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

CSP 003 | Earn Higher Consulting Fees

Steve Shu is a management consultant who has worked and consulted for Vodafone, Allianz, Nortel, Lucent and Wolters Kluwer, as well as taught courses in the business school at Irvine University. He helps incubate technology-oriented startup initiatives within other companies, including new business units, innovation areas, and new product development.  In this episode, Steve shares key tactics for securing high-figure consulting projects, the value of workshops and networking, and the benefits of making regular investments of increased knowledge within your area of consulting expertise.

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

We have Steve Shu. Steve is a Management Consultant who has worked and consulted for Vodafone, Allianz, Nortel, Lucent, and Wolters Kluwer. He’s also taught courses in the business school at Irvine University. Steve, a big welcome. 

Thank you very much for having me, Michael.

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

I help incubate technology-oriented startup initiatives with other companies. This includes things like new business units, innovation areas, and new product development. I also do some pure startups, but it’s startup initiatives within larger companies.

If we were to take that idea and break it down so people can get a better picture into exactly what it is you’re doing, could we play off in a project example or one that you’re comfortable sharing of what you did?

One of the clients that I’ve worked for 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 define the business, and also secure the funding at the CEO level to invest and developing the business units. We started off with the funding and the strategy for the business, then we went into planning and the incubation and acquisition of new clients and staffing in the organization. That’s a somewhat long process. The funding efforts can take a few months to half a year. Then we go through the incubation phases of getting those business started.

It gives people a better picture into what you’re doing and what level you’re at. Many of your projects for clients can be $100,000 and more. What does a $100,000 or $200,000 project look like for you? Is it what you described?

Those projects are broken into phases, so the funding project might be a self-contained project. 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 broken into pieces where the first piece is getting the funding piece. The second piece might be another project, which is around getting organized and developing the service offerings or the development. Then starting the prospecting phase with new customers or partners. Finally, the latter phases are scaling that up and incubating it out.

When you’re going in 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 a process that you need to work within? Are you coming in and they have no real clear idea of how to move forward and so they’re counting on you to bring all of your process and structure that you developed over the years in working with other clients into their business?

I have to bring in some structure of what the business planning should look like. We may leverage pieces of what they do in the rest of the business. Sometimes those structures are bulky for a startup initiative with lots of approval boards and very extensive financial modeling. That’s not that conducive for a startup, so it’s more tailored to be leaner. It’s a negotiated thing, but I would say that most companies probably don’t know how do they do these startup things within companies.

You’re talking about $100,000 and $200,000 projects. When you’re discussing with clients on a project of that size, what is it that you’re selling to that prospective client? Where are you focusing to be able to win a project of that size? Is it your process?

Two pieces. One is that you have to sell the vision. What could this business be? We may not know in advance, but we may have some rough idea. You have to sell the outcome of this life cycle, let’s say it takes six months, goes to few years; you have to sell the bigger picture. You also start with a starter engagement. It might be a workshop that I started off with, which is strategy development. In that case, we might build very specific structure for the workshop where we gather a lot of competitive intelligence. We interview folks one-on-one, we would bring on outside research perspectives, and then we organize that all in a workshop where the senior management can get together and debate the pros and the cons and the positioning and the relative risk that folks are willing to take. It starts off that way with a smaller step.

Investment-wise for the company, is that a $5,000 engagement? A $10,000 workshop? Is it $20,000? Is there a range that you work with?

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I work with various levels, but in order to get it quickly through the door, starting anywhere from $10,000 to $40,000 is probably easier. Otherwise, you start getting into the $100,000 levels. You have more levels of approval here. There’s probably some follow-on efforts where there’s a lot of prep that’s conducting a workshop. There’s an individual follow-up, and you might have some specific things like rough financial modeling to move the discussion forward. You’ve made a small investment to help advance everyone’s understanding of what the possibilities could be, and then work into this in larger engagement. You have to do some work behind the scenes to get these sessions to work. There’s a lot more work on the prep and the follow-up than in the session itself.

It’s to give people a perspective because some people will be new to consulting. What I think is good about what you talked about is the process of working with clients because when you’re speaking with a brand-new client, somebody you haven’t worked with before, rather than jumping right into much larger engagement and projects, you’re easing people in. You’re removing or lowering the barrier to entry. Your client is comfortable with an offering that is easy for them to manage investment-wise. You work hard to make sure that you are demonstrating the value that you can bring. The hardest part is to get your client’s trust. Once you built it up through the workshop, do you find it a much easier to sell then go to larger engagements?

By that time, you made some investment. The company has their initial temperature, and often they’re willing to go to the next stage. That includes not only committing resources like myself but committing other resources in the organization.

Would you also be interested in doing workshops if you knew they are one-time things and there was no real potential to moving forward? Would you even be open to those?

I try to think about it as a longer-term piece because the sales process and the marketing investment process requires a lot of my work. I definitely prefer to have those longer engagements. I do favors when I know someone well. I might do these smaller engagements to help them through a quick hurdle. There’s another interesting aspect of the model, but I’ve moved around in terms of geography. Sometimes in order to get myself used to the market, because I might not have any contacts in the area or geography, you might have to do some of these “get to know you” things.

When it comes to setting your fees for products, whether it’s a workshop where you’re charging a range of $10,000 to $40,000or a larger project with some phases and it could be $100,000 or more, how have you figured out over the years to charge? How do you arrive at those?

I come at it through a few ways. One is I have an idea of what the trajectory of the business is. You can look at what is the potential outcome for getting this business successful. Being one of the early folks in incubating it, you’ll look at the value. I find that a number of conventions that people see in terms of what is a typical workshop or what is the typical spending levels. It’s a craft, but I like to start with the outcomes piece. You want to get in the door, so you want to start smaller. I try and price those earlier engagements more on the value because as you get farther, 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 there, they’re looking at you more as a contracted labor. It’s harder to command those larger returns.

You try and start off focusing more on the value side so that way you’re not locking yourself in by starting with an hourly because you will get locked down the road?

You always try and shot for value rather than the hourly-rate type model. I would say that as the time progresses and you’re working with a client longer, some of these clients I have worked for a few years, they come down in value because there’s other people that are in the organization. Unless you’re moving onto 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.

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

Yes, project structure then more to a retainer structure. If it falls off, then I might go to an hourly schedule. I try and hold that on more to retainer schedule.

Why did you decide to go after larger companies? You mentioned startups, which is a very small company, unless it’s a startup within a larger company. Is that what you meant? Are you working at all with the true, genuine, bootstrap startups that are getting going? When you said startup, did you mean startups but still within large organizations?

Both types. I focus on the larger companies. I would say the sweet spot customer is probably in the $200 million to $2 billion in revenue. That type of company is where I have most of my client base, but I do the pure startups either the bootstrap or angel-funded startup initiatives as well. I would say that in that arrangement, they have less money, and so it’ll be a mix of cash and some equity or options.

Clearly you can make more money or the potential for it in most cases unless you’re working with the next Twitter or Facebook or Instagram and you happen to own some stock and make a killing. Aside from the money aspect of it, was that the driving force behind why you decided to focus on working with larger companies? Were there other reasons for you in making that decision?

It has a lot to do with my appetite. I like the dynamic, creative, and innovative process with startup situations. That requires a fairly broad skill set. You involve some finance, involve some knowledge of legal. You have to have some strategy background, but you also have some specialist skills in terms of either acquiring customers and negotiating with customers. I do like the variety. I would say that’s probably one of the major driving factors. People also view my technology background and business background as very suited for that as well, so both of those things align.

It’s interesting because on one side, you’ve worked with companies that are worth $200 million to a billion or two. On the other side, you have the pure play start-ups that are getting going. Some of them are pre-revenue or getting their revenue going. Those are quite different markets and the resources that are available in each of those groups are different. 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?

It works out pretty well. I would say that I’ve had to change the balance from time to time. One of the things with the large companies that are looking for these startups, they’d been attracted to my background in working with the pure start-ups both as a consultant and as an operating manager. You’re not just a consultant, you have done that as well. They see value there. When you go off to smaller companies, they’re attracted to the knowledge of the with the larger companies, but that doesn’t count so much in the startups. It’s getting things done in startups is what they like. A lot of those opportunities in the startup space, I got involved with based on relationships that I had with past managers, senior managers or angels that became investors. That’s something that I have done without a lot of marketing. It’s more networking, and it’s a process. It’s a very special fit.

One strategy that you mentioned that has worked well for you especially in your earlier years was aligning yourself with other service providers and creating strategic relationships. Can you give us a bit more insight into why and how?

When you’re practicing consulting, you always have this issue with when you’re selling, you’re not delivering; when you’re delivering, you’re not selling. By partnering with other folks, you 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 then you got to figure out how we can deliver. Some of the partnerships that I’ve done, since I work in the technology space, are around 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. You have to rely on the network to get an idea where were these opportunities might be.

The way that you would recommend the people to approach that, would that be to think about, in this case if you’re targeting startup companies, what types of services and products might startup companies need and then trying to align yourself with those?

You have to think about what is it that you’re offering, then you’re going to have that real credible story. You might build it in flight a little bit. 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 Texas. I had to 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.

If you can add value and do everything yourself, why not connect with others that can complement your offerings and vice versa. 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 out on your own. Why did you decide to become an independent consultant? Why not stay within the traditional consulting world where pay can be fairly good, you get to travel the world and have a nice little expense tab or ride up the startup world where it is very high paced. You’re working with a bunch of people. You could be the next billion-dollar company, but instead you decided, “I’m going to go out on my own and become a consultant.” Why did you choose that side?

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

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. You’re talking more about knowledge investments. As a consultant, this is an important area.

The area that I was thinking about talking about was around making investments. They are the intellectual capital. If you want to have market stability, markets change, people needs change, you have to invest in intellectual capital. Every few years, I try and invest my time in summer in a particular area. In the past years, I’ve been investing in the areas of design thinking, as well as behavioral economics, which is an area that combines psychology with other disciplines like marketing, finance, and policy. Investment comes in both areas of explicit information, such as books, articles, and academic papers, but also getting involved with tacit things like networking and applying the knowledge and then forming one’s own models.

You get to a point where you need to do that on a project. Typically, 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. There’s another area that you might be working on. That’s the conceptual aspect of making investments. It’s very important for consultants to make a significant investment in thought leadership or development because markets are changing all the time.

It’s a great point and one that probably not enough consultants consider. Why should people really make an investment? If they’ve been in a specific area and they’re comfortable with it, what’s the reason that every three to five years, they should consider making a new investment?

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It’s definitely in terms of interest and appetite. A lot of offerings, they end up becoming stale over time. For example, if you think about mobile technology and the prevalent use of mobile applications, this wasn’t here five years ago. You got to get early on and understand 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 together applications. You have to get used to these new shifts. Ten years is too long for you to develop some expertise. It’s not going to come in a year. It’s going to be a long process where you’re going to have to have some understanding of an area, and then figuring out how you’re going to apply it and then taking it to the next level.

I’m a big believer that consultants should focus on building up their specialization, not for themselves to become experts, but for the market to see them as authorities, so that they can build their thought leadership status. It makes the whole marketing piece more interesting and allows them to stand out from the competition and become more confident and competent.

I don’t necessarily recommend going into a totally unknown area. I would base it on where you are right now and what portfolio you have. We’re doing a lot of strategy development, and we’re seeing inklings of design thinking permeating the strategy space. Stay ahead of that curve. Design thinking is starting to permeate, so you want to get ahead of the curve. It’s not like a totally new area where you see the center of gravity for a new thinking in your existing space.

How should people choose where to make their investments? You’re saying that if you’ve been focusing on mobile or you were focusing on web applications and cloud software as a service types of applications, and you saw on the horizon that the mobile is going to be big, then that’s connected enough around your core area of expertise. It would’ve made sense at that point to make an investment into understanding mobile and then how that affects your clients in the marketplace. Whereas, you wouldn’t necessarily be in the software as a service and then decide, “I’m going to start studying now about productivity.” It might be a good one, but you wouldn’t start selling both colors or how that influences brands. I thought that would be something that would be separate from your core area of expertise.

It’s okay to have other interests, but in investment, you want to cross some actual milestones. It’s better when it’s connected in some way to what you’ve been doing.

That’s a good food for thought for everyone, to take a minute and consider what are you doing and that’s great. Take a few steps forward and think about 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. You’re not trying to stay abreast of everything going on, but you’ll be one of the leaders, one of the people at the forefront, that your clients can call confidently and position yourself as someone at the top of their game. Thanks for sharing that and I appreciate your time.

Mentioned in This Episode:

Steve Shu
Blue Ocean Strategy
Michael Porter

 

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