Strategic growth for freelancers
Part 7 of 13 of my series on the profession of management consulting
Reviewing the history of the management consulting industry is a lot like playing with mercury (for those of you who remember when mercury could be found in thermometers). As you push and swirl mercury, it often splits into smaller globules over and over again – only to reform into larger globules later on just to split again later. Management consulting companies behave similarly. It is not uncommon for an office to break free from its parent company, a former VP to start his own practice or for a small firm to get assimilated into a larger one. This should not come as a surprise as the management consulting industry is one based on client services and as such must cater to market tastes and demands.
While we don’t have the luxury of having the buying power or force of, say, a consulting firm like Bain, even a single-person operation can consider growth as an option to better meet customer needs. Ways one can grow one’s business will be the focus of the remainder of this post.
How can you grow?
Sometimes as a freelancer or a consultant you wonder if you are doing “enough”. Should you just maintain the status quo, should you get more clients, should you expand into another industry? Before you go off darting into the woods, it’s best to understand some of the basic modes of growth. While there are many directions a company can grow, they generally boil down to either vertical or horizontal.
Vertical growth
Simply put, vertical growth represents providing more services that are in-line with a particular application area. Furthermore, you can expand upstream or downstream. For example, say you are a web designer (Small world, so am I!) and you have a solid client list and regular work but feel you could expand a bit. As mentioned you could expand vertically by increasing your ownership of services upstream and/or downstream of your web design offering. For instance, upstream expansion could mean that you hire an information architect or strategist while downstream expansion could mean you start offering hosting solutions. Of course, depending on the cost analysis, vertical expansion may or may not be suited for you if your sales volume is too low. For most solo freelancers, this type of growth may not be in the cards.
Horizontal growth
What I see more often is horizontal growth in the web freelancing domain. In a nutshell, horizontal growth is where one would offer either related or unrelated services in other areas of expertise. Sticking with our web designer model, a related horizontal growth, or diversification, would be something as simple as offering web analytics services, while an unrelated move would be something like baking cakes. Delicious, but perhaps not the best move in this case – but who knows, it might work for you.
You don’t have to do this alone
Now mind you, you don’t have to do all this alone. You could grow in any direction either organically, through an acquisition or through an alliance. For example, you can grow organically by hiring more bodies, or grow through acquisition by buying another freelancer out (I know – a bit of a stretch), or through an alliance – essentially two companies working together, but separately.
In my experiences as a freelancer and as an owner of a small company, personally I’d lean towards alliances to begin with. While there are a few headaches such as how to split profits, and contract agreements, I feel alliances get you running quicker since you don’t have to train anyone. Even better, you gain their client network, and they gain yours as well. The ideal situation is an alliance with a complimentary company. For example, as a web designer, forming an alliance with a hosting company. This is a great solution for both parties and usually your client will appreciate the one-stop-shop aspect.
Take it slow
While I covered a few basics of growth, never underestimate the power of biting off what you can chew. I learned at a conference once that you should operate out of your basement as long as you can until you absolutely must rent out office space because of all the obligations tied to doing so. Similarly in freelancing web services – don’t spread yourself too thin trying to do too much. Take your time, build your rep. The opportunities will present themselves, so be patient, and step forward with confidence.
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