By Michael Feder
For many consultants, working with large corporations has significant appeal. With the revenues of the Fortune 500 greater than 75 percent of U.S. GDP, the impact of big business on the economy is hard to overstate.
Not surprisingly, in the consulting world, big business tends to draw the lion’s share of attention and focus as these are the companies that usually offer the largest projects and can support higher fees. But, while big business accounts for a large percent of GDP, it’s the middle market that is the real engine of growth and opportunity in America, as there are 140 times more middle-market businesses than large companies:
Consulting to the “middle” of the middle-market businesses range—which we’ll define as those in the $50 million to $500 million revenue range—can differ markedly from working with larger organizations. Having worked with multiple middle-market companies, from entrepreneur—and family-owned business to private-equity-backed or public entities, we’ve found there are six things consultants must do to successfully create value when working with middle-market companies. While a number of these may apply to big business as well, we have found these items to be consistently critical for consultants to create value in middle-market businesses.
I, the consultant, had delivered my report to my client, the CEO of a $50 million building company looking to rapidly expand his business. It covered new go-to-market potential, organizational enhancements and improved sales management processes. It was something I had spent two months working closely with the company on and I took great professional pride in it. A few days after delivering the report, the CEO called me into his office, which looked out on his team of sales executives and project managers. “It’s a great report,” he said. I smiled. “Some of this is just brilliant.” I beamed. “There’s just one problem: How the hell am I going to do any of it?”
My pride and face dropped. He continued, “You think those people out there can execute any of this? They’re too busy managing building projects. Who’s going to make sure all this gets done? Me? I work 80 hours a week. I can’t do any of this stuff.”
It was an embarrassing but important lesson. The best advice is worthless if the client can’t successfully act on it. For large businesses, with significant resources (human and otherwise), this may not always be an issue. But in middle-market (and smaller) businesses, where employees may be stretched across multiple job functions, this is almost always the challenge. To be “actionable,” then, plans need to:
• Fit the available resources, time and ability levels of the company’s employees manpower;
• Have reasonable (but defined) time frames, and convey an understanding of the time requirements involved;
• Be able to be staged in increments that can provide incremental gains and avoid taxing the organization;
• Have clear and compelling outcomes that reward effort.
BE SIZE—AND STAGE—APPROPRIATE
The brand consultant finished his pitch, confident that it had been both engaging and impressive. He covered value questionnaires and focus groups, color consultants and graphic designers. He even had spent time going over reputation management via ongoing social-media monitoring, the results of which he felt truly separated his firm out from competitors. When he finished up, he believed his six-figure proposal would be accepted within the week. He was truly stunned to receive a polite call a few days later saying the company had chosen someone else. “Why?” he asked. “I truly believe what I proposed would be perfect for you.”
“Maybe in 10 years” said the head of marketing, “But right now, relative to where we are and where we want to be, it all seemed like a lot of overkill. Thanks anyway.”
Consultants in any field often have to guard themselves from pitching the work they want to do rather than the work the company really needs—and is ready for. Taking the time to understand where the company is in its development, what its goals are, both near-term and longer-term and what it can really achieve are critical to developing a proposal that can deliver meaningful value to the client.
“We have very limited resources for consulting projects. Why should I use my money and my people’s time to work with your firm?” asked the middle-market company CEO of the president of the boutique consulting firm sitting across from him. “Well, I am sure the consulting firms you have used in the past were great,” she started by saying. He nodded. “And I’m sure at the end of the project, you have a very impressive report, in a very thick notebook that covers all the angles of their study,” she continued. He nodded again. “In fact, I wouldn’t be surprised if you had a number of your reports on shelves or in drawers in this office,” she went on. He smiled, and glanced over at a large cabinet.
“I can promise that you won’t get a big report at the end of our engagement, but what you will get is us working alongside your people to deliver results.”
And that was the start of a very positive relationship.
LEVERAGE INTERNAL RESOURCES
Middle-market companies may only be able to afford consulting teams of one to two people. In these instances, it is more important than ever to leverage the client’s good work and maximize their effort. Be sensitive to client resources day-to-day responsibilities and the concentration of knowledge and decision-making at the top. To quote the words of one mentor, “Good consultants show how smart they are. Great consultants show the client how smart the client is.”
The executive team of the manufacturing business— which consisted of the founding husband and wife and their two most-trusted employees—was tired after a day of hearing pitches from consultants. They knew they were struggling to stay price competitive and that there was likely serious margin loss in their plant operations but also knew they needed outside help to drive change.
After listening to four proposals, all of which sounded remarkably similar, the company’s president decided to cut the last meeting short.
“Let me guess,” she told the two people on the other side of the table. “It will take six to eight months for you to do your evaluation and then another two-to-three years to implement your recommendations.”
“Sounds like you’ve been talking to a lot of firms,” one of the consultants said. “Let me let tell you everything you need to know about us and how we will work with you though. It comes down to two things that are the foundation of everything we do:
First, you can analyze anything in four to six weeks. Second, you should always apply the 80/20 rule and remember that fast is almost always better than perfect. Fix first, then improve.”
MAKE RESPECT THE CORNERSTONE
Middle-market businesses are generally built by operators—entrepreneurs and families who worked long hours turning an idea into a reality. Sometimes they have impressive pedigrees and educational backgrounds. Sometimes they are high school dropouts. If there’s one thing they have in common, it is a commitment to hard work and a willingness to make things happen. Who is really the expert at a middle market company? I would bet that it is the “operator.” To gain respect, you have to first start by giving them the respect they deserve.
Consultants should always remember that the ability to build and manage a business deserves respect. Having been on the company side, working with consulting teams on projects there’s a few things to keep in mind to make sure that you form a strong, respectful relationship with your client:
• Clearly communicate and avoid consulting jargon;
• Don’t be afraid to get your hands dirty;
• Treat everyone at every level with respect and courtesy;
• It’s the little things that often make the biggest difference;
• Remember, everyone already has plenty of work on their plate.
Working with middle-market companies can be incredibly rewarding, both professionally and personally but it does require taking a different approach than working with large businesses.
Michael Feder is a managing director and Gabe Koch is a vice president at AlixPartners.