Why Your Consultancy Needs to Solve the Right Problem
What Problems Will You Help Clients Solve?
Most consultancies fail because they solve the wrong problem. If you want to avoid that, reading this handbook will be the best time investment you can make this week. Let’s dive in.
You might have decades of experience, all the “right” connections, and a fantastic work ethic, but none of that matters if you’re solving problems your clients don’t care about.
Consulting, at its core, is about problem-solving. But it’s not enough to solve just any problem. You need to solve the right problem. One that’s big, expensive, and urgent. If you’re not helping clients with something they desperately want to achieve, your consultancy will struggle to survive.
The good news? Getting this decision right will make everything else easier, unlocking huge growth for your consultancy. But you have to be ruthless about what you will do and for whom. There’s no middle ground here.
Why We Start With Problems
A lot of consultancies develop services no one is going to buy. I see it all the time. They’ve spent years perfecting their offering, created shiny brochures, and built an impressive website. Yet, no one bites. No one sees the value. No one cares.
Why? Because these consultancies are solving problems that aren’t important and urgent. They're trying to sell umbrellas in the desert. Pushing for what they think clients need, rather than what they really want.
This is why we always start with problems in our go-to-market advisory work. It’s hard for founders to see how their past decisions limit their growth - like David C. Baker says, “we can’t read our own label from inside the jar.” But once they do, the impact is tremendous.
For instance, one of my clients, an ex-CMO, spent six months developing a rebranding service for tech platforms. And guess what? She couldn’t close a single deal. She was focused on “building better brands” but her clients couldn’t care less. They were bleeding out from customer churn. Once we switched gears to focus on that - boom! High-ticket clients started rolling in like carnival dancers.
Identifying Urgent Problems
How Do I Know If the Problem I'm Solving Is Urgent Enough for My Clients?
If your clients aren’t already throwing money at someone - anyone - to try to fix this problem, you’re not solving the right one. An urgent problem is like a house on fire. It’s not a “maybe later” issue; it’s “fix this, or everything burns.”
Think of your last three client engagements. Were they solving high-urgency problems? If not, go back and see what your clients were already spending money on. If they’re already investing in stop-gap solutions, it means they know the problem exists but haven’t found a real fix. These band-aid solutions might be working for now, but they’re temporary. That’s where you come in.
For example, if a company is spending money on freelancers to plug skill gaps but is still underperforming… that’s a sign that the problem runs deeper and they’d probably benefit from your strategic advice.
Another indicator of urgency is frustration. Listen for emotional cues during client conversations - anger or stress over ongoing problems are strong signals. Take note of that and use the information to reframe or design your services. That’s how you ensure the problem you solve is critical enough for clients to care.
Why Early-Stage Consultancies Must Pick One Critical Problem
Every consulting founder faces a choice. Do I solve a lot of problems and risk spreading myself too thin? Or do I pick one critical problem and go all-in?
For early-stage consultancies, the second option is the only viable choice. Here’s why: You don’t have the luxury of time, resources, or market share. You can’t afford to be a generalist. Generalists get lost in the noise. Specialists stand out.
Every minute you waste trying to be a jack-of-all-trades is time you could’ve spent becoming the go-to expert for that one massive problem.
Let me make this concrete for you. Think about a recent client conversation. You probably spent a chunk of it explaining the value you bring to the table, didn’t you? That’s a red flag. When you’re solving the right problem - the critical, urgent one - clients don’t need convincing. They already know they need help.
The biggest consulting mistake is trying to solve too many problems at once. The second biggest? Solving a problem that doesn’t matter.
Avoiding Commoditization Through Specialization
The Downward Spiral of Commoditization
You might wonder why consultancies need to focus so intently on one problem. Isn’t variety good? Won’t I get more clients if I offer a broad range of services? The short answer is no. Here’s why.
Every consulting service, over time, runs the risk of becoming a commodity. The more competition there is, the lower the price goes. Why? Because buyers start to see similar services everywhere. They become interchangeable in the eyes of the market. And when that happens, the only thing that differentiates you is price - and trust me, you do not want to compete on price.
Here’s what drives commoditization in consulting:
- Consulting isn’t regulated: Anyone can call themselves a consultant. There’s no governing body, no exams to pass, no licenses to get. That means anyone who reads a few books or watches a few YouTube videos can set up shop as a “consultant” and start undercutting you on price.
- Cost arbitrage: Consulting services can be delivered from anywhere. That means consultants in lower-cost countries can offer the same services you do at a fraction of the price. If the only difference between you and your competitors is price, guess what clients will choose?
- Education requires you to share expertise: In consulting, marketing means educating your prospects. You write blogs, give talks, and create content that showcases your knowledge. But here’s the catch: you’re not just educating your clients. You’re also educating your competitors. And they’re paying attention.
These three factors - lack of regulation, cost arbitrage, and educational marketing - create constant price pressure (I could comment on the impact we expect to see from AI in consulting, but that’s a topic for another article). Your fees will drop unless you do something to stand out.
Specialization: The Antidote to Commoditization
Specialization is your shield against commoditization. It’s how you rise above the noise. When you specialize, you’re no longer competing on price. You’re competing on expertise. And expertise, unlike price, is something clients will pay a premium for.
Specialization avoids commoditization for three key reasons:
- It builds expertise faster: The more you focus on solving a single problem, the more efficient you become at solving it. You develop insights that generalists can’t. And that level of expertise commands higher fees.
- It strengthens your value proposition: “Helping businesses grow” doesn’t mean anything to anyone. “Helping ecommerce brands in the food and beverage industry increase customer retention by 20%” is crystal clear. Clients with that problem will seek you out.
- It builds trust faster: When you specialize, you start to build a network of relationships within your niche. Over time, you become the go-to expert. People in your niche know you, trust you, and recommend you. The more trust you earn, the less you compete on price.
The narrower your focus (both in terms of what you do and who you do it for), the faster you’ll become the go-to expert in your field. And the more you’ll be able to charge. Simple as that.
Many consultants fall into the commoditization trap because they don't think strategically about the problems they solve. They focus on delivering services without questioning whether those services are solving the right problems.
Think of it this way: If you’re constantly trying to sell your services, it’s because you’re solving problems that don’t feel urgent to your clients. On the other hand, when you solve big, painful problems, your clients come to you. No more hard selling.
The trick is to stop thinking about what you do and start thinking about what problems you solve. The bigger the problem, the more your clients will value your solution—and the more they’ll pay for it.
Moving Upstream for Higher-Value Work
Moving Upstream: Solving Bigger, More Strategic Problems
Every independent consultant has heard the advice to “charge more.” I say this all the time, and it’s true. It’s good advice for most of you.
The problem with it is that it's kind of empty advice. You don't know how exactly to put it into practice. That's why we prefer to talk about problems.
The key to charging more isn't just about asking for it - it's about solving bigger, more critical problems for your clients.
Moving upstream, or picking larger problems to solve, is an actionable framework. It provides you with concrete ways to continually increase the value you create. And, by consequence, ratchet up the price of your work.
For example, take Joe, a marketing consultant who initially offered content writing services. Joe was stuck charging $200 per article, working long hours, and competing with freelancers and AI tools. Then Joe started asking, "Why?"
- Why do my clients need more content? Maybe their current content isn’t attracting enough leads.
- Why isn’t it attracting leads? Maybe it’s poorly targeted or lacks a clear call to action.
- Why is the content poorly targeted? Maybe there’s no content strategy in place.
By asking “why” over and over, Joe uncovered the real problem: his clients didn’t have a content marketing strategy. He moved from being a content creator to someone who builds entire content strategies worth $10,000 per engagement. That’s how you move upstream - by solving deeper, more valuable problems.
Case Studies of Moving Upstream Across Industries
This strategy of moving upstream can be applied to various industries, not just marketing. Let’s look at a few examples.
HR Consultancy
Before:
Critical Problem: Dealing with high employee turnover.
Solution: Conducting exit interviews and running employee surveys.
After:
Critical Problem: Increasing employee engagement and retention.
New Potential Service Solutions:
- Developing employee retention programs.
- Enhancing company culture through targeted initiatives.
- Implementing leadership training and development programs.
- Designing performance management systems that motivate employees.
These solutions lead to a more stable and productive staff, allowing the consultancy to increase the average engagement fees for their insights and services. Retention programs sold for $10,000. Comprehensive leadership training could be valued at $20,000.
IT Consultancy
Before:
Critical Problem: Correcting IT issues.
Solution: Fixing technical problems as they arise.
After:
Critical Problem: Replacing outdated technology leading to operational inefficiencies.
New Potential Service Solutions:
- Developing a comprehensive IT transformation strategy.
- Implementing cybersecurity measures.
- Conducting staff training programs to use new technologies effectively.
- Upgrading systems to improve overall efficiency and security.
By solving these larger issues, the consultancy avoided low-valued, high-competitive tasks that clients could purchase from freelancers. Fees also saw a huge immediate bump: An IT transformation strategy was considered a “bargain” for $15,000. A few months after reviewing their offering mix, the consultancy was hired for a comprehensive cybersecurity overhaul for $25,000.
Financial Consultancy
Before:
Critical Problem: Basic bookkeeping and tax preparation.
Solution: Providing routine accounting services.
After:
Critical Problem: Poor cash flow management and financial planning.
New Potential Service Solutions:
- Developing comprehensive financial planning and budgeting strategies.
- Offering investment advice and risk management.
- Implementing cash flow management systems.
- Conducting financial health assessments.
Same benefits as the other two examples. Less competition. Higher value delivered to clients, which led to higher fees. Stronger client relationships and reputation in the market.
You can move upstream no matter what industry or market segment you are in.
Framing and Prioritizing Problems For High Impact
Picking a “Solution-Neutral” Problem
One of the biggest mistakes consultants make is defining the problem too narrowly. They get locked into a specific solution before they’ve even fully understood the problem. This is a fast track to inefficiency and missed opportunities.
Here’s a better approach: pick a solution-neutral problem. This means framing the problem in a way that leaves room for different approaches and solutions. You’re not just solving one aspect of the issue - you’re addressing the underlying need.
For example: “Helping clients whose projects frequently run over budget” is flexible. It could be solved through better financial reporting, project management, or scope control.
But “Helping clients whose projects run over budget because of understaffing” is too narrow. It boxes you into focusing only on staffing when there could be several other big problems in play.
This doesn't mean your consultancy should solve a million different problems. It means clients and prospects are getting fiduciary advice. And likely will trust you to help them hire for, manage and/or oversee bigger projects.
By keeping your problem statement solution-neutral, you open up opportunities to offer a wider range of services and adapt your approach as needed.
The "Because" Test for Problem Framing
If you want your consulting clients to buy more and larger engagements, another concrete recommendation is to make sure the problems you solve pass the "because" test.
The main problem your consultancy chooses to solve matters. But so does how you communicate it, and how clients understand it.
Founders overcomplicate how they talk about the problems they solve. The biggest temptation is to dive into the details, get technical. This is a mistake most early-stage consultancies make.
Your critical problem statement should ideally do two things: Span many issues of concern. And contain no potential solution.
This ensures you can help clients in different ways. You can use different approaches. You can have more flexibility to design services and solutions.
This leads us to the "because" rule. You can use it to make sure you can add value in many ways. Your critical problem statement must be able to be followed by “because.”
Here's an example of what to do and what to avoid.
“Helping clients whose projects frequently run over budget” is a good problem statement. Simple, concise, and memorable.
“Helping clients whose projects frequently run over budget due to understaffing” is a bad problem statement. This means your consultancy will only focus on staffing issues - even though projects can run over for many other reasons.
You can see the first example passes on the “because” rule. You could write, for example:
- "Clients' projects frequently run over budget … because they lack financial reporting."
- "Clients’ projects frequently run over budget … because of scope creep."
- "Clients' projects frequently run over budget … because of poor PM skills."
Of course, at some point, prospects will be interested in your specific services. They will ask you how you structure your solutions - if you can help them with hiring, reporting, or project management.
But not at the beginning of their buying journey. Not the first time they visit your website. Not during your first intro chat.
A good problem statement helps you put more focus on what you help clients achieve, rather than what exactly they can hire from you.
The "because" test is also a powerful way to sell more to existing clients. They need to be reminded that you can help them in different ways - and leading with the problem, instead of the service, helps you do that. You can always come up with complementary services.
Remember: People don’t care about your offer, only what your offer can do for them.
Brainstorming and Prioritizing Problems
Before you start prioritizing, you need a solid list of problems to choose from. This is where brainstorming comes in. Aim for a good volume of ideas - your critical problem will iterate over time either way, and putting everything down on paper ensures you don’t overlook some powerful options to test.
Here’s how to get started:
- Brain Dump: Start by writing down every potential problem you’ve noticed in your client conversations, industry research, and personal experience. Don’t filter anything at this stage - write down problems big and small. Whether it's something that seems like a minor annoyance or a massive operational gap, list it all.
- Categorize & Cluster: Once you’ve got a good list going, start grouping similar problems together. You’ll quickly notice that many of the surface-level issues are actually driven by the same root cause. For example, complaints about “low productivity” could fall under a larger issue of “ineffective management” or “poorly designed workflows.”
- Expand: Take a step back and ask yourself: what aren’t clients telling me? Sometimes the most pressing problems are the ones they haven’t realized or can’t articulate. Look beyond the symptoms and consider what the root cause might be.
Not all problems are created equal, so you need a method to prioritize which ones to focus on. Here’s a simple framework to help you sort through your brainstormed list:
- Urgency: How pressing is this problem for your client? If it’s something they’re losing sleep over, they’ll be more willing to pay for a solution.
- Impact: How much is this problem costing your client? Big problems with high costs lead to bigger budgets for your services.
- Frequency: How often does this problem show up? If it’s a recurring issue, you’ll have more opportunities to help - and get paid.
- Expertise: Do you have a unique skill set or experience in solving this problem? The more confident you are in delivering results, the better.
Take each of the problems from your brainstorm, assign them a score in these four areas, and focus on the ones that score highest. The goal is to identify the problem that hits hardest across all four dimensions. That’s where you’re more likely to see traction from.
FAQ
What If My Niche Is Too Small, or I Worry About Limiting My Market?
Specializing can feel like you’re cutting off potential opportunities, but this couldn’t be further from the truth. High-growth firms (who average a 9x faster growth rate and 50% higher profitability than the market) are almost 3x more likely to have a strong differentiation - either via specialization or business model innovation (Spiraling Up, by Hinge Marketing).
If you’re worried about limiting your market, remember that your critical problem and your market segment are interconnected decisions, but the problem always comes first. Once you’ve identified the critical problem you want to solve, you can refine your market segment over time. Often, when you specialize, you discover new market segments that need your solution, and your niche evolves as you learn.
We recommend focusing on relevance first, then testing your assumptions as you go. Both the problem you solve and the market you serve will likely change and become clearer over time as you bring your services to market and gather feedback.
What Happens If I Pick the Wrong Problem to Focus On?
You’re not carving your focus into stone. It’s more like clay - you can reshape it as you go. The first problem you choose is just a starting point. Think of it like an educated guess. As soon as you start working with clients, they’ll tell you, directly or indirectly, if you’re on the right track.
What’s important isn’t getting it perfect on day one. What’s important is the direction you’re heading in - upstream, solving strategic problems, and becoming the trusted advisor, not just the hired help.
Don’t be afraid to test the waters. Take the feedback you get from early clients and iterate on your problem statement. The more you experiment, the faster you’ll hone in on the right problem to focus on. What matters most is that you’re continuously learning and adjusting based on the market’s response.
Stop Selling, Start Solving
The most successful consultancies don’t focus on selling services. They focus on solving the right problems.
Start by identifying the most critical problems you have worked on in the past. Ask “why” until you get to their root causes. Prioritize a single one, then build your consulting service around solving it.
And remember the kicker: In a sense, picking the first critical problem for your consultancy to go to market with isn’t as important as you might think.
There’s no way to perfectly guess which problems have real market pull. No amount of research or market analysis will fully prepare you. What seems like an urgent problem on paper may turn out to be low priority once you start talking to clients. And that’s okay.
Whatever hypothesis you start with will change and evolve. As soon as you try to sell and deliver your services, you’ll begin refining your understanding of the problem. The real learning happens when you’re in the market. Clients will tell you, directly or indirectly, what they’re actually willing to invest in solving. And that feedback loop is priceless.
What’s more important than nailing the perfect problem right out of the gate is knowing the overall direction you need to follow. This direction is about moving upstream. It’s about positioning yourself as a fiduciary, trusted advisor. It’s about building capabilities and solving root problems, helping clients avoid having to work on the same issues again in the future.
Remember, clients don’t just want a pair of hands. They want someone who can help them think bigger, move faster, and get to the real heart of the issue. When you become that person, everything else - clients, revenue, impact - falls into place.
