Today we’re sharing an extensive list of 45 ideas to help make your HR consulting business more profitable.
Thanks to all the successful consultants from the HR industry who have shared their many excellent ideas, suggestions, and pieces of practical advice.
How To Run A Profitable Consultancy In The HR Industry [4 Categories]
To keep things organised, the profitable HR consultancy tips are divided into four broad categories:
- Financial Management
- Sales & Marketing
- Service Delivery
- Your People
Before we begin . . .
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Ok, let’s get started . . .
Financial Management Ideas
- Increase pricing. If you bill hourly, review your billing rates and push them higher. If you charge per product, look for ways you can command a higher price. Could you bundle more value into a package? Improve your marketing and sales scripting to effectively sell at a higher price? Or could you just boldly increase your pricing? Most businesses set their prices when their business was first launched, and since they were so hungry for business, they set pricing levels low. Over time, the business likely only made nominal increases to pricing every few years, but rarely did the owner ever sit down and fundamentally rethink his or her pricing model. Well, take a close look at your pricing now. (David Finkel)
- Part of being profitable is keeping expenses as low as possible. Don’t rent an office unless you have to (e.g., if clients come to see you), hire support staff in lower-cost areas (e.g., my virtual assistant is in Louisiana, not San Francisco), make sure you’re write off all the business expenses you can, and similarly, contribute as much as you can to a SEP-IRA or solo 401(k) in the U.S. to dramatically lower your taxable income. It’s not sexy stuff but it makes a difference! (Liz Steblay)
- Look for ways of earning money that aren’t reliant on selling your time but ARE related to the day job (you would expect me to say that). Use your network unashamedly – it’s what networks are for. Don’t be embarrassed to ask for help. Leave time to work on, not in, your business. Think virtual, not employee – it may be more expensive in the short term but it’s easier to turn off if money and work dry up. NEVER assume your pipeline is too full. If everything in it becomes business and you struggle to cope, that’s a great problem to have. (Martin Goodwill)
- It’s easy to get caught up in the nitty-gritty, block out some ‘headspace’ to take a break and do something different. It’s often in these moments that you’ll find new ideas come to you. Stay current, even if it’s just knowledge (rather than an additional offering), clients should want to come to you for a one-stop place of advice. Oh, and become a Breathe Partner, it’ll save both you and your client’s time, keep you competitive and give you an easy win to retainer work! (Georgina Sillett)
- Stay on top of your accounts/bookkeeping regularly, invoices/expenses, and so on. Don’t let it build up. (Raj Mehta)
- Keep the billing/repayment periods short(ish); offering retainers was also helpful. Lastly, make sure you have strong client/ consulting agreements. I left so much money on the table for lack of explicit and CYA policies. (Sandy Castoro)
- For expenses, hook up something like Curve to Xero and you save loads of time on financials and expenses. (Pete Townsend)
- Pricing. In 20 years of consulting, the single biggest impact I have had on profitability is convincing partners to bill more aggressively – not gouge – but bill what they are truly worth. Firms should strive to be higher priced/lower volume instead of low price/high volume. Metrics: Partner billing rate, overall net firm billing rate, realization. (Marc Rosenberg)
- Charge more. The more you charge, the less they complain. One of the first things I learned is that there is an inverse correlation between how much a client pays you and how many times they complain. In other words, the more money a client pays you, the less they will complain. Large paying clients usually have a lot more cash, so spending it isn’t that big of a deal. They know that if they want to continue to grow, they have to spend money. And when doing so, sometimes things work out, while other times they don’t, but at the end of the day, they have to keep on making bets. Smaller clients, on the other hand, don’t have that much money. So, if they hire you and you mess up, they usually don’t have the luxury of hiring someone else like the larger clients do. When you first start off, you may have to take on smaller paying clients, but your goal should be to transition to the larger paying ones as quickly as possible. (Lars Lofgren)
- Consistently look for ways to lower your fixed overhead. Scrutinize your base expenses to eliminate non-strategic expenses that just don’t add value to the company or to the customer. (David Finkel)
- Project margin: Larger projects realize a better margin, on the order of 38.6% versus 36%. (Natasha Engan)
- Read Profit First by Mike Michalowicz and then implement its excellent cashflow management system. (See Ben Geoghegan’s podcast interview on this topic with Claire Sweet).
Podcast Interview: Managing Cashflow In An HR Consultancy
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Check out the HR Business Accelerator
Sales & Marketing Ideas
- Deliver great value and get paid properly for it. Don’t commoditize yourself. Price objections are buying signals. (Reuben Swartz)
- The more niche you are, the easier it is to sell. (Rana Kordahi)
- Plan ahead – don’t underestimate how long it can take for a potential client to make a decision so start thinking about your next steps well in advance of a current project coming to an end. Also, use your eyes and ears to look for other potential areas you could assist with as hopefully by that stage the client will be happy with what you’re doing and trust your opinion on things slightly outside the original scope of work. (Christina Jones)
- Get in the door via your network, and then pitch by asking questions rather than making statements. Find a way to craft what you love to do into a framework that gives the client what they need and puts you in a position to perform with passion – easier said than done! (Pete Townsend)
- Having run a consultancy with staff and as a freelancer, I think you need several things to start an HR consulting business and quickly grow it so it is profitable. (a) A compelling offer that provides value. (b) A well-populated niche of potential clients. (c) A repeatable system for attracting clients. (d) An excellent customer-centric approach whereby you understand the business challenges of your clients. (e) Upsell where you can, based on the clients’ needs or find other providers that can collaborate to solve the key business problems. (f) Say no to business that is not aligned with you. Another opportunity is definitely around the corner. (g) A rewired mentality (h) Do keep abreast of change and invest in yourself. (i)Know your numbers. (k) Love what you do. (Mandy Withers)
- The question I often ask people is ‘What is your Why?’ What drives you. Where does your passion come from? If you can articulate that, you will get the emotional resonance with your clients. I’m often more stimulated by the ‘Why’ than the ‘What’. (Nigel Cliffe)
- Network at events with potential clients, not just anyone for the sake of networking. Use your contacts and ask for referrals and recommendations. (Raj Mehta)
- Referral fees are often well worth the cost to get a warm referral. (Sandy Castoro)
- A huge part is making sure folks have the tools to know that they are both unique and equal. How can we help our teams see that they can stand apologetically in who they are and remain aware their neighbor is not their competition in their own purpose. (Rocky Garza)
- Define your unique offering and points of difference to stand out in a growing market. There are lots of full-service, multi-industry consultancies out there. What will make you different? (Rebecca Day)
- Feed your winning salespeople more leads (even if that means you starve your lower-performing salespeople of leads.) Audit the “$ value per company generated lead given to a salesperson.” This is not a time to be “fair”, but to be strategic. If every lead you give to John is worth $2,100 and every lead you give to Sarah is worth $3,200, then you’ve got to take this into account when you divide leads. It costs your company $1,100 extra in lost sales for every lead you give to John instead of Sarah. Be transparent about this and let it be a spark to help John learn how to increase his own dollar value per company lead given to him. (David Finkel)
- Research. Spending a boatload of time and expenses by conducting market research as a way to learn what your big company prospects are looking for and how they are wording their needs can be costly. The process historically is to learn as you go. Meet as many prospects as possible and modify your message to fit what you learn. But here is the free method (which takes minutes, not all those meetings): go onto the job boards and see what these companies are hiring for. Those positions are where they have a need, and the ads state the exact messaging (words) these companies use to explain their needs. (Mike Michalowicz)
- Write Real Proposals – You normally don’t need a lengthy proposal for a small project, but if you’re quoting a high budget project you should write a real proposal that will make the hiring decision easy for the client. A proposal shows you’ve taken the time to understand the client’s needs, can solve the problem and have the experience to back it up. This will help you win bigger projects rather than a line item estimate because the client will be focused on achieving their goals, not reading through line item pricing. (Abhinav Marla)
- Increase the dollar value of every purchase transaction with your clients. Ask, “How can I get each customer transaction to be for a larger dollar amount?” What upsells, cross-sells, or resales could you strategically implement? What package offers could you test and introduce? (David Finkel)
Podcast Interview: Running A Profitable HR Business
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Service Delivery Ideas
- Look after your clients so that you get lots of repeat business, and they make recommendations. Develop great relationships with other Associates (or find great people who would prefer to be employed) so that you can compete ‘with the big boys’ and tender for meatier pieces of work. There’s nothing like beating one of the ‘Big 4’… Get great admin support, otherwise, you never sleep! Switch off sometimes! (Cheryl Lee)
- Creating systems and structures has been really crucial for me. Being ruthless about what you spend your time on is also key, and outsourcing or automating where possible. (Abigail Ireland)
- You have to delegate! I used to think I could do it all on my own but I have a virtual assistant based in Spain that helps with all my administration. I provide her a list of what I need to do each day and she really keeps on top of things and the work she does is 100% accurate all the time! Sometimes you need to invest to ensure you stay afloat as it’s so easy to become overwhelmed. I have also contacted my local university for a marketing student that is ‘social media’ savvy who will do paid work for 5 hours per week to give me guidance and create content for my social media. (Leanne Makinson)
- Since there are many ways to approach HR, my initial preference was to hire employees with only some experience so that I could train them on our approaches, methodologies, etc instead of reprogramming… But I realized pretty quickly that I didn’t feel comfortable charging my clients the same rate for less experienced consultants and I still had to spend significant time training and managing them. Even though it might be difficult to justify the cost, I think it’s well worth spending what money you can reasonably afford on a stronger, more capable and autonomous team (especially in the beginning). Lastly, make sure you have strong client/ consulting agreements. I left so much money on the table for lack of explicit and CYA policies. (Sandy Castoro)
- At your core, have an unrelenting passion for and commitment to delivery, underpinned by service excellence. Beyond that always be learning, seeking improvement and innovating. (Daryl Stickland)
- Eliminate tasks and activities that don’t add value to the company or customer. Every dollar you save by eliminating the cost of things that don’t add value to your company or to your customer drops directly to your bottom line. (David Finkel)
- Making transformation easier for execs and their people; expertly creating agile, engaged, and performance-focused teams. Yes, don’t try and be everything to everyone! Be niche and be good at that niche – don’t be afraid to turn work down if it doesn’t fit your niche. (Rosin Johnson)
- If you want people to trust you enough to source their talent, be honest with them, always. Even if the outcome is not the ideal one for the client or the candidate, honesty, integrity, and kindness are key ingredients to any successful long-term hire. (Kerri Duff-Borthen)
- It can be tempting when a project comes your way that isn’t quite the right fit but it is good business practice to refuse it. Reputation is really important and so is honesty. (David Warren)
- Beware the steep cost of attrition. Customer retention is a strategic expense if spent wisely. How can you increase your customer retention? (David Finkel)
- Retain clients for longer. The day you sign a client is the day you start losing them. Here’s what I used to do to ensure that clients stay as long as possible: (a) Set expectations from day one – before you take on a client, you should let them know what they should expect and when to expect it by. If they have unrealistic expectations, let them know why. (b) Have a kick-off call – having one is a great way to ensure that things start on the right foot. One unique thing you can do is send your client some cookies or snacks in the mail so that they feel like they are with you during the kick-off call. (c) Weekly calls – every week, you should have at least a 5-minute call with your client. Tell them what you did for the week and see if they have any questions. (d) Send industry updates – if you are a design agency, you should be sending unique design news to your clients. If you have a marketing agency, you should send them marketing information. Sending industry-related news to your clients not only shows that you know the latest and the greatest, but it also makes them feel special. (e) Monthly reports – at the end of each month, you should send your clients a detailed report of everything you did. Ideally, it should include pretty graphs and other forms of visual aids. You should go over the report with the client over the phone or in person. (f) Monthly surveys – at the end of each month, I recommend sending your clients a quick survey. The survey shouldn’t have generic questions like “are you happy?”, but instead it should have specific questions that help you improve the quality of your work. Include questions such as “how can we make the monthly report better?” (Lars Lofgren)
- Have a Process – A process communicates to clients how you work and how the project will be executed. Having a very clear process is one of the best ways to close higher-paying client projects and even charge more. Instead of briefly explaining to clients what you do, give them an in-depth overview of the project cycle, from start to finish. This information will make a client comfortable because they’ll come to understand how their investment is being spent and how you’ll achieve the right result for their business. (Abhinav Marla)
- If a firm excels both at retaining existing business and winning more, those revenue increases drop straight to the bottom line. Metrics: Growth rate, marketing expenses as % of revenue, fees per partner, mix of services-A&A, tax and consulting, client retention rate, referral rate from clients. (Marc Rosenberg)
- Demonstrate Value: You’re worth every penny, so show it. Don’t take crap from clients; make sure you show them that you’re worth every penny. You can do this by showing their return on investment. For example, with my consulting company, we looked at three numbers: average revenue per transaction, conversion rate, and search engine traffic. We used those metrics to show how much additional revenue we brought in through our efforts. This shows how valuable of an asset you are, assuming you are actually providing results. The next time they are thinking about canning you, they’ll think twice because they know you actually bring in more money than you cost. (Lars Lofgren)
- Manage Client Expectations – Clients hire you for your expertise and to solve a problem – so why let them run the project on their terms? (a) Gather all feedback internally and have one person post it. (b) Provide feedback within 2 days. (c) Give proper feedback. (d) Use project management tools properly and consistently. (Abhinav Marla)
Your People
- Employ a flexible structure – Business will wax and wane. And because no two projects are alike, you must remain flexible by cultivating a freelance support network. Use contractors from varied industries and disciplines who can introduce additional expertise and perspective. This approach also lets you reduce overhead, minimize risk, and better staff projects to meet clients’ needs. (Scott Steinberg)
- Management and leadership. This is the first item on the list because it makes everything else possible. Adopt a corporate governance structure that allows most decisions to be made by the MP and a small management team. Keep partners out of admin work so they can focus on clients and staff. Have a strategic plan and a vision; keep the firm on track. Metrics: Fees per person, admin personnel as % of total FTEs, MP’s billable hours, overhead expenses per person, age spread of the partners, income per equity partner. (Marc Rosenberg)
- Regularly review your administrative and operational staff levels closely. Most service and administrative departments can be cut by 1 in 4 with no impact on quality of work. Many can handle 1 in 3 cuts with no significant negative impact. I’m not suggesting you cut staff, instead, I’m suggesting that you delay hiring admin and operational team as you grow. Let your revenues grow faster than your hiring. (David Finkel)
- Time management. Of key importance is how firm personnel, especially partners, spend their most precious resource – their time. Make sure each person dedicates the greatest amount of time to their top goals and priorities. Metrics: Equity partner billable hours, equity partner total work hours, MP’s billable hours, average billable hours of professional staff, utilization. (Marc Rosenberg)
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Special Presentation: Advanced Strategies To Help You Accelerate The Growth Of Your HR Consulting Business – with David Finkel
Summary – Ideas To Make Your HR Business More Profitable
Hopefully, you’ve picked up some good ideas to help make your Human Resources consulting business more profitable.
Thanks to everyone who shared their excellent ideas!
All the best,
