I recently read an article entitled five ways to build a $100 million dollar business. It discusses different business models that vary in the number and size of your customer base. Some businesses work with a few enterprise scale clients while others work with a larger number of smaller customers. Patrick Mackenzie mentioned on Twitter that “The math here is equally applicable if you are trying to build, say, a $200k a year business”.A $200k/yr consultancy is a goal that seems both attractive and attainable, so I decided to try and answer the question “How can you build a $200,000 consultancy?”
Find 1 Client That Pays You $200,000 (The Elephant)
I’ve been a part of projects where a single engagement has had a price tag of $200,000 or more. I think this scenario is a little unlikely. If you can find one of these clients, then you can find more, and you are on your way to becoming a $1mm+ consultancy. It would also be precarious for a company to put all of it’s eggs in one basket like this.
Find 10 Clients That Pay You $20,000 (The Deer)
There are a few examples of consultancies that make this kind of money. One is custom application development services that can handle ten projects in a year. Most of the client work I find is in this range. Another example is high end consulting engagements. People like Patrick Mackenzie and Brennan Dunn charge anywhere from $10,000 – $30,000 for a week of their services. They could work ten engagements a year and hit this $200,000 benchmark.
Find 100 Clients That Pay You $2,000 (The Rabbits)
With this setup, your consultancy would have to have a service that scales very well. One way to accomplish this would be to find a way to service multiple clients at one time. Hosting courses or seminars is a way you could accomplish this. For example, Big Nerd Ranch offers programming courses that cost $4,200. At this point, the focus of the work changes, though it is less of a consulting model and more of an information product model. There are plenty of gigs out there that pay $2,000 for smaller jobs, which are fine but those are hard to scale.
Find 1,000 Customers That Pay You $200 (The Mice)
At this level, you need a product that you can resell. It could be a course that requires little to no interaction for $200 (For example, a UDemy course), or it could be some form of subscription product, which would cost just shy of $20/month. For software developers, you may be able to build a premium software framework or plugin that can sell for this amount. The Magento Connect marketplace is a good example of people going this model. I can’t think of any repeatable service model that works at this scale.
Find 10,000 Customers That Pay You $20 (The Files)
You are a product business at this point. You could sell ebooks, themes, plugins, or something of that nature. You really can’t call it a consultancy at this point. For this kind of business, it looks like the math doesn’t scale don’t quite so well at this point.
Applying This To Your Business
Do you want to work on $2,000 or $200,000 projects? Before you say “$200,000, duh.” Think about the pros and cons of fewer clients vs. more, and smaller clients vs. large. Fewer larger clients mean a more rigorous, in-depth sales process, and a higher risk if you lose a customer.
What kind of consultancy do you want to run, and how are you going to scale it? You can scale not only by getting more clients but by getting bigger ones as well. If you think about the kind of business you want to be running, then you can start making deliberate steps to get there.