Creating a Successful Consulting Practice

Gary W. Randazzo

• Publisher: Business Expert Press
• Year: 2018
• ISBN:
  9781948976831
• Topic: Betriebswirtschaft
• Subtopic: Beratung

Starting with understanding the types of consulting projects and how they originate, this book shows the reader how to develop networks that can play an important role in generating prospects for consulting projects.

The reader is given the steps of identifying the objective of a project, establishing the project's scope and deliverables, how insure a successful consulting engagement by having early agreement between the consultant and the client on the process, the deliverables, the timetable and the cost of the project.

The author introduces a process that will guide consultants through the steps of generating a project strategy, tactics and execution plan, and how to present recommendations to the client. Finally, this book will provide insights and guidance on how to build a thriving practice through successful completion of individual consulting projects.

The global consulting market was estimated to be $251 billion U.S. dollars in 2016 and is projected to have steady growth through 2020. There is no better time to pursue a career in consulting and this book will be a useful guide for consultants both established and aspiring.

CHAPTER 1

Genesis of Consulting Projects

Consulting projects can be the result of actions taken by an organization to improve operations, establish metrics for success, find new markets, or address changes in the business environments. The needed action can be the result of ongoing audits or operations reviews or they can be the result of management’s desire to grow market share or develop new markets.

Financial Audits

Most organizations have regular audits for their organizations. Annual accounting audits can uncover deficiencies in control and reporting systems. Management audits can show gaps in organizational structure that can impede growth and efficiency gains. Marketing audits can uncover ineffective marketing programs and find new marketing opportunities.

Annual accounting audits are most likely to identify weaknesses in control and reporting but they rarely define solutions and at times focus on symptoms rather than underlying problems.

Accounts Payable Example—One firm’s annual audit revealed there were a number of late payments and loss of discounts for timely payments to vendors. The audit suggested that late payments had a negative impact on cash flow management. The firm’s controller was unable to determine the cause of late payments and invited a consultant to review the payment process.

After visiting with managers in the organization and following the flow of invoices and the accounts payable procedures the consultant found that managers received invoices directly from vendors. Managers then approved invoices for payment and forwarded them to the accounts payable department. In the analysis phase of the consulting process, the consultant discovered that managers routinely withheld invoices from the payment queue if payment would cause the manager’s department to exceed budget. In effect, managers would schedule payment to insure that their budgets were met.

The consultant determined the problem was caused by a very strict budgeting process that rewarded managers on reaching budget. This coupled with the manager’s control of when invoices were paid led to inaccurate reporting of expenses and a negative impact on cash flow due to discounts lost. It also had an aggravating effect on vendors receiving late payments.

The consultant recommended a change that required all invoices to be sent to the accounts payable department where they were entered into a log before being distributed to department managers. Managers were given one week to either approve or disapprove the charges in the invoice. Managers were told that if they did not respond, the assumption would be made that the invoice was approved and it would automatically be paid. This approach left the final approval ability with the department manager but control of expense reporting and cash flow with the financial accounting function.

In virtually every annual accounting audit there are similar findings by the audit firm. Some findings come with recommendations and some do not. Even those with recommendations will require further study and development of an implementation plan.

For consultants with a strong financial and accounting background, annual audits can provide consulting project opportunities.

Management Request

Occasionally managers find they are wrestling with a situation that requires action and they will reach out for help. The problems can range from inability to execute the tactics of a strategy to operational inefficiencies that result in wasted resources and poor profit performance.

Organizational Structure Example—A general manager of a ­mid-sized publishing company was having difficulty developing long-term strategies due to everyday problems that kept his focus on current operations. He asked a consultant to analyze the organizational structure to determine how it might be changed to provide opportunities to plan for the future. The consultant started with analysis of the kinds of information the manager was receiving and who reported the information. After some analysis, the consultant determined that there were similar types of information coming from various departments. There were 10 departments reporting the information to the general manager.

After studying the information flow, the consultant found that if similar types of information were reported by one entity, some reports could be eliminated and that areas reporting similar information could be combined. The result of the consultant’s recommendation was that by combining the reporting functions the number of departments was reduced from 10 to 5 and one of the departments focused on information that provided insights for strategy development.

Management audits are not a regularly occurring phenomenon in organizations and may only take place when organizations are performing poorly. For consultants with organizational development expertise, it is necessary to have a strong reputation in the market and good relationships with senior managers in organizations. The relationships will allow consultants to gain an understanding of an organization’s goals and how well the goals are being met. When problems occur the consultant will likely be in a good position to offer assistance.

Marketing Audits

Marketing audits are usually a result of products or organizations missing sales performance goals. At times, an audit can be implemented to insure all of the marketing components (price, place, product, and promotion) are working together to produce the best results.

Sales Performance Example—A group of investors developed a sophisticated marketing system for commercial real estate brokers and commercial real estate investors. The system collected data on commercial properties listed by major commercial realtors and made the data available to investors. Investors could query the data base to locate properties based on price, location, financial performance, type of real estate, and so on.

The system provided investors with a rich inventory of properties across the United States. For brokers, it provided quite a number of advantages including the ability to present their properties to the most qualified buyers in the country.

The sales to investors were quite brisk but sales to commercial realtors were very slow. For the company to be successful it was critical to have a broker in every major market. A broker had to pay a significant fee to be the representative in a market but would be the only broker in the market able to show their properties to qualified commercial real estate investors.

The system’s founders decided to have a consultant determine why brokers were not participating in the program. After considerable study, the consultant discovered that the system sales group was presenting the system as a data base that could be manipulated in many ways to locate just the right property for a buyer. The consultant determined that a sale to each broker was unique and needed to be based on that specific ­broker’s needs. For example, if the broker was having difficulties getting new listings the system salesperson would focus on the system’s ability to present properties to the best buyers and would provide sellers with an opportunity to get the best price for their property. This would in turn provide the broker with a tool to get more and better listings.

After retraining the sales force to customize their sales pitch based on the challenges faced by brokers, sales of the marketing system to brokers increased dramatically.

Operations Management

Some consulting projects are a request from management to improve operations or determine if operational procedures should be changed.

Cash Flow Study Example—A major retail grocer needed to build a new milk plant to provide stores with the grocer’s private label dairy goods. The margins on private label merchandise were more attractive even though they did not provide position revenue paid by national brands for shelf space. The CEO felt that interest rates were too high to borrow the funds for the new milk plant and that there was enough cash flow in the stores to fund the project.

The CEO directed the CFO to develop a system that would free up cash flow for this project. The CFO and a team of analysts worked for some time to develop a system that was focused on having multiple cash pick-ups each day from the store. The result was no increase in cash availability and a significant involvement of corporate administrators in store operations.

A consultant was asked to evaluate the approach and determine if there was an alternative method that could be used. The consultant determined that there needed to be a clear understanding of what would be defined as “efficiently used cash.”

Normally store managers requested cash from their local bank each morning to have some operating capital to open the store. In the evening each store would deposit all cash and checks into the local bank using armored car services. The amount withdrawn in the morning was left to the discretion of the store manager.

The consultant felt that the best way to free cash for other uses was to minimize the cash withdrawn by store managers each morning. Since all cash and checks were deposited each evening, a reduction in cash withdrawn in the morning would result in cash that could be used for other purposes.

To accomplish the goal, the consultant recommended a system that defined efficiently used cash as being an amount of cash being deposited in the evening that was less than or equal to the amount withdrawn in the morning. Store managers who did not meet this criterion were charged an interest penalty on the inefficiently used cash (that amount greater than the morning withdrawal). The interest penalty was counted against store operating margins and directly affected the store manager’s annual bonus.

This system put the responsibility of cash management with the store managers and did not involve corporate administrators in store operations. In the first six weeks after the system was implemented, $1 million was freed for other uses.

Changing Environment

Many organizations seek advice from third-party consultants when there is a significant change in the business environment. In today’s business setting, change is the ...