I have everything I need to run my business in this handbag
- A laptop
- A notepad and pen
- A mobile phone
- A digital recorder and batteries
- A business debit card
And that’s all I need. No stock, no staff, no premises, no real assets. Just a little bag of stuff.
If you think of a business, you probably imagine something like a cafe or a factory. Take out a business loan. Rent a premises and employ staff, get some stock in, utilise the premises and staff to turn that stock into something better and sell it for more than it cost to make it. Repeat. Ensure that you have enough cash to keep repeating. Eventually make enough margin to be self-sufficient and profitable.
Consultancy isn’t like that, but it is an interesting business model. You don’t need very much at all to set it up and get it done. As a consultant… well in the nicest and most appropriate way possible… you’re selling yourself. You are the stock. You are the asset. Only very limited logistics and supply chain are required. As a sole trading consultant I’ve not needed to spend any significant money getting started or maintaining my business. As such it is super low risk.
So yet again I’m going to steal a bit from a business degree essay that I wrote. This one’s a bit more academic-y so proceed with caution!
Porter’s Value Chain: Porter’s Value Chain (2004) enables a business to describe the activities within the organisation, identify linkages between these, and highlight competitive advantage. Ruthless Research is a very straightforward business whose human resource is a single member of staff delivering a single core service. As highlighted in the assets and capabilities audit the experience and actions of this individual are fundamentally linked to the success (or failure) of the business. Operations (research consultancy services provided to not-for-profit clients) is the focus of the business, with marketing and sales, and service, driving this. The output of research consultancy is insight which is usually intangible so there is no need for any inbound or outbound logistics to deliver this output. Similarly, procurement is extremely limited because there is rarely need to buy anything to generate the output. This is largely due to the nature of the service provided, as the key mode of technology applied to create the output is expertise and insight. Again, this is inherently linked to the capability and performance of the staff member. By making both vertical and horizontal linkages between business functions it can be shown that Ruthless Research:
- Has a good understanding of the factors that contribute to margin;
- Has systems and processes which contribute to quality;
- Uses multiple channels for sales and marketing, and makes linkages between these;
- Makes linkages between sales and marketing and the various assets of the business;
- Has no cash is tied up in assets or liabilities, so the business is low risk and can cease or commence trading at any time with few consequences.
Actually this was the biggest revelation for me during my business degree. I’ve been a consultant for years, and as a consultant I’ve worked with loads of different businesses. I’ve known they were different from mine but somehow I’ve not had the words to describe how they were different and why the usual rules don’t apply.
Now I know the difference.
My business fits in a handbag.