Managing a portfolio of independent consulting work is akin to managing an investment portfolio. Just like in the equity markets, there are bull times and bear times for independent consultants – and a good performing project is worth more in the bear times than in the bull times. There are some important lessons from investment theory that can be applied to managing a project portfolio. You may not be able to eliminate a bear market for project demand, but a diversified strategy can make those consulting project bear markets few and far between.
That’s all great in theory, but we all know how hard it is to minimize bear markets for stocks as well as for consulting projects in practice. When times are good, there’s no time to make the business development effort required to keep the project pipeline full. When you have time to do the business development, sales cycles can be painfully long. We’ve all been through the long slog that starts with cold calls and warm intro request and often ends with “yeah, there’s definitely an opportunity to work together down the road.” That sales cycle will be somewhere between 6-months and (more likely) some other lifetime. You need a way to quickly fill in gaps in project demand with quick turn-around projects.
Can we draw from investment theory again in learning how to manage independent consulting project risk? Those that believe in efficient markets may not be willing to pay a financial advisor to pick stocks, but may be willing to pay an advisor to diversify a portfolio. An investment portfolio should have a mix of asset classes and solid diversity within asset classes. Similarly, in independent consulting, it’s ideal to diversity your portfolio of clients. A safe strategy would be to work across different consulting “asset classes” such as start-ups, large corporates, consulting firms and others. Moreover, you can diversify within each of those categories with multiple clients.
For independent consultants looking to diversify, the good news is that boutique consulting firms are also trying to manage their own volatility in project demand. As we outline in our post geared at consulting firms titled What Unpredictable Project Demand Really Costs You, boutique consulting firms face a particularly high cost of volatile project demand driven by: lower utilization of full-time resources, risk of bad hires, risk of losing good hires, and the cost of delaying or even losing project work. When project demand peaks for boutique consulting firms, they need to staff up quickly with outstanding experienced consultants.
While there is never any guarantee that bull times for boutique consulting firms will align with bear times for you, you can increase the likelihood of alignment through exposure to many firms. Talent Response has deep relationships with over 25 boutique consulting firms that rely on our network of experienced independent consultants to augment their consulting teams during peak periods. Our diversity of clients within the boutique consulting “asset class” makes Talent Response an excellent option to fill in gaps in project demand.
To increase your exposure to meaningful consulting projects with boutique consulting firm teams, we encourage you to view open positions with our clients and join the Talent Response network.