The Prevailing Consultant: Four Principles To Embrace In Tough Times
Now it’s time to build the kind of consulting practice that not only survives a downturn, but uses it to grow stronger.
Hi, I’m Rich. Welcome to my weekly newsletter where I share systems and frameworks for scaling your consulting practice from $0 to $1m+ in revenue.
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Tough Times Separate Consultants With Strong Foundations From The Rest
The vast majority of consultants I know only lasted a couple of years before packing it in and heading back to the world of employment and a steady paycheck.
In tough times, like we’re facing now, you can quickly tell the consultants who ride the crest of the wave compared with those who have built a practice to last the test of time.
That’s because it’s pretty easy to prevail in a good market, but the real challenge for a consultancy practice is whether it can survive a downmarket.
Over the past year or so, I’ve noticed a sharp decline in the number of active consultants in my sector - and I suspect my sector isn’t alone.
The Worst Time To Begin Consulting
I began consulting in 2008 - a rather inauspicious time to start consulting. The one upside to this was that difficult markets were my training ground. The habits I learned in the early years have paid dividends ever since.
If you want to be a consultant for the long term, you need to thrive in the good times and prevail in the difficult times.
Here are some general rules for surviving a down market. We’ll dive into each.
Have enough financial runway to last 6 months (or ideally 12). This is your living expenses multiplied by six.
Have at least 10 to 20 potential prospects you contact regularly. This is your circle of allies.
Have a strong inbound source of prospects. Don’t rely on people stumbling on you by chance; have a deliberate means of making yourself known to potential clients.
Diversify services to satisfy the unique needs of the downmarket. Adapt your services to the services which organisations buy in a difficult market.
Building Your Financial Safety Net
Thanks to my financially prudent habits, I haven’t been seriously stressed about economics downturns or quiet periods for years. Instead, I try to see them as opportunities to execute ‘shovel-ready’ projects to grow your consulting practice. The key is building a financial safety net of at least six months (ideally twelve months).
If you’re like most consultants, you pay yourself dividends rather than a salary. A common mistake here is to pay yourself your entire profits and leave nothing in your business. The problem is that once the money is in your account, you will likely spend it.
I suggest paying yourself only 50% of what you earn each year and letting the rest accumulate in the business until you have a safety net of six to twelve months. Over time, you can even invest this on behalf of the business.
A good financial rule is that you should always have a minimum of 12 x monthly expenses (often $50k to $70k) in your business. If you have more, you can invest that too. You can see how I invested $500k here.
This lets you comfortably ride out any downturns (and even make great use of them). That means you should aggressively save capital when you get started until you hit that figure. Then pay yourself more once you have a good safety net in place.
Build Your Circle of Allies & Past Clients
Staying in touch with past clients is essential, but it becomes doubly so in difficult times. People have become more risk-averse, budgets for new projects are smaller, and hiring past consultants is becoming more likely. Past clients are the people most likely to hire you again.
You need your client marketing system to be in place and operating well. Constantly check in on the success of past projects, gather feedback and highlight new ideas and ways you can help.
Then, make sure you have a strong network of allies to call upon for support. A business is like a community; you need some ‘superusers’ to thrive. Over the years, many supporters (often past clients and key contacts) have generated millions of dollars for my business by hiring us directly, referring clients, or connecting us to people who can promote us.
Remember, you will never rise alone as a consultant. Sustaining a small number of strong relationships is critically important.
Refine Your Client Acquisition
In difficult times, many consultants get desperate and resort to tactics (cold-calling/messaging) that do more harm than good.
Trust me, if it didn’t work in good times, it won’t work in bad times.
A far better approach is to invest your spare time into optimising whichever client acquisition method you’ve chosen. You can explore the latest techniques, test and experiment with new ideas, and continue to grow an audience. Don’t be afraid to be bold. Test and adapt ideas from different people and sectors to see what works well in your audience.
Permission marketing is still the secret to success, so expand the number of people you have permission to reach. But do it with innovation and sustainability. The ratio of audience to clients might be lower than in good times, but it’s still a numbers game. So the higher the total number, the better the results.
Diversify Your Services
Consultants often thrive in strong economic times when organisations have excess budget to invest in strategy, training, and process improvement. However, consultants are among the first expenses to be cut in downturns, making income unpredictable. This cyclical nature makes it difficult to sustain a consulting business over time.
To weather these fluctuations, you must diversify your services to appeal to good and bad economic conditions. Most consultants unintentionally position themselves as “vitamins” – services that enhance performance but aren’t urgent, which only sell in strong markets.
Instead, you should also offer “painkiller” services that solve urgent problems, especially when budgets are tight.
Consulting services can be categorised using a simple 2x2 matrix below:
Strong Economy / Improve Outcomes: Services like strategic roadmaps, brand positioning, and innovation programs that help clients achieve long-term goals.
Strong Economy / Solve Problems: Services like platform migrations, churn reduction, or scaling support that address growth barriers.
Weak Economy / Improve Outcomes: Lower-cost services that help clients get more from existing resources, such as optimising marketing, customer support, or tech usage.
Weak Economy / Solve Problems: Services that save money or provide immediate relief, like expense audits, fractional support, and revenue recovery.
A sustainable consultancy acts more like a business than a freelancer. It builds a flexible service portfolio that adapts to market conditions, offering different solutions based on whether the client wants to grow or survive. You must recognise shifting market signals and actively promote the right mix of services accordingly.
Execute On Your ‘Shovel-Ready’ Projects
You should have a consultancy roadmap outlining how to improve your practice over the next year. This means you should have identified some ‘shovel-ready’ projects you can execute whenever possible. This might include:
Creating the definitive guide to significant problems in the topic, which you keep updated indefinitely.
Revamping/relaunching your website to a top-tier standard.
Creating and managing an exclusive community of industry peers.
Creating an industry index lets you create rankings and comparisons between relevant organisations.
Hosting your event series.
Launching a professionally developed training course.
Developing a new service you can promote to past clients.
Completing training courses to equip yourself with new skills.
Creating a collection of case studies and video testimonials showing your work.
Creating a remarkable content series (video, audio, detailed guides).
Hiring an SEO expert and optimising your site to do well in search.
Developing a new sales system to score potential leads and keep track of deals is an infrastructure project.
etc…
Similar to national recessions, don’t waste a downturn. Use that time to work on a big project. Rebuild your website, write your book, create your course—build the infrastructure that will pay off indefinitely.
Good luck!
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I started consulting in the summer of 2020 because I had no choice. After my COVID layoff, I needed income. I didn’t return to full-time employment until May 2022…and over a dozen of us lost our jobs in May 2023.