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#561: Should You Create a Networked Consulting Firm?

Posted By Mark Haas CMC FIMC, Monday, May 9, 2011
Updated: Monday, May 9, 2011
I see other consulting firms list a series of "affiliates" on their websites. What is this all about?

There are two strategies a firm can do to increase their service revenue, regardless of size. One is to add capacity in their main line of business and the other is to extend their service lines, either through new product/service development or cross selling through a partner.

A small firm or solo practitioner rarely has the opportunity or resources to add a lot of capacity unless they choose to grow in size. For many small firms, this is exactly what they do not want to do, particularly because they would give up valuable flexibility, speed and independence available to them as a small firm. Similarly, line extensions more than the natural introduction of evolved services or an occasional new product are also difficult.

A strategy increasingly used by small firms to build breadth of offered services is to create a network of complementary service providers. These are the "affiliates" you see listed on many small firm websites. An affiliate could provide functional expertise, added personnel capacity, geographic coverage, disciplinary extensions, stage of service extensions (e.g., planning, implementation, management may be different skill sets in some industries), or financial capacity. Your affiliate strategy depends on (a) what you need to strengthen or complete your business offerings, and (b) what you think might increase the confidence of your clients that you are capable of providing the next level of service.

Tip: List the three things that you are pretty confident are responsible for your not getting business recently. Was it lack of personnel? A missing area of expertise? Lack of financial capacity? Make a list of other small firms in your network that have these capabilities and identify what you might provide to them in return if you were to affiliate? Pick one firm to talk to this week to begin the process of a formal affiliation. As your discussions proceed, you will better appreciate what you might do together to strengthen both firms (i.e., the relationship could range from "looking out for each other" to a formal, vigorously pursued strategic alliance).

© 2011 Institute of Management Consultants USA

Tags:  collaboration  consulting colleagues  practice management 

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Comments on this post...

Michael E. Cohen CMC MBA says...
Posted Thursday, May 12, 2011
1. What is a reasonable number of affiliates to have? Just give a range.
2. How does a networked firm relate to a virtual firm, or are they completely different concepts?
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Mark Haas CMC FIMC says...
Posted Wednesday, May 18, 2011
The number of affiliates depends on the complexity of your intended services and the number you realistically can manage. Listing a dozen affiliates whose services you never intend to use (and whose services don't even correlate to yours) can backfire in the eyes of a client looking for a robust team. There is no right number but if you have a practice in one or two subject areas then 3-5 skilled firms or individuals with obviously related services seems about right.

My thought is that a networked firm consists of potential affiliates/partners and a virtual firm is one in which those components are or were already working together. Some people use the term virtual firm to mean a stable of potential consultants so there is no settled terminology here.
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