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I am often asked by aspiring entrepreneurs whether they should start a consultancy firm. One of the biggest mistakes to avoid in your entrepreneurial journey is placing too much emphasis on consulting services. While it may be tempting to engage in consulting due to your prior experience as an employee and familiarity with the work, it’s important to be aware of the limitations associated with this approach. Consulting often leads to one-time revenue rather than recurring revenue, which can hinder long-term growth and stability.
The Attraction of Consulting and Its Potential Traps
When you’re coming from an employee background, it’s natural for people in your network to seek your advice and guidance. This internal consulting role, whether through informal conversations or program-based support, can easily become a default option for those who know and trust you. The demand for your expertise may draw you into consulting engagements with various individuals and organizations.
The Freelancer and Consultant Conundrum
While there’s nothing inherently wrong with pursuing freelance or consultant work if it aligns with your goals, it’s crucial to understand the implications. Relying solely on consulting can lead to a cycle of continually searching for new projects as each engagement concludes. This perpetual hunt for opportunities can be time-consuming and take away from focusing on the actual work you enjoy and excel at.
The Agency Model for Recurring Revenue
Contrasting with the consulting path, owning an agency presents a different business model that offers the potential for recurring revenue. With an agency, the work you have done in the past continues to generate income over an extended period. Clients pay for services not only from recent projects but also from work completed months or even years ago. This steady stream of income contributes to the stability and predictability of your agency’s financial health.
Balancing Consulting and Agency Ownership
While consulting can be a valuable component of your business endeavors, it’s important to strike a balance between consulting work and agency ownership. By diversifying your revenue streams and incorporating the agency model, you can establish a foundation for long-term success. This approach allows you to leverage the relationships and expertise you possess while also building a sustainable business that generates recurring revenue and fosters growth.
Dennis Yu
Dennis Yu is a former search engine engineer who has spent a billion dollars on Google and Facebook ads for Nike, Quiznos, Ashley Furniture, Red Bull, State Farm, and other organizations that have many locations.
He has achieved 25% of his goal of creating a million digital marketing jobs because of his partnership with universities, professional organizations, and agencies. Companies like GoDaddy, Fiverr, onlinejobs.ph, 7 Figure Agency, and Vendasta partner with him to create training and certifications.
Dennis created the Dollar a Day Strategy for local service businesses to enhance their existing local reputation and make the phone ring. He's coaching young adult agency owners who serve plumbers, AC technicians, landscapers, roofers, electricians in conjunction with leaders in these industries.
Mr. Yu believes that there should be a standard in measuring local marketing efforts, much like doctors and plumbers need to be certified and licensed. His Content Factory training and dashboards are used by thousands of practitioners.