Starting a consulting business seems like the perfect idea for a lot of people in the 21st century. You can make money doing what you love, while helping people, and even working from home. Some even associate being a consultant with making passive income.
You can obviously think about a few consultants right now who are making big money, and who are famous. Those people make you believe that this is the easiest job in the world, and this feeling leaves people often disappointed when they just don’t see their own numbers after starting their own consulting business.
But is it really that easy starting a consulting business or being a consultant? Are you able to make passive income following this path, or is this just another scam?
3 Levels Of A Consulting Business
Like all businesses, when you start out as a consultant, you start little. No one made big money in their first month, even if some people want to sell you on this idea – and of course sell you on their newest product promising hundreds of thousands of dollars with just a few clicks from your part.
I like to use the metaphor of starting a steam locomotive. It already has a lot of energy and potential, makes a lot of noise and fuss, while still standing still. Then it starts making even more noise, and very slowly, almost undetected, it starts moving. Even then you see that it takes a lot of energy to get to speed.
And only then comes the nice and easy, fast and nice sweeping of the engine. This latter state is when you feel that nothing can stop the locomotive, and this is the state that we all want to achieve with our consulting business.
Watch this video about a steam locomotive starting and gaining speed. Don’t worry if you’re putting a lot of energy into your consulting business at startup, and just doesn’t seem to catch up:
First Level Of A Consulting Business: The One-Man Show
The definition of a one-man show is a business where there is only one person who does or manages just about everything. This applies usually to small businesses, and of course the owner or founder is that one man running the show.
When you’re at this stage, you feel like a juggler, handling literally everything you have around you.
And although running a one-man show is a bad thing in general and in long term, when you start a consulting business, unless investing a ton of money, you’ll be doing everything by yourself and this is just the right way to do it.
Here are a few tasks that you, as a beginner consultant would do in your consulting business in this phase one
- Managing your own business
- Making all or most of the paperwork
- Getting clients
- Consulting your clients, including even tedious tasks
As an example, when I started out as an SEO consultant back in 2012, I would personally do everything in my “company”. This included meeting prospects and sell them my services, making invoices, and of course doing SEO job for my clients, but including very tiresome and monotonous jobs like link building.
Second Level Of A Consulting Business: The Expert Consultant
This is the stage when you personally can operate as an expert, don’t wasting time on unnecessary things, but still doing all your consulting tasks by yourself.
At this time you already have a few staff members helping you (e.g. in financing or with tedious jobs), and maybe some system in place to get you clients.
But you do all the tasks that need expertise in your company. You are the only one who works as a consultant, so the income and the potential of your company largely depends on your time and capacity to handle customers.
Although in this stage you can start making much more money than in the beginning, you’ll still feel very frustrated. You’ll obviously feel your personal limitations. Also making more money and taking more customers comes with a big price tag: sacrificing more and more of your free time, and reaching the point when you are actually handling customers even in the time frame that would be necessary to improve your business.
Still, in my opinion this is a necessary step. Here is when you learn how to work together with others in your consulting business, and also gain enough momentum – money, experience, satisfied customers – to get into phase 3.
Some tasks that you as a consultant should delegate in this phase
- Customer service
- Repetitive, tedious parts of your professional work
When my SEO company started to take some traction, I had someone helping me in invoicing and running our customer service, and also I outsourced every tedious tasks like link building or writing meta descriptions by the hundreds. But still I was the only one able to provide professional service, so the income of my consulting company largely depended upon how much work I was able to handle.
Third Level Of A Consulting Business: Building A Passive Income
This is the level that everyone’s trying to achieve. Also, this is the phase that you might think of as a consulting business when you have no experience in the field.
In this phase 3 you work less and less as a consultant, and even if you do, your income doesn’t really depend on how much you actually work every day or week.
The most important aspect of phase 3 is that you inevitably must go through phases 1 and 2 to reach this level. If you try to save the hard work in your consulting business, you’ll never reach your full potentials.
Think about it as a large building. Even if you want to get to the upper floor, you start at ground level, and you have to go through all floors to reach the top.
Some passive income consulting business models
Here are some successful business models for your consulting business when you reach this level. Which way you go may depend on your niche or on your general attitude to business.
- Building a large consulting company and employing consultants.
- Building a franchise system when you let other small businesses (consultants) use your brand and you train them.
- Developing training tools, e.g. books, online courses. You work once, but sell your product several times.
Which stage do you think your consulting business is right now? What’s your next step in order to move it forward? What’s your biggest challenge in building your consulting business right now? Let us know in the comment section so we can also help you and others with actionable tips.
1 thought on “3 Levels Of Every Consulting Business”
Thank you for sharing your thought about the three levels of consulting. Personally, I will be at the beginning of the three levels given that I don’t have consulting experience. I have worked for organisations all my live, however, it has always been my passion to run a consulting business. I am hoping that your company will help me in navigating the roads to becoming a management consultant.