If you’ve been running your consulting business for fewer than seven years, you’ll want to pay attention to the story of Meredith Starr.
Meredith,1 who is in her mid-thirties, has been building a reasonably successful practice in northern Virginia, making rain of roughly $300k/year for herself and her full-time assistant. Not exactly the stuff of legends, but better financials than her neighbors working at the White House.2
Last year, though, in her sixth year of business the new-business pipeline was drier than a Latin textbook. Why? Because Meredith had not been following the Rule of Replenishment.
Stand outside your home with a garden hose and turn on the spigot. (This metaphor will work better if the hose is connected, but it’s not required.)
Now, as you watch the water stream out of the hose and splatter your feet, do you know when the water will run out? If you’re on a municipal water system, the flow may never stop. But a municipal supply is like a corporation or a big-name consulting brand and you, my friend, run an independent consultancy. You are on your own and your water will run out.
The problem is, looking at the steady gush from your hose gives you no advance notice. One moment it’s all sprinklers and puddles and the next, just like Meredith, you’re high and dry.
When you start your consultancy, your revenue potential is like a water tower holding all the possible projects you could tap into. What fills that small reservoir? Your “core” relationships. The more strong ties you have to the right decision makers, the more money-making power you have.
A few connections with well-funded executives in need of your offering are all it takes to get your business off the ground. In fact, I have worked with consultants who have built very substantial practices from only one or two clients. For a few years.
Most independent consultants’ water towers run dry roughly 5-7 years after they first hang up their shingle. At that point their Rolodex of friends-who-become-clients is exhausted. Then begins the drought that withers the vast majority of small firms.
Ironically, smart thinking and best practices exacerbate the problem. When it comes to new business, consultants rightly focus on current and past clients. These are the easiest sales and often the most fertile hunting grounds for fresh projects. Unfortunately, this approach carries a downside: most clients will eventually disappear, and unless the water tower is constantly replenished with fresh buyers, the new-business pipeline shrivels.
The Rule of Replenishment is simple: You must add at least 15% new contacts to your core every year. Your core consists of decision makers (i.e., people who can actually hire you) with whom you have a strong relationship. The three “boxes” that comprise your core are shown below.
Before you launched your consultancy you acquired a book of contacts. Terrific. Now, to create a profitable consulting practice for the long term, stop relying on that book and tirelessly build your network. Annually check the waterline: what percent of your network core is new?
Waiting until the tank is empty to start establishing new connections is a recipe for a long, dry spell. Conversely, if you always meet or exceed the Rule of Replenishment, you’ll enjoy a steady stream of business that can grow into a torrent over time.
Out of curiosity, what are you doing to follow the Rule of Replenishment? Post your comments below so other consultants and I can learn from your experience.
P.S. The Rule of Replenishment is particularly important if you are starting your practice in your 50s or later. By that point in your life, most of your contacts fall into two buckets: 1) not successful enough to hire you; 2) retiring.
Text and images are © 2023 David A. Fields, all rights reserved.
Over the years I have found this to be more true than ever. While taking advantage of current assignments I look three to six months down the road to replace what I have now. The emphasis is on making contacts. This may not be scientifc but I use a rule of 3: three proposal to get one assignment; 9 serious conversations, 27 contacts. While I try to keep this ratio per month I don’t always succeed. The 27 contacts per month equals to 324 contacts a year: 1 to 1.5 contacts per day. I count as contacts even those at a networking event because it starts the conversation or leads to another introduction. I’ve been consistently inconistent so the focus now is consistency and it is working. Hope this helps…
Great insights, Don. Thanks for contributing your experience. Your consistency IS working and you’re a great example of the benefits consultants can glean from consistently building the network core.
The same holds true for subscription services. Thanks for giving me a “name” I could use to identify a process that I need to focus on!
Dan, you run one of the best subscription services for consultants and have been doing so for a long time, so it’s interesting to hear that the Rule of Replenishment applies to that type of business too. Great insight – thanks for sharing!
I completely agree. I was just recently telling a friend that the real challenge for him in starting a consulting practice will be a few years down the road when his current network has been touched multiple times and he has to figure out how to create a new client beyond his old network. This has been my struggle for the past year as I work to get a repeatable process in place for creating new clients.
Don, I’m curious how many of your 27 contacts per month are new relationships versus keeping in touch with your current network?
Allen, your advice to your friend was spot on, and “good on you” for creating a repeatable process. (If you need help with that, feel free to give a call.)
Since Don didn’t answer and I’m familiar with what he’s doing (he’s in one of my programs) I’ll give you some insight on his outreach. He has a very extensive network that he’s built over decades. That said, one of his key focus areas for the past few months has been expanding his core. I’d estimate about 15-25% of his outreach is to “new” relationships.
Does that help?
Replenishment of all your business development interests is crucial: influencing network, fresh offerings in your market segment, knowledge of the latest business and technical trends. Being a competitive consultant in modern market it is not enough to be a good programmer or carpenter, you should offering specific business knowledge and experience that makes you a Subject Matter Expert (SME). Thank you for the great article.
Great point, Ramiz. Replenishment of your knowledge and offerings is also critical.
You hit it correctly. started 91 was great through 96. Then my mistake was accepting a client offer for a 2 year full time project everything dried up of course. Then worked for several companies that got me gigs but was not in control.
Doing good work means client love you but they become successful and don’t need you.
after 50 the other problem with the rolodex is contact fall into bucket 3 … died