Yesterday I shared the concept of a lifestyle boutique consultancy. That is a small and specialized business optimized for the founders' flexibility, fun, and fulfillment. For many of you who don't see yourself doing it alone or scaling up a firm, this idea can completely change your career and vision of work.
A considerable share of the readers here are solo consultants, and they frequently ask me what's the difference between running a micro consultancy and freelance consulting. While everyone is different, people find it helpful to look at the typical consulting journey to better understand the different business models and phases.
Freelance Consulting
After launching, most consultancies start in survival mode with the founders working alone - even if you have financial reserves or projects lined up, there's a lot of uncertainty if your new venture has a concrete future or not. You have to make the best with what you have. Almost all of them are bootstrapping to grow.
There’s no team to help with business development, client work, or administrative tasks. This is taxing for founders, who are left with little spare time, money, or flexibility. They often feel overwhelmed, and struggle to see a way to break the cycle - many end up relying on third parties (on-demand consulting platforms or selling their time to other firms) to pay the bills.
Statistics vary based on location, but around 3 out of 4 consultancies do not reach a point where they can employ anyone.
Micro Boutique Consultancy
The business becomes a boutique when a small team begins to form and the roles become more focused. The micro boutique can pay basic wages but it’s not very profitable - founders would almost always earn more by taking a corporate job.
If it manages to improve its financial performance and security, there are different follows boutique founders can take. It can become a lifestyle firm, which consists of a small dynamic team with relatively low overheads. Or it can decide to try to scale and sell the business, which will require big investments and create a whole different set of challenges.
Before getting to this crossroad, however, the first goal for most founders is to increase fee billings to afford to pay themselves a decent compensation and hire at least some help, instead of doing it all themselves.
It's Different, Not Better
So, how does a micro boutique consulting firm differ from freelancing? I'd say the main difference is the level of support and structure that is provided to the founder. As a freelancer, you are essentially on your own. In a micro consultancy, you have some external support.
For those of you who are solo consultants, I'd like to highlight this doesn't mean freelancing is a poor option. It's different, not better. This is your business, and it should help you support your personal goals.
There used to be a time when freelancing always meant trading time for money - luckily, this is not the case anymore. But if and when you keep growing (most) businesses will grow with you, and founders hit a limit to how many tasks they can handle. Almost all successful "1-person consultancies" I know are powered by assistants and collaborators - not formal employees, but offering support the same way.
If you're interested in learning more about what the typical journey of building a lifestyle boutique consultancy looks like in practice, I invite you to attend one of our online workshops. They're free and live, and happen every two weeks. We discuss key indicators and benchmarks of lifestyle boutiques, and whether they're really the kind of consulting business you want to build.
By Danilo Kreimer
January 13, 2023