming 30 billable hours each week the balance will be lost as soon as that job is complete. Ideal balance not only represents good time utilization today, but helps manage the longer term flow of work.

Different consultancies will define an ideal balance based on their target client characteristics. Serving unpredictable but time-sensitive clients will require having more unused time available to immediately accommodate unscheduled challenges or developments. Working as a government contractor represents a more predictable work load with a much longer sales cycle, so being fully booked is not very risky.

I prefer to target something in between those two extremes in order to optimize for minimum sales overhead. I do this by creating and leveraging a network of possible referral sources. The goal is to always have one large client (10-30 hours per week), and 3-5 small clients (another 5-10 hours total).

The Large Client

Otherwise known as 'Bread and Butter.' This is the client which enables the consultancy to be successful. Having only one large client allows the consultant to always be available and provide a level of service above what would normally be expected. This premium service is easy to provide when you realize that without that work, things start to look bleak in the sales department. I aggressively focus my sales and planning efforts on making sure that I have a large client most of the time.

The Small Clients

Otherwise known as 'The Sales Force.' Doing remarkable work on small jobs that other consultants may not even quote is a great way to get in the door of a company or industry. Because there isn't much money at stake the sales/quoting/contracting overhead is easier and can usually use templates. They are most valuable as a way to connect with the next large client, or become one themselves. While the small clients don't provide a lot of total revenue, they pay enough to keep the lights on when finishing work with a large client and starting up a new one. It is important to set expectations with small clients up front, as some assume that they will have immediate access to 50% of your time after a year of silence.

Obviously the balance is never completely as described above, but setting the goal makes it easier to determine when to chase work, and when to pass. With experience, a consultant will learn what balance works best for the industry that they serve and the life they want to live.

James Benson is writing a series on 'Engineers As Consultants' to educate and encourage salaried engineers to consider if hanging a shingle is right for them. New posts on the first Monday of every month.

Pt. 1: So You Want To Be A Consultant

Pt. 2: How Do Engineers Find Consulting Gigs?

Pt. 3: How To Price Consulting Services?

Pt. 4: How To Keep A Client?

Pt. 5: Finding The Best Client Mix

Pt. 6: How To Turn Down A Client

Pt. 7: How to Write a Client Acceptance Clause

Pt 8: Business Structures

Pt. 9: Taxes, Writeoffs, and Accounting

Pt. 10: When Subcontractors Quit

Pt. 11: When a Client Turns into a Deadbeat

Pt. 12: Getting Paid with Company Stock

Pt. 13: How to Assign IP Ownership in a Contract

Pt. 14: Annual Review

Pt. 15: How to Take Vacation

Pt. 16: How to Engage Peers