Relationships And The Importance of Distribution To Consultancy Success
Relationships And The Importance of Distribution To Consultancy Success
Why distribution is supreme in the game of consultancy
Over the past decade, I’d guess we’ve been approached a few dozen times by organisations who want us involved as part of a bigger project.
This is usually where the community forms one part of a bigger project they’re undertaking for the client.
I usually turn these opportunities down.
The simple reason for this is simple; we need a direct contract with the client.
Beware The Benevolent King (and why you shouldn’t go through third parties)
If you have to go through a third party to reach an audience or a client, your fate hangs upon the benevolence of another. And, believe me, they will always take the largest share for themselves.
If someone else brings you into a project, you’re going to benefit less than they do from it.
For example, imagine you are brought into a consultancy project by another firm which has a contract with the client. Let’s imagine the project goes really well and is a great success. Here’s the problem…
It’s not your brand that benefits, it’s theirs. The client isn’t going to leave two testimonials. You can’t each publish case studies. You’re not going to get repeat business or referrals from that client (unless your partner does).
Whoever brought you into the project gets all that.
At best, you might display the logo, but then you run into the problem of showcasing logos for brands who haven’t hired you (apparently this was a more controversial take than I presumed at the time). Worse yet, the more people who post the same logos on their site, the harder it is to stand out.
You can still earn a nice living from this kind of work, but you will never be able to earn a great living simply because the benefits accrue to whoever has the direct client relationship. You will earn less and benefit less than they do.
Accepting projects like these from others pays the bills, but that’s all it does.
Perhaps worst of all is you’re essentially a freelancer (perhaps even crossing the line into an employee). You’re the hired help. There’s nothing wrong with freelancing if that’s your objective. But I suspect it wasn’t what you were looking for when you decided to become a consultant.
The act of being an independent consultant means you need to build your own audience and find your own clients. If you’re working under another, that’s not independence. That’s part-time employment without benefits.
Distribution Is Leverage
The recent history of corporations might often be seen as a battle for distribution.
Whoever has a direct relationship with the largest audience always has the leverage in any discussion.
These Steve Jobs emails are worth reading. Steve Jobs bullied News Corp, one of the most powerful organisations in the world, into agreeing to its terms for eBook prices (and split of revenue) by reminding James Murdoch:
…only two companies have demonstrated online stores with significant transaction volume--Apple and Amazon. Apple's iTunes Store and App Store have over 120 million customers with credit cards on file and have downloaded over 12 billion products
In short, he’s saying we have millions of customers we can drive to purchase your books at a click of a button….and you don’t.
Apple had a direct relationship with the audience, so they won.
Netflix and Spotify Too
Netflix and Spotify are also illustrative examples. Netflix began by licensing content, built a huge audience (distribution), and now makes its own shows largely cutting out TV companies entirely.
Why?
Because they won the battle for distribution. Once they had a relationship with a big enough audience they could skip the TV companies entirely.
Likewise, artists frequently complain about not getting a fair cut of revenues from Spotify. Yet few decide to remove their songs from Spotify. Why not? Because Spotify gives them access to 500m+ people.
Spotify helps them grow their own audience. The same audience they can sell concert tickets, merchandise, and other higher-margin products. Artists might not like it, but it’s harder to build a following today without Spotify.
Artists get hit with a double whammy because their distribution is also controlled by record companies. Macklemore sang about being offered 7% of revenue from a recording contract (to split between them). Why do artists get such a tiny percentage? Because they don’t own the relationship with their audience.
The biggest artists are able to exert some influence. But there may only be a handful of artists in the world who can make this work.
In pretty much every sector you can imagine, whoever owns the direct relationship with the largest audience gets the biggest cut.
Self-Publishing vs. Published Work
My first two books were self-published and are ‘print on demand’. I promote them myself, Amazon ships them, and I get around 50% to 70% of the royalties of every book I’ve sold.
My first book, published in 2011, has earned me around $70k in royalties.
My last book was published by Pearson. I received a tiny advance (I think around $3k) upfront. I get 3% to 5% of the royalties of each copy sold. That’s because (theoretically at least) Pearson owns the distribution channels for the book. I create the work, but they own the distribution so they take the overwhelming majority of the profits (they also have the highest costs).
However, to even get that measly deal, I had to prove I had a large audience I could reach with the book. Publishers aren’t buying your book, they’re buying your platform. The bigger the platform, the bigger the upfront royalties you’re going to get.
Even today, I receive more revenue from books I published a decade ago than I do from my most recent book.
Aside: Unless you have an audience of 200k+ plus people, I’d recommend self-publishing.
Want To Speak At Events? Build An Audience
I know many people who are frustrated at their lack of speaking opportunities (or not being paid for speaking opportunities).
These same people often haven’t built a large following which gives them leverage in discussions.
If the event organiser owns distribution (i.e. you need them more than they need you), you’re always going to be at their mercy. But if you invest the time and resources to build your own audience, you can have a different kind of discussion.
If the event organiser thinks you can promote their event to a large following of your own, the odds of you being invited to speak (and paid to speak) rise considerably.
In the early stages, it does make sense to speak for free because it helps you build your audience. But once you have a large enough audience, it makes sense to charge because the benefits skew towards event organisers.
In pretty much every arena, building your own audience is key to success.
You Need Direct Relationships
This is all a long way of saying you must have a direct relationship with the people you’re trying to reach.
You can’t rely on intermediaries. They will always take the lion’s share of the benefits for themselves. The more you rely on others to present you with opportunities, the more you are at their mercy - and they know it.
You need to build your own following over time, make sure you have direct relationships with the clients you work with, and build a sustainable consultancy practice.
You will notice is over time you can start to predict how many clients you will attract each year by the size of the audience. You can start to make some broad mathematical predictions about it and plan accordingly.
In the early stages, you’ve got to build the following one person at a time. Then aim for dozens of people at a time. Finally, you will be able to build your audience by 100s of people at a time.