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Comment by tptacek | Hacker News Reader

It is straightforward to get a body-shop consulting business to mid-7-figures.

In an acquisition of that business, you're going to get a very low multiple on your forward revenue. That's because, in general, you can't plug a body-shop consultancy into a bigger sales machine and amplify the profits; sales and delivery in those businesses are delicately balanced, and while they can be scaled, they can't be abruptly scaled by an acquirer.†

If you can bootstrap a product business, none of that caveat applies. You should bootstrap if you can!

† (but if your consultancy is throwing up 7 figure profits, you might not care about its sale value; just run the company for 10 years and bank the profits).

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"It is straightforward to get a body-shop consulting business to mid-7-figures."

Sorry, no. This is demeaning. It's not easy and it's not straightforward.

disclosure: Been running a "body-shop consulting business" (also demeaning) for 21 years in London, started about a dozen other businesses, 2 are 2MM+ rev/50% EBITDA profit recurring revenue companies.

Please don't demean "consulting" or "agency" work. In my experience it is way more challenging to win and grow business in those circles than it is in a well times SaaS company. I learnt a LOT doing that for a long time. The work is just as relevant.

They had to say it was straightforward because the previous poster had said they had done it. That's how the cocktail party works. ;)

My background is in this kind of consulting work. I'm not demeaning it.

What evidence do you have that it is "staightforward"? If it was, everyone would do it.

I think you've misconstrued the word "straightforward" to mean "easy". They're subtly different concepts.

What's the playbook?

Establish yourself. Specialize. Hire someone to increase delivery capacity. Sales capacity improves; ratchet delivery up with it it (get better at recruiting). Raise rates continuously and aggressively. Give it 2-3 years (once you've got your sea legs).

Be good at what you're doing and steer clear of commoditized work. You can't scale up a generic IT consultancy this way. Or maybe you can! I've never tried.

>steer clear of commoditized work

can you give more details about this from your own perspective? What does commoditized work mean to you and what should one assume about IT consultancies that tend to dabble in this kind of work? What are the problems with it in your opinion? Is this work even avoidable?

I have my own thoughts on this I just don't want to bias your response.

I'm curious to hear your thoughts, and I don't think you'll bias tptacek, he's spent a long time doing it.

I spent a lot of time in consultancies and started one myself, I'm not tptacek but here's my two cents.

Does the buyer see you as a commodity? How hard is it to find someone else to do what you do?(as defined by the customer not you) Can you differentiate yourself from competitors?

I think it really comes down to establishing a brand. And the problem is if you can't establish a brand you can't charge enough to fund growth (and at the beginning charge enough to give you time to grow the company).

A company with a brand can charge 2-3x their labor costs. A company without one can maybe charge 25% more than their labor costs and this puts you in the classic consultancy spiral where you spend so much time working for your business you don't have enough time to work on your business.

that's an interesting way to put it.

My thoughts are, as someone who worked from the consulting end and not management or sales, that when you hire sales people to bring in consulting work, they inevitably bring in commoditized work because sales people have unique incentives and pressures. If you are at the point where you are trying to get sales people to sell specialized consulting work, you aren't doing it correctly. It more or less has to sell itself with a brand as you say. Sales people don't want to spend the time building relationships or learning specialized information to sell to specific targets. So you can't scale up a small consultancy imo.

From the employee side, it is boring and meaningless work that burns you out. So taking on that kind of work will likely cause a death spiral in your firm. Your more senior employees will leave and you will have to hire more entry level employees and at that point you can only take on commoditized work and your brand reputation is shot.

I've seen big consultancies buy up small boutique consultancies and it always turns out badly. My own thought is if you are an IT consultant and you find yourself doing commoditized work, something has gone wrong.

Thanks for taking the time to write that out - totally fair take.

This is peak HN

Is it really? Do you want to understand what I'm saying, or are we here to dunk on each other? I think you have the impression I wrote a drive-by comment about building businesses, and, as I said upthread in response to you, before you wrote this "peak HN" barb, I have a little bit of experience here, too.

What's a little annoying here is that I don't even think the parent commenter is building consulting businesses. I was moved to comment at the incredulity people seemed to have about bootstrapping 7-figure businesses. One way to do that, straightforwardly, is to build a consultancy. But there are others.

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