Practice or Business: What’s the Difference?

I have met many business consultants who are either working on a book or at least thinking about writing a book. I have known several who actually have a manuscript they tote with them from client site to client site. These consultants have two problems in common: having manuscripts does not necessarily make them writers and books do not sell themselves. The mental exercise of putting experience into words can be its own reward, but what it reveals is a personality trait that says those consultants would prefer a consulting practice to a consulting business.

There are two kinds of consultants: financial oriented people and management oriented people. Financial folks love spread sheets and can write love letters in Excel. They tend to have finance and accounting backgrounds; many are CPAs, others have MBAs, some have both. Management folks love organizational charts and can write sonnets as PowerPoint presentations. They tend to have corporate backgrounds; many have business degrees, some have MBAs. Others have been business owners and are former entrepreneurs. All are familiar with the relationships between finance and management.

Regardless of their orientations, consultants share one common trait – they dislike, or at least distrust, sales people as a group of slick-talking, promise-anything-to-get-the-deal, glad-handing, tap-dancing liars and thieves. What sales people think about consultants is similar, but that is not my point. The use of professional sales people to acquire clients characterizes the difference between consulting practices, which do not, and consulting businesses, which do. Neither approach is better than the other. The significance is the difference in overhead.

Other differences in overhead include advertising, depth and size of support staff, and location. They may have large corporate structures to serve corporate customers, such as publicly traded companies, that employ hundreds to thousands of people, generating many millions of dollars in annual revenue. Consulting businesses have greater resources than many consulting practices and may offer layers of specialty in the services they offer, such as proprietary software, IT, tax consulting and financing.

Consulting practices are more entrepreneurial in nature and structure. They may be highly specialized themselves, depending upon the orientation of the consulting staff they employ. They may also be general practitioners whose services range from QuickBooks to websites. Because of their nature, consulting practices serve entrepreneurial clientele, most often privately held firms, who employ less than a hundred people and generate less than twenty-million dollars in annual revenue.

From a consultant’s point of view it is not about the money. It is all about the work. As I have previously written, when I worked for consulting companies my clients ranged from restaurants to general building contractors, from convenience stores to slaughter houses, from liquor stores to RV dealerships. For anyone who wants to become a professional consultant, I recommend the experience with the caveat that the travel can be torture.

From a client’s point of view it usually is about the money, what they think they need and they think about the work that is performed. So what is the difference between a consulting practice and a consulting business? The difference is in the overhead and in the specialties. Change is the product that the client buys or is sold.

Stranger From Afar -- But How Far?

When I worked for the big dollar consulting companies, I began to believe that travel was a form of hazing. As a Project Director for one of those companies, I could be found in an airport at least three times a week. I picked up and delivered three rental cars. I drove an additional average 250 miles a week. I checked in and out of three or more hotels.

As a Senior Executive for another company, if they had no assignment for me on Saturday afternoon, I reported to the airport on Monday afternoon to call the office every fifteen minutes beginning at 5 pm, bags in hand. No assignment meant checking into a hotel near the airport and performing the same ritual the next afternoon. Of course, I thought the arrangement was better than the first since I only had to fly twice a week. Less was more better.

I said that travel was a form of hazing because it is in addition to working a ten-hour day. As a Project Director, I averaged 4 to 5 hours of sleep per night. As a Senior Executive I probably averaged 6 hours per night. Those are considerations for you, should you decide you, too, want to become a “road warrior.” These people are easy to recognize. They wear suits at the airport, schlep at least two wheeled suit cases in addition to a laptop, and fall asleep in the airplane as soon as it reaches cruising altitude.

What does it mean to a business owner? It means an additional expense to a consulting project – 12% to 15% on average. The expenses are round-trip air fare, rental car and gasoline, lodging, per diem and incidentals such as printer cartridges and project binders. Take it from one who has served up a healthy $15,000 invoice for two days with three people on the project -- you can do the math. As a radio engineer of my acquaintance once wryly said, “A consultant is a salesman that lives 500 miles out of town.”

None of what I am writing is to impugn the quality of the consulting performed by “road warriors” from out of town. In fact such experience is worth the hazing for the person who wants to choose consulting as a career. It is a better credential than holding MBA or CPA credentials alone. However, for small to medium sized business owners the cost does not necessarily assure the best quality. The consultant you get may be just the next person on the bench or at the airport being hazed.

The consulting business is about selling consulting hours, just as Coke’s and Pepsi’s business is about selling bottled and canned products. The product itself is another issue. I have often said of the consulting business that when times are good, our business is good. When times are tough, our business is better. To a large degree that has been true. But today, times are hard. Just ask Detroit, where GM cannot borrow money and sales are puckered.

A similar effect is occurring in business consulting because the industry is not immune from the impact of this recession. Sales are down for their prospective clients who, as a result, are becoming more reluctant to avail themselves of consulting at a time when they need it the most. Consequently, sales are down for the consulting business. It is truly a vicious cycle.

However, this recession provides small to medium sized business owners, especially family-owned business, an incredible opportunity to reorganize themselves so that they can reap the benefits that will be realized in our economic recovery. The question then is not if they should retain consulting help from a stranger from afar. The question is “How Far?” and the closer to home, the better.