7 Key Strategies to Build a Successful Consulting Business: Project Models, Hiring, And Growth

Having worked with and consulted for multiple successful companies, I've identified several strategic choices that can set your consulting business on the path to success.

1. Either have large projects and high hourly rates, or small projects with a lot of automation‍‍

A) Sell Large Enough Projects to Focus on Generating Value

The most value is created when consultants can focus on one client at a time for an extended period. While not all businesses can achieve this, it’s important to consider the implications of having your team work on one or ten projects in any given week when starting a professional service.‍

B) Sell Small Projects, But Automate to Maximize Throughput

Another path to success is selling smaller retainers, with as much automation as possible. This approach is common in industries like accounting, where automation drives efficiency, minimizing the time spent on mundane tasks. This frees up resources to provide high-value consulting services at higher hourly rates, thereby increasing profits. What you don’t want is to end up somewhere between these two extremes.‍

2. Hire Smart People

One thing that can stifle a company is growth that turns it into a command-and-control-oriented bureaucracy, where people don’t trust each other and performance metrics are misused. A good way to avoid this is by hiring smart people who tend to be autonomous. You can trust that smart people will make the right decisions, and if they’re autonomous, there’s no need for micromanagement. In a professional services context, this helps keep the billable-to-internal staff ratio optimal, allowing you to increase profits.‍

3. Hire Early-Career Professionals with Potential and a Willingness to Take Responsibility

As your consulting business grows, you’ll need people to ramp up operations at new locations and take on sales roles after getting to know the offering. Aim to hire individuals early in their careers who are willing to take risks and responsibility. Consulting business leaders require generalists, and these roles are ideal for younger professionals to prove themselves.

4. Get Experienced Consultants to Help Sell Big Projects

When pitching projects, it’s not just generalists who help close the deal. Clients buy from people they trust, and nothing builds trust more than having a senior consultant say, “I’ve worked on this before, and I’ll be the one leading this project,” during the sales phase. If you keep your consultants hidden until after the contracts are signed and rely solely on the sales team’s persuasion, you risk losing to competitors who involve their senior experts earlier in the process. We talk a lot about this in our article, how to set up an agency sales process.

5. Sell More, Recruit When Necessary

Consulting businesses should never hire more than necessary. There should always be a healthy buffer of revenue generated by external consultants. It can be tempting to hire “just one more person” when growing, but from experience, it’s better to have a recruitment problem than a sales problem. A sales problem means profitability issues, whereas a recruitment problem means capacity issues. The former is far more detrimental to the company than the latter.

6. Maintain a Base of “Bread and Butter” Projects to Enable Experimentation

To stay relevant, consulting businesses need to experiment with new offerings. However, expanding your company’s services is expensive. Typically, it goes like this: You venture into a completely new area where you see potential but have no existing references. You sell the project too cheaply. The budget overruns more than expected. You sell the next one, and it’s entirely different from the first. By the third project, you start to see patterns, and you’ve now been able to hire a subject matter expert. Things improve.

To manage this, you need a healthy base of recurring or long-term projects that bring in consistent revenue. Don’t spread yourself too thin in the beginning, or you risk too much.

7. Expanding Offerings Should Happen in Projects and Through People

Sometimes, external forces like generative AI compel every company to extend its offerings. However, many times, professional services firms decide to focus on a specific technology simply because competitors are doing so. This can be challenging to execute from scratch. Instead, look into your existing project portfolio and clients to find areas where your team already has expertise. Perhaps someone on your team has experience with a technology you’d like to explore.

Sometimes, you have to take a leap of faith and hire a competence lead. This can be risky and expensive, but if done right, it can significantly boost the company. Look for individuals with sales skills and existing networks in the space who are also interested in developing their subject matter expertise. These people can help turn sales cases in your favor and take on advisory roles once projects begin, ensuring smooth project delivery.

Summary

Building a successful consulting business requires strategic decisions, such as focusing on large projects that allow consultants to create significant value or automating smaller projects for efficiency and profitability. It’s essential to maintain a balance by recruiting only when necessary, ensuring a healthy revenue buffer, and having a stable base of recurring projects to support experimentation and growth.

Hiring the right people is also crucial. Smart, autonomous employees prevent bureaucratic inefficiencies, while early-career professionals can be groomed for greater responsibilities. Experienced consultants help win large projects by building client trust. Expanding service offerings should be done strategically, leveraging existing team expertise and occasionally taking calculated risks with new hires to drive growth in emerging areas.