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Hey there,
Yesterday, we dove into how the AI consulting market will grow by 8X over the next 8+ years. I also outlined 4 questions to shape your business model:
- Money: How much do you want (per year)?
- Team: Going solo? Or do you have (or plan to have) a team?
- Lifestyle: How many hours per week would you personally put in to make this happen?
- Timeline: How many months do you think it’d take to hit that target?
Answering these questions sets your foundation for our new AI consulting program (opening this Wed, July 10th).
Today, let's dive into 4 consulting traps to avoid as you refine your business model. Let’s dive in.
Pro Tip: These are infinitely more valuable with your answers to the questions above. You don’t need perfect answers - even a rough idea will work. Take 30 seconds to come up with them if you haven't already.
Consulting Trap #1: “Revenue Rich”, “Profit Poor” 📉
When I looked at the 1,200+ applications for our new AI consulting program, ~75% of applicants quoted their goals in revenue, instead of profit.
Nothing wrong with that, but the risk of falling into this first trap of “Revenue Rich, Profit Poor” is higher.
What It Looks Like:
You’re landing client after client. End of the month comes. You glance at the books. Record-breaking revenue.
NICE. But wait, what’s this?
A little overhead here. A bit of tax allocation there. Oh yeah, and some client scope creep over there. Hmm. And there’s that independent contractor you needed to hire to help. And just like that, your take-home pay isn’t terrible…but it’s the same as it was every other month.
That. Is. Not. Very. Inspiring.
But that, my friend, is the “Revenue Rich, Profit Poor” trap, and it’s all too easy to fall into, especially when we’re focused on growth and scaling.
Why This Happens:
- Overhead Costs: As your business grows, so do your expenses. Office space, tools, software subscriptions, and team salaries can quickly add up.
- Undervalued Services: Sometimes, we undercharge for our services, aiming to attract more clients, but this can erode our profit margins.
- Inefficient Processes: Without streamlined processes, you might spend too much time on low-value tasks, eating into your profits.
Steps To Avoid This:
1 - Check your original goal: Revisit your “money goal” for your AI consulting business and ask yourself: “Will hitting that number give me the freedom I want?”
2 - Select your freedom goal: Break down what financial freedom looks like for you. There are generally three levels:
- Financial Security: Enough to cover basic living expenses.
- Financial Independence: Enough to maintain your current lifestyle.
- Financial Freedom: Enough to live your ideal lifestyle without financial stress.
3 - Set your profit goal: Do a ballpark estimate of the profit you need to achieve each level.
Try This Right Now:
Take a moment to reflect on your current financial situation.
Are you aiming for impressive revenue numbers without considering what you actually take home? Adjust your goals to prioritize profit, ensuring you build a business that supports your desired lifestyle.
Consulting Trap #2: Growing “Too Big, Too Fast, Too Soon” 🏢
What It Looks Like:
You’ve landed a few big clients. Workload is increasing so you hire more people to keep up. Before you know it, your head count is up, and now your expenses are up, up, and away 🦸🏻! But your efficiency? Well, it’s in a free fall.
This is the “Too Big, Too Fast, Too Soon” trap.
Where, without careful planning, we grow the team, tech, and complexity of the business -- which can turn into a management nightmare, and a prison for your profit. Oh, and let’s not even talk about the stress.
Why This Happens:
- Increased Overhead: More employees mean higher salaries, benefits, and office/infrastructure costs (even if everyone works from home).
- Management Challenges: Managing a larger team requires more time and effort, potentially diverting you from core business activities.
- Inefficient Processes: Rapid expansion is the best way to break your operations if you’re not on top of your processes.
Steps To Avoid This
If you’re planning to stay solo, then skip to the next section. If not, then…
Path 1: If you’re a solo, but planning to grow
- Are you managing your current workload efficiently?
- How many people do you really need to hit your goal?
- How soon do you need them?
- What specific roles will they fill?
Path 2: If you have an existing team…
- Consider growing your AI consulting new line of business as a solo practice first
- Optimize your processes and make them as efficient as possible.
- Only then, start adding team members to scale up.
The Big Question To Ask Yourself:
Should you start your AI consultancy as a solo - yes or no?
Consulting Trap #3: ‘Golden Handcuffs’ that ‘Chain Us to the Chair’ 💺
What It Looks Like:
Your consulting business is booming. Clients are knocking at your door, your income is rising, but so are your working hours. You find yourself glued to your desk, working long days and nights. This is the “Golden Handcuffs” trap—where high income comes at the cost of your freedom and flexibility.
Why This Happens:
- High Client Expectations: Clients often equate value with the amount of time you spend working for them, leading to unrealistic demands on your time.
- Lack of Boundaries: Without clear boundaries, it’s easy to overcommit and overwork.
- Work Addiction: The thrill of success can make us addicted to work, constantly striving for more without considering the toll it takes on our personal lives.
Steps To Avoid This
Step 1: Define Your Ideal Work-Life Balance
Forget about money for a moment. Imagine your perfect workweek. How many hours would you ideally work? What would your days look like? Seriously. Think about this.
Step 2: Filter Your Clients
Create a system to filter out clients who believe “value = time in chair.” Instead, look for clients who understand that value is in the results and outcomes you deliver.
- Red Flag Clients: Those who micromanage or expect constant availability.
- Green Light Clients: Those who focus on results and respect your boundaries.
Step 3: Set Clear Client Expectations
From the beginning, set and maintain expectations about what progress and success look like. Regularly communicate your milestones and deliverables to keep clients focused on outcomes rather than hours worked.
Step 4: Manage Your Workload
Implement systems to manage your workload effectively. Use project management tools to track your time and ensure you’re not overcommitting.
Your Turn: Knock this out (right now)…
Take a moment to assess your current work habits. Are you working more than you’d like? Are you tied to your desk, sacrificing personal time for client demands?
Or (be honest), is re-creating this situation one of the secret fears that could hold you back from building an AI Consultancy?
If it is, then it’s important to acknowledge it - that way, we can work on it together.
(alright, we’re almost across the finish line.)
Consulting Trap #4: Unrealistic Rigid Timelines ⌚
What It Looks Like:
You’re excited about hitting the profit goal for your new AI consulting business.
You set ambitious goals and tight deadlines, eager to see results. But as the days pass, you find yourself rushing through tasks, missing important details, and feeling constantly stressed. This is the “Hare” approach—moving too fast and risking inefficiencies 🐇.
On the other hand, imagine setting a profit goal that’s so far in the future that you lose motivation. Weeks turn into months, and your initial excitement fades. You find yourself procrastinating or even quietly giving up on your dream. This is the “Tortoise” approach—moving too slow and risking stagnation 🐢.
Why This Happens:
- 🐇 The Hare: Fast movers often miss crucial details, leading to problems in marketing, sales, or service delivery. This can cost you time, profit, and peace of mind.
- 🐢 The Tortoise: Slow movers risk losing momentum. Without clear, achievable milestones, the dream can fade, leading to frustration and regret.
Steps To Avoid This:
Step 1: Assess Your Natural Pace
- Reflect on your natural working style. Are you more of a hare or a tortoise? Understanding your tendencies can help you set a realistic pace.
Step 2: Come up with a “Hare” Goal and a “Tortoise Goal 🐇🐢.
- Look at your original timeline goal - if it was a “Hare Goal” then, try to come up with what the “Tortoise” version would be. And, vice versa, if you started with a “Tortoise” goal, imagine what your “Hare Goal” would be.
Step 3: Find The Average
- Your realistic timeline is probably somewhere between the two.
Your Turn: Consider This…
In business and life, there are times you may need to flip between “hare” and “tortoise” strategies.
Thinking about it that way might allow you to find the balance you’re looking for.
Want to have a “growth season” in your business? Then switch to a “hare” approach. Need a “rest and recharge season” season? Switch to the “tortoise” strategy.
Ultimately, to have flexibility means having the option to switch between both - even if you never need to.
Want Help With All Of This?
We covered a lot and, hey, thinking through all might not feel easy, but it’s worth it.
I mean, we’re talking about your AI consulting model - the one that allows you to work with dream clients, make a difference in the world, and live life on your terms.
That said, if you’d like an easier way to get all of this done, then keep an eye on your inbox -- tomorrow, I’ll share exactly how you and I can create your AI consultancy together inside our new program.
Personally, I’m proud of what we’re building, and I’m excited to share everything we have for you.
To Your Best Year Yet,
– Rob
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