David Blair is an award winning corporate strategist, facilitator, mentor, ICAEW Council member and regular speaker at ICAEW events, shares with us in this article his insights on the importance of a business model for a portfolio career.

Much has been written about the attractions and advantages of pursuing a portfolio career. The satisfaction of working for yourself, the ability to manage your own diary and the variety of different types of work are recurrent themes that draw people down that path. At the same time the availability of powerful and affordable online resources together with modern communication tools present opportunities to work with clients in ways that were not available even a few years ago.

The coronavirus pandemic has precipitated a sea change in the use of video conferencing and remote working which is completely aligned with the typical workflows of independent consultants. The increasing acceptance of these methods in the business mainstream will enable such consultants to develop new markets and delivery methods that have the potential to leverage that most precious of all commodities - their time.

Conversely, building a portfolio career presents personal and practical challenges that cannot be overlooked. There are several ways to address the basic needs of having an effective workspace with adequate IT and administrative support but building a personal skillset can be more challenging and is an ongoing process. Basic time management and scheduling is as important as the need for personal resilience and building a growth mindset.

At the same time the potential for “on demand” availability of skills can increase client expectations regarding responsiveness and the ability of their professional advisers to work to ever tighter timelines. Meanwhile, there is a constant downward pressure on fees in an increasingly competitive marketplace and you have to be clear about your positioning and offer in order to succeed.

You must approach your portfolio career as a business in exactly the same way that you would approach a business plan for a client. I have often found it helpful to view myself as my own client in order to check that I am not making unrealistic demands or failing to provide adequately for downtime or other important activities such as marketing or professional development.

That means that you must have a clear business model for your career as an independent professional consultant.

The term business model has been used in many ways and can cause much confusion. As accountants we often think immediately of a spreadsheet model producing detailed financial forecasts, but it can refer to a very high level approach telling the story of how a business works, or to the application of a very specific use of technology. It is easy to get confused.

It is easiest to think about your business model in terms of its relationship with your clients and the value you create for them. Building that value is central both to your strategic success and to theirs.

There are just three aspects to every successful business model.

Firstly, and most importantly, your business model is based on an understanding of what value you create for your clients that is important to them. Whether that value is important to you is completely irrelevant. Your opinion does not matter. The only thing that matters is whether your clients see that value as important.

Secondly, we need to understand how you create value for your customers. What infrastructure do you need to deliver that value proposition? The most important of these is your time together with the resources necessary to deliver your offering such as IT infrastructure and communications. You will also need to consider the regulatory framework within which you operate and the requirements that it imposes. 

The third aspect is what you capture back from clients as value in return. As an individual this is much more complex and difficult to define than simply the fees that you charge. It includes different elements that are personally satisfying and will differ for each of us. This is why portfolios often include a high proportion of pro bono work that is important to us but does not yield income. The important thing is to establish the income that you need and plan your chargeable time accordingly.
That is absolutely as complex as your thinking needs to be.

The problem that I see repeatedly is people who focus on the second of these elements when building their business model. In other words, they focus on a day rate and the number of hours that a task has taken to deliver. That is understandable; we are proud of the effort to gain and maintain our professional qualifications and we value our time accordingly. However, these factors of themselves add no value. 

If clients feel they can obtain a result of similar or better value elsewhere for a lower price, then you do not have a sustainable business model. The time you take to perform the work is irrelevant.

Of course, the apparently cheaper solution might prove more expensive to the client in the long term due to, for example, poor tax advice or inadequate business planning - but that is of no use to you in building your portfolio today.

In this series we will explore ways of building that value adding business model and building your portfolio career. Next time we will consider segmenting your client base and developing different value-based offerings for each segment

Author
David Blair MA FCA MBA
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