How many potential buyers are there in your target? Most consultants rely on the Law of Large Numbers. I recommend you do exactly the opposite: rely on the Law of Small Numbers.
When it comes to defining a target for your consulting firm, there’s the “aim a floodlight at a crowd” approach, there’s the “point a spotlight at a clique” approach, and there’s the “throw an LED keylight at a neighbor” approach. Actually, I’m not sure of that last one.
Most consultants spread their light wider than they realize, and reduce their effectiveness. Large targets are made up of many, many individuals. And when each says “No thanks” to your offering, that doesn’t accumulate to a “Yes.” It’s just a lot of “Nos.”
You are far better off focusing on a very tightly defined group of prospects with whom you can build a deep relationship and whose common problem you know inside out. How small? You may be surprised.
A few examples of the Law of Small Numbers:
- In the U.S. there are fewer than 450 hospital systems, yet a consultancy I work with consistently sells $5-6 million to one department inside hospital systems.
- In California there are only 256 municipalities with over 25,000 people, yet another consulting firm I work with has built a steady, multi-million dollar practice with just that narrow target.
- In the whole world there is only one Dell Computers, yet an agency called Enfatico was created with that single company as its target. Granted, that one client delivered $4.5 billion in revenue. Enfatico ultimately failed because a target of one is too small. Particularly if your work is mediocre.
Like the firms in those examples, focus your practice on a small, homogenous group with a common need that they’ll pay to resolve. Your prospects will feel like you “get” them, and you’ll be able to demonstrate success in situations that feel familiar to them. Both of those build the trust that will lead to a consulting sale.
How Big Does Your Target Need to Be?
That depends on four factors:
- Your revenue goal. More revenue requires more clients.
- Your average project size. Bigger projects require fewer clients.
- How well you penetrate your target. If you understand your target so well that you can capture everyone, then a very tiny target will work out fine.
- Your client repeat rate. When each client signs up for multiple projects, you need fewer clients.
One consulting group I work with enjoys a high repeat rate (70% of revenue is from return clients), very high market penetration (roughly 60% of their target has hired them at least once in ten years), and an average project size of $50,000. With those numbers it’s easy to see how their tight target of under 300 prospective buyers has delivered over $6 million in annual revenue.
They leverage the Law of Small Numbers; i.e., they know their target extraordinarily well, and are well known by their target. You can do that too.
A simple calculator will show you exactly how big your target needs to be, assuming you penetrate it over ten years. Yes, I’m giving you a ten-year time-horizon. You may be amazed at how tightly you can define your target. Perhaps as small as a few dozen prospects.
But, you must identify a common, burning need among that small target. A tight target and the right offering are your ticket to success.
Is your target size smaller than you thought it could be? If so, what are your thoughts about narrowing your target?
Text and images are © 2024 David A. Fields, all rights reserved.