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Alternative Revenue Sources for Your Consulting Firm

If you’re having trouble accelerating your consulting firm’s revenue growth, it could be because you’ve forgotten to create a stable revenue base.

“Bread and Butter” work (outlined in this classic article) is the most common and straightforward path to establish a solid, bedrock of revenue for your consulting firm. However, you have another interesting option:

Your consulting firm houses a treasure trove of assets, all of which are sellable to create a steady revenue stream that supports your consulting work.

A half-dozen assets that you could possibly leverage into cash flow are outlined below:

People

You can rent out your people to clients at a fee-for-time rate. This is staff augmentation, not consulting, and it’s a tried-and-true revenue generator.

In some industries, such as IT, staff augmentation margins are razor thin; however, some of our clients earn north of 50% margins on staff augmentation engagements.

Processes

Clients hire your consulting firm in large part because of your approach to solving their problems. You understandably guard your approach jealously and view it as a secret sauce that you don’t want to share. However, that precious resource could also line your coffers.

Licensing or franchising your consulting firm’s approach can yield generous income streams while potentially boosting awareness and demand for your services.

Software

If your consulting firm’s thinking can be captured or enabled by software, you possess a highly scalable and, perhaps, a highly valuable asset.

Freestanding software can be sold to clients and also to other consulting firms to create a revenue annuity that funds your core consulting business. Apps that enable your consulting firm’s solution can energize a high-volume roll-out that creates marketing buzz and a financial ch-ching.

Prepackaged Knowledge

Your consulting firm is unlikely to generate significant revenue from low-end products such as books and inexpensive, online courses. Yet, there’s no rule against packaging up your content into an online academy, an evergreen certification program or a multi-volume manual that you offer for tens (or hundreds) of thousands of dollars.

Data

If you regularly survey your clients or conduct surveys for your clients, you likely own a lake of data. Data fuel insights and create benchmarks, both of which clients will pay handsomely to attain.

Once you decide data will serve as a source of Bread & Butter income, you can arrange your projects and self-funded research to maximize the value of your data lake.

Community

Many of your consulting firm’s clients would eagerly welcome connections with executives at other companies. Heck, after a year working from home, your clients crave connection more than status or promotions!

Hence, you could potentially monetize a community anchored by your clients. Peer groups, roundtables, and forums organized by your consulting firm all can produce meaningful revenue.

While all these assets offer tremendous revenue potential for your consulting firm, be wary when you approach them. They can lure you onto the dangerous shoals of strategic confusion, brand dilution and revenue diminution.

Remember that selling assets is a source of incremental, steady revenue, not an equal partner to your core, consulting mission.

It’s extremely difficult to build an asset-based business on top of a consulting practice. The two types of business are so different in terms of structure, sales approach, personnel needs, etc., that they don’t co-exist happily very often.

Hence, if you stray too far from your core, you’ll find you no longer lead a consulting firm. Instead you’ll be running a struggling software company or a product company that happens to have a professional services arm.

The best asset plays fit naturally with your consulting firm’s strategic direction and the worst are a massive distraction. In other words, if you’re going to develop a revenue stream around an asset, it must fit naturally with your current work so that you don’t bifurcate your focus, your business development efforts and your consulting firm’s energy.

What alternate sources of revenue have worked (or have not worked) for you and your consulting firm?


14 Comments
  1. Ronnie
    April 7, 2021 at 6:26 am Reply

    Great ideas. I have been toying with software monetization for grant research and tracking for a while. It’s time to do it! Thanks.

    • David A. Fields
      April 7, 2021 at 8:20 am Reply

      Yep. Carpe diem, and all that. Go for it… if you already have the software.

      If you have to build the software, then pause and consider how long it will take to build and how expensive it will be to maintain. Software is the most alluring and also the most difficult of the assets to build alongside a consulting practice. Definitely keep me up to date on your progress, Ronnie! I’m glad you posted your idea.

  2. Kristin Richards
    April 7, 2021 at 7:25 am Reply

    Love these ideas. I’m a Human Resources Consultant and HR done-for-you service provider and I have been considering offering courses or even a monthly membership (prepackaged knowledge) for some time now. I strongly agree with diversification in your business and having multiple streams of revenue, especially during times when consulting client census is low. Thanks for sharing these ideas!

    • David A. Fields
      April 7, 2021 at 8:17 am Reply

      Good on you for being creative with your revenue streams, Kristin!

      The one idea on your list that I’d urge particular caution is the monthly membership. Memberships are notoriously difficult to maintain, and the idea is to create a base of easy revenue, not a new, labor-intensive burden! Let me know how they work out, and thanks for sharing today, Kristin.

  3. David Burnie
    April 7, 2021 at 9:17 am Reply

    We’ve considered staff augmentation but ultimately decided against it for a few reasons:
    – Typically only your best people are appropriate for staff aug (e.g., you can’t offer a newly hired team member)
    – It’s usually not great experience for your team members – they signed up to work with your firm, and while on the staff aug project they can lose touch with your organization
    – It limits your ability to take on new work – a couple of team members that are tied up on a staff augmentation commitment for a few months could mean that you have to turn down an entire project. The margins gained from the staff aug would be more than offset by this loss.

    We have found success with software and data. We have partnerships with a number of software firms which we help to implement. The recurring revenues from software sales, though relatively small, can help to smooth out the ups and downs of a typical consulting firm. On the data front we lead a quarterly industry benchmark which both provides an ongoing revenue stream but also provides a great way to stay in touch with clients.

    • David A. Fields
      April 7, 2021 at 9:56 am Reply

      Those are all great examples, Dave, and your experience with staff aug is helpful.

      One of our clients who uses staff aug well actually has the staff aug group as a separate division; i.e., they don’t rent out their regular consultants. Another one of our clients has consultants that they specifically use for staff aug, so there’s no unhappiness with those team members. Your point is well taken about renting out regular consultants.

      I love your extension of the partnership with software platforms (which we often recommend to consulting firms) to selling their licenses as well. As you said, it can produce a nice revenue stream to smooth out the lumpy consulting revenue.

      Your examples will be helpful for a lot of readers, Dave. Thank you for being willing to share.

  4. Susan
    April 7, 2021 at 11:16 am Reply

    Thanks for confirming the route that I have taken – staff augmentation (sparingly). IP revenue of processes and knowledge (slowly implemented) to assure that the firm would remain on an even keel without anything superseding our consulting. I didn’t want to commoditize the work, just augment what we were doing already. Although a few of my MBA consultants probably feel that it has been too slow, I wanted to make sure that it was done right and that I’d have few regrets. So far, so good. Now I feel positioned to take it up a notch.

    • David A. Fields
      April 7, 2021 at 4:26 pm Reply

      Boom! You’ve provided a terrific example of using assets as supplementary revenue source. That’s outstanding, Susan. Thanks for explaining what you’ve done. (And, I look forward to seeing the up-a-notch results!)

  5. Stacye
    April 7, 2021 at 5:49 pm Reply

    The timing of this article is interesting, as I was *just* talking to a fellow IC colleague about this last night. The alternate source of revenue that I’ve been considering (but haven’t taken action on) is development of an online training or academy. The challenge I’ve been bouncing around in my head is that my clients are those organizations that need support around Portfolio & Project Management (as well as Strategy and Process Improvement). My ideas for the academy are for those in the Project Management field. Those are two different clients: one for my “bread and butter” consulting business and the other is for the online academy. Not sure if that would be a smart move.

    • David A. Fields
      April 9, 2021 at 8:20 am Reply

      Stacye, you’re considering an interesting idea. Also an ambitious one. Before you build a full-on academy, you may want to consider a single course. My guess is that most companies that offer a catalog of courses receive most of their revenue from a handful of offerings. Develop those offerings first, which will prove out the demand.

      That said, we’ve developed and installed an Academy at a number of our clients. They’re customized to each client; however the core materials-including quite a lot of video we shot with professional actors–is in the can and therefore, salable and profitable asset.

      I appreciate you sharing your idea, Stacye. Keep talking it through with colleagues and clients, and let me know how you progress.

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