How to Earn $100,000 to $200,000 For Each Consulting Project

Steve Shu Interview

Interview Transcript (Draft)

Mike Zipursky:  Hey everyone.  Welcoming you back for another consulting interview session.  I’m Michael Zipursky from Consulting Success and today on the show we have Steve Shu with us.

Steve is a management consultant who has worked and consulted for Vodafone Allianz, Nortel, Lucent and Wolters Kluwer, to name a few.  He’s also taught courses in the business school at Irvine University.  Steve, a big welcome to you.

Steve Shu:  Thank you very much for having me, Michael.

Mike Zipursky:  Let’s start by having you tell us what it is you’re doing for clients these days.

Steve Shu:  Great.  Typically, what I do is I help incubate technology-oriented startup initiatives within other companies.  This typically includes things like new business units, innovation areas, new product development, and I also do some pure startups but it’s typically kind of startup initiatives within larger companies.

Mike Zipursky:  Can you give us a bit of a – like if we were to take that idea and break it down a little bit so people can get a bit of a better picture into exactly what it is you’re doing.  Could we just play off maybe a recent project example or one that you’re comfortable sharing what you did?

Steve Shu:  Sure.  One of the clients that I worked for recently was involved with starting up, they wanted to start up a new business unit.  They wanted to move into an adjacent market space leveraging their current software products.  I got involved early on with helping them kind of define the business and also secure the funding from, you know, at the CEO level to invest and develop the business unit, so started off with the funding and the strategy for the business then we went into things like the planning and the incubation and acquisition of new clients and staffing the organization.  That’s a somewhat long process.  The funding efforts can take a few months to a half year and then we go through kind of incubation phases of getting those businesses started.

Mike Zipursky:  Right.  I definitely think it gives people a better picture into what you’re doing and what level you’re at.  You also told me that many of your projects for clients can be $100,000 and more.  What does a $100,000 or a $200,000 project look like for you?  Is it just kind of what you described or is it typically something …

Steve Shu:  Those projects are usually broken into phases.  The funding project might be just a self-contained project and sometimes the decisions don’t get made that rapidly or sometimes you have to align with the fiscal year of the company that you’re working for.  Sometimes they’re usually broken into pieces where the first piece is just getting the funding.  The second piece might be another project which is really around getting organized and developing the service offerings or the development, and then starting the prospecting phase, if you will, with new clients or new partners, customers or partners.  Finally, the latter phase is really kind of scaling that up and incubating that out.  That’s pretty much.

Mike Zipursky:  Right.  We know when you typically are going and working with a client – let’s play with the same example for the purpose of this interview right now – when you’re going and working with a client, do they typically have very clear ideas around what it is that they’re looking to do with regards to funding?  Do they have a structure or process that you need to work within, or are you coming in and they really have typically no real clear idea of how to move forward and so they’re counting on you to bring all of, you know, your process and structure that you developed over the years in working with other clients into their business or are you kind of working with what they have?

Steve Shu:  I would say that typically the process is that I have to bring in some structure like here’s what the business planning should look like.  We may leverage pieces of what they do in the rest of the business.  Sometimes those structures, though, are a little bit bulky for a startup initiative with lots of approval boards and very extensive financial modeling and things like that.  That’s not really that conducive for a startup thing so it’s a little bit more tailored to be leaner if you will.  I think it’s a negotiated thing but I would say that most companies probably do not have kind of how they do these kinds of startups.

Mike Zipursky:  Okay.  As you had mentioned this – and I’m thinking you’re talking about $100,000 or $200,000 projects – you mentioned you can do several of those a year, although you’re trying to scale back a little bit right now, I know you mentioned to me, but when you’re discussing with clients on a project of that size, what is it that you’re really selling to that perspective client?  Where are you focusing to be able to win a project of that size?  Is it your process?  What would you say that it is?

Steve Shu:  I think there are two pieces.  One is that you have to sell the end vision, what could this business be roughly speaking.  We may not know in advance but we may have some rough ideas so I think you have to sell kind of the outcome of this life cycle.  Let’s say it takes basically six months, goes to a few years.  You have to sell the bigger picture but usually you also have to start with a starter engagement, so it might be a workshop, for example, that I start off with, which is a strategy development.  In that case, we might build very specific structure for the workshop where we gather a lot of competitive intelligence.  We interview a bunch of folks one on one.  We bring on outside research perspectives and then we kind of organize that all in a workshop where senior management can get together and say, debates the pros and the cons and the positioning and the relative risk that folks are willing to take.  It usually starts off that way with a smaller step, if you will.

Mike Zipursky:  Yeah, that’s great.  That’s a strategy that I’ve talked about and shared with others, but I really like this example and seeing how you’re making this work.  Typically that workshop would be investment-wise for the company, might be what, is that a $5,000 engagement, a $10,000 type of workshop?  Is it a $20,000?  Is there kind of range that you go and process with?

Steve Shu:  I work with various levels but I would say that in order to get it quickly through the door, probably starting anywhere from the $10,000 to $40,000 is probably easier.  Otherwise, you start getting the $100,000 levels, you get various levels, more levels of approval here.

Mike Zipursky:  So that might be for a one-time workshop for $40,000?

Steve Shu:  Yeah, more like a one-time workshop.  There’s probably some follow-on efforts too, where there’s a lot of prep.  There’s conducting the workshop, there’s individual followups and you might have some specific things like rough financial modeling and just kind of move the discussion forward.  You’ve made a small investment to help advance everyone’s understanding of what the possibilities could be and then you work into this in a larger engagement if you will.

Mike Zipursky:  I’m glad that you clarified that you’re not just showing up for a workshop with a white board and saying, “Okay, I’ll charge $40,000.  Let’s chat right here.”

Steve Shu:  No, chat is pretty much free.  You have to actually do some work behind the scenes to get these sessions to work right.  There’s actually a lot more work on the prep and the followup than actually in the session itself.

Mike Zipursky:  It’s good.  I mean, just to give people perspective because some people that are listening to this will be needing consulting and might hear, “Oh, yeah, workshops are great,” and you know, make that $23,000 just one day, quick little workshop, and go sit on the beach.  Obviously, that’s not the way that it works.  I’m glad that you mentioned it.

What I think is good, though, that you just talked about is the process of working with clients because clearly when you’re speaking with a brand new client, somebody you haven’t really worked with before, rather than jumping right into a much larger engagement and project – the $100,000, $200,000, or more – you’re easing people in and so really you’re kind of removing or lowering the barrier to her fee, right?

Steve Shu:  Right.

Mike Zipursky:  You’re getting your clients comfortable with an offering that is easy for them to imagine investment-wise and then I would imagine that in those you work really hard to make sure that you’re demonstrating the value that you can bring so that then after that – because that’s the hardest part is to get your client’s trust – and once you built that up through the workshop, do you find it much easier to sell than go to a larger engagement?

Steve Shu:  Yeah.  Usually, it is.  By that time, you kind of made some investment.  The company sort of has their initial temperature and they definitely want to investigate usually or kill things as well, but often they’re willing to go to the next state, and that includes not only committing resources like myself but committing other resources in the organizations to look at things.

Mike Zipursky:  Would you also be interested in doing workshops if you knew they were just one-time things and there was no real potential in moving forward?  Would you even be open to those or are you really looking for clients where you can see, “Okay, I do this workshop.  I’m obviously going to be compensated fairly for my time and investment and the value that I bring, but I’m doing it because I see there’s a lot more coming down the road with this client.”

Steve Shu:  I try to think about it as kind of the longer term piece because the sales process and the marketing investment process requires a lot of work and so I definitely prefer to have those longer engagements.  I do favors, generally when I know someone well.  I might do this smaller engagement, kind of one-off, just help them through a quick hurdle and I’ll do those as well.  Lately, I have not been doing them as much.  I guess there’s another interesting aspect to the model but I’ve moved around quite a bit in terms of geography, and so sometimes in order to kind of get myself used to the market – because I may not have any contacts in the area or in the geography – I might have to do some of these get to know you kinds of things, if you will.

Mike Zipursky:  Right.  That makes good sense.  When it comes to setting your fees for products, whether it’s a workshop or you’re charging a range of $10,000 to $40,000 or a larger project with some phases in it where it could be $100,000 or more, how have you figured over the years to charge?  How do you arrive at those amounts?

Steve Shu:  It’s kind of a black art, but I usually come at it through a few ways.  One is, you know, I have an idea of what the trajectory of the business is, and so you can look at what is the potential outcome for getting this business successful and be kind of the early folks incubating it.  You look at the value, if you will, but I find that there are a number of conventions, if you will, that also people see in terms of you know, workshop, what is a typical workshop, or what is a typical spending level.  It’s a bit of a craft but I usually like to start with the outcome’s piece and I tend to – it’s kind of a balance here.  You want to get in the door so you want to start smaller but I would say that I try and price those earlier engagements a little bit more on the value because as you get further – especially in this business that I’m in which is more startups – as you get longer into the business and the business is already running and you may be transitioning as a consultant they’re looking more as a contracted labor, if you will, and it’s harder to command those larger returns.

Mike Zipursky:  What you’re saying is you try and start off folks more on the value size.  That way you’re not locking yourself in by starting with an hourly because that’s then you will get locked in down the road.  Are you saying that – just kind of clarify that piece.  I didn’t really get what you mentioned as to how …

Steve Shu:  I think that always you should try and shoot for value rather than the hourly rate type of model.  I would say that as the time progresses and you’re working with the client longer – some of these clients I’ve worked for a few years, right – they come down in value a little bit, because there are other people that are in the organization and so unless you’re moving on to a new piece within there, they’re going to start dragging you down a little bit.  They’re going to negotiate for more competitive rates and those kinds of things.

Mike Zipursky:  Have you tried to move in those types of situations from a project-based fee into a retainer type of structure?

Steve Shu:  Yes, so project structure then more to a retainer structure, and then it kind of falls off, then I might go to an hourly kind of schedule, if you will, but I try and hold that up to a retainer schedule.

Mike Zipursky:  Okay, great.  Steve, why did you decide to go after larger companies?  I know mentioned startups, which is typically a very small company unless it’s a startup within a larger company.  Is that what you meant?  Are you actually working at all with the true genuine bootstrap startups that are just getting going?  When you say startups did you mean you’ll start but still within larger organizations?

Steve Shu:  It’s both types.  I typically focus on larger companies so I would say the sweet spot customers probably in the $200 million to maybe $1 or $2 billion in revenue.  That type of company’s where I have most of my client base but I do the pure startups, either the bootstrap or angel-funded types of startup initiatives as well.  I would say that in that kind of arrangement, they have less money.  It will be a mix of usually cash and some sort of equity or options, if you will.

Mike Zipursky:  Right.  I can understand clearly you can make more money or the potential for it in most cases, unless you’re working with an ex-tweeter, Facebook, Instagram or whatever and you happen to own some stock and make a killing, but other than that, aside from the money aspect of it, was that the driving force behind why you decided to focus on working with larger companies typically, or were there other reasons for you in making that decision?

Steve Shu:  I think it has to do a lot with sort of my appetite.  I really like the dynamic, creative, innovative process with startup situations and it requires a fairly broad skill set so it involves some finance, it involves some knowledge of legal, you know, perhaps some strategy background but you also have some special skills in terms of either acquiring customers, negotiating with customers or whatever it is.  I do like the variety.  I would say that’s probably one of the major driving factors.  I think people also kind of view my technology background and business background as very suited for that as well, so I think both of those things align quite a bit.

Mike Zipursky:  Okay, because it’s interesting.  On one side you’ve worked with companies that are, like you’re saying sweet spot is $200 million to a billion or two, and on the other side you have the pure play startups that are just really getting going, some I would imagine are pre-revenue or just kind of getting revenue going a little bit.  Typically, those are quite different markets and the resources that are available in each of those groups are considerably different.

Steve Shu:  Yeah.

Mike Zipursky:  How do you find it working?  Has that been a benefit to you or has that been a disadvantage when you’re going to sell your services and to win more business, whether it’s with the smaller startup or a larger organization?  Has it been a benefit to have those polarizing experiences in some ways or have you found that it works out for you?

Steve Shu:  I think it works out pretty well.  I would say that I’ve had to change the balance from time to time.  One of the things, for example, with the large companies that are looking for these startups, I think they’ve been attracted to my kind of background in working with the pure startups both as a consultant and as an operating manager because you’re not just like a consultant.  You’ve done that as well, so I think they see value there.  I think that when you go after the smaller companies, I think that they’re attracted to the knowledge of working with larger companies but that doesn’t count so much in the startups.  It’s really getting things done in kind of the startups is what they really like.

A lot of those opportunities in the startup space, I actually got involved with based on relationships that I had with past managers, senior managers, or angels that became investors, that type of thing.  That’s really something that I have done without a lot of marketing, if you will.  It’s more networking and it’s a process of you know, it’s a very special fit, I would say.

Mike Zipursky:  Sure.  On that note, one strategy that you mentioned that has worked well for you, especially in your earlier years was aligning yourself with other service providers and kind of creating strategic relationships.  Can you give us a bit more insight into why and how you did this?

Steve Shu:  Yeah.  I think the why is so – when you’re practicing they’ll always have this issue with when you’re selling you’re not delivering, when you’re delivering you’re not selling, and so by partnering with other folks you kind of stabilize things a little bit more.  You can get referrals through the people that you network with.  You can also work delivery issues when you’re trying to sell something and you have to figure out how you can deliver.

Some of the partnerships that I’ve done since I worked in the technology space are really around like the incubation phase where there may be some initial product development and requirement specification and prototyping.  I developed relationships with those that are technology analysts where they’re kind of digital branding type companies and they assist with that piece of the process.  So, yes, I think it really comes down to sales and delivery, and then since a lot of these startup initiatives are not, you know, it’s not like people publish in the newspaper, “We’re starting up a new division.”  You have to rely on the network a little bit to get an idea where these opportunities might be, if you will.

Mike Zipursky:  That makes sense.  The way that you would approach that or the way that you would recommend the people approach that, would that be to think about, you know, if you’re targeting, let’s say in this case, startup companies, think about what type of services and products might startup companies need and then try and align yourself with those specific providers?

Steve Shu:  Yeah, I think that’s a good way to do it.  I think that you really have to think about what it is that they’re offering then you’re going to have to have kind of that real credible story.  You might built it in slight a little bit because for example when I moved to Texas for the first time and I had no contacts I had no idea what the companies were in the Texas area.  I had to basically network around a lot, get a feel for the market and figure out how we might be able to help each other on various projects that were in process or project prospects.

Mike Zipursky:  Yeah, it’s a great approach.  If you can add value and you can’t do everything yourself, why not connect with others that can compliment your offering and vice versa?  Steve, you got started at a large traditional consulting firm then you moved to working on a startup company yourself with others.  After that, you went on out on your own.  My question is, why did you decide to become an independent consultant?  Why not just kind of stay within the traditional consulting world where pay can usually be fairly good, you get to travel the world and have a nice expense tab and so on, or the startup world where it’s very high-pace but you’re working with a bunch of people, you could be the next billion-dollar company.  Instead, you decided, “Okay, I’m going to go out on my own and become a consultant.”  Why did you choose that?

Steve Shu:  I think one aspect was that, again, I had a real appetite for working with startup situations, and I would say that when you work for a larger consulting firm you don’t always get the fortune of working in those environments.  I really wanted to be involved in kind of controlling which companies that I worked with and the types of engagements.  Also, important for me at that time was geography as well.  I’m married to an academic.  Until my wife is kind of tenured, you can move around all the time so I wanted to have a structure where I could move around a lot and also control where I was at.  I think those were the two biggest factors that shaped going out on my own.

Mike Zipursky:  Okay, that makes good sense.  Let’s get into today’s action bite.  You mentioned that you’re going to share some thoughts and tips for other consultants on making investments.  Maybe these are investments that people may not have thought of before and that word triggers thinking about financial investments, but when you’re going to talk about this you’re actually talking a little bit more about – I mean, it can involve finance as well – but knowledge investments and as a consultant I think this is a really important area.  I’m looking forward to hearing what you could share with us on this.

Steve Shu:  Yes, the area that I was thinking about talking about was around making investments and that they are the intellectual capital type of things.  As a consultant I think unless you’re, if you want to have sort of market stability, you know, market change and people’s needs change.  You have to invest in intellectual capital.

Every few years, if you will, I try and invest a little bit of my time in a particular area so the past three or five years, for example, I’ve been investing in the areas of design thinking as well as behavioral economics, which is an area that kind of combines psychology with other disciplines like marketing finance and policy and things like that.  I think the investment comes in both areas of explicit information such as books, articles, academic papers, but also getting involved in tacit things like networking and applying the knowledge and then forming one’s own models.  Then you get to a point where you need to actually do that on a project, so typically where I would take new ideas.  The best way to test these things and to get them introduced would be to find a way to incubate it within the current client, because these clients have trust with you, working with you.  You don’t have to market it as a new thing but it’s kind of this other area that you might be working on.

That’s sort of the conceptual aspect of making investments and I think it’s very important for consultants to make significant investment in thought leadership or development because markets are changing all the time.

Mike Zipursky:  Steve, let me ask you.  I think it’s a great point and one that I think not enough consultants really consider.  Let me start by asking you why.  Why should people really make an investment?  If they’d been in a specific area and they’re kind of comfortable with it, what’s the reason that every three to five years they should consider making a new investment?

Steve Shu:  Well, for me it’s definitely in terms of interest and appetite.  I think that’s a good thing, but I think that a lot of offerings they end up becoming stale over time.  For example, if you think about mobile technology, if you will, and the prevalent use of mobile applications.  This wasn’t here five years ago.  You have to get kind of early on in understanding what are all the possible things that people are doing with mobile technology and what are some of the new applications, what are some of the new fabric that people are weaving to get applications.  I think you have to get used to these new shifts.  I think ten years is too long, if you will, and I think for you to develop some sort of expertise it’s not going to come in a year.  It’s going to be a long enough process where you’re going to have getting some understanding of an area and then figuring out how you’re going to apply and then really taking it to the next level.

Mike Zipursky:  Right.  Okay.  That makes a lot of sense.  I’m a big believer that consultants should really focus on building up their specialization not just for themselves to become experts but for the market to see them as authorities so that they can really build their thought leadership.  It makes the whole marketing piece more interesting and allows them to really stand out from the competition and become more confident and competent.

Steve Shu:  Just to interrupt you for a second, just one point.  I don’t necessarily recommend going into a totally unknown area.  I would base it on where you are right now, what portfolio do you have.  I was doing a lot of strategy development and so we’re seeing inklings of design thinking really becoming kind of permeating a strategy space and so to stay ahead of that curve, you know, I don’t know when Blue Ocean Strategy came out but it was much after like Michael Porter’s competitive strategy framework, design thinking started to permeate so you want to get a little bit ahead of the curve, if you will.  It’s not a totally new area.  It’s around, where you see the center of gravity.  It’s kind of a new thinking in your existing space.

Mike Zipursky:  That’s perfect, because that was my next question, how should people choose where to make their investment.  You’re saying if you’ve been focusing really on mobile, or let’s say before you were focusing on web applications and cloud software or service types of applications and you saw on the horizon that mobile’s going to be big, then that’s connected enough around your core area of expertise, and so it would have made sense at that point to, you know, make an investment into understanding mobile and then how that affects your clients in the marketplace, whereas you wouldn’t necessarily be in a software or service and then decide, “Okay, I’m going to start studying now about” – productivity might be a good one – but maybe you wouldn’t start studying about colors or how that influences brands.  That obviously would be quite separate from your core area of expertise.

Steve Shu:  That’s how I think about it.  I think it’s okay to have other interest but I think in investment you want to cross some actual milestones and I think it’s better when it’s sort of connected in some way to what you’ve been doing.

Mike Zipursky:  That’s makes a lot of sense.  I think that’s a good food for thought for everyone listening, to really take a minute and consider, you know, what are you doing right now, and that’s great – potentially what are you doing – but to take a few steps forward is unthinkable.  Where do you want to be in the next few years and where will your clients be and where will they want to be, and how can you position yourself and take a strategic position now and make that investment like Steve is suggesting so that you’re not trying to just stay abreast at everything going on but you’ll actually be one of the leaders, one to fuel the forefront that your clients can call on confidently and really position yourself as someone at the top of their game.

Steve, thanks for sharing that.  I really appreciate your time and doing this interview.  It’s been a lot of fun.

Steve Shu:  Yes, I enjoyed it very much.  Thank you for inviting me.

 

 

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