Why Productizing Your Expertise Is Worth the Extra Effort

I’ve written about productization before. I’ve held workshops and done speaking engagements on the subject. I’ve even written a white paper on how consultants and other service providers can productize their experience (see http://www.jlroy.com/JLROY_LearningCenter.htm for more information). The main premise behind productizing your expertise is that it makes something that is inherently intangible into a more tangible object, which is much easier to sell. By converting your expertise and experience into a concrete set of deliverables and/or work products, your prospects can arrive at their purchase decisions quicker, which will help you grow your practice faster.

But there is another reason – building lasting value for yourself by monetizing your “intangible” assets. Most owners of service businesses, such as consulting companies, struggle with how to develop an exit strategy. At some point in their career most people would like to exit the consulting business and take a little value with them in the form of cold hard cash. This may seem impossible since consultants generally have no hard assets to sell, but there are steps that can be taken to help.

You can start by making your business bigger than yourself. In the end, your ability to make money as a consultant is generally limited by the number of billable hours in a year. In many cases, the small consulting business never gets sold. It simply closes its doors when the partners retire, give up or get hired by a client. This is not an exit strategy - it is capitulation. If you can expand your business through productization, then others can deliver services based on your expertise and proven processes. If successful, you may eventually be able to sell that as an asset.
By providing value to your client over an extended period of time, your client will start to view you and your team as an extension of their own firm. At some point, it may become more cost effective to “buy” your team and their experience as opposed to continuing an expensive consulting relationship. If done properly, this can be an opportunity for you to take value out of your company in the form of a cash buyout or annuity.

As an example, my project outsourcing business (see www.ifconnect.com) recently did just that. My partner and I sold a project team and their respective hard assets, such as PCs, to a long term client. This asset transfer left the business intact, but allowed us to monetize the expertise we developed while working with this client over the years. As a result, we were able to take a profit on our investment of time while we continue work for our other clients. This also freed us up to complete the development of some products we had been working on for a while.

The client in this case, was willing to pay a premium to maintain the corporate memory and experience of the team they had been paying as contractors. In the end, the team itself is expendable to the consulting business. If the price is right, selling the team simply provides you with cash while simultaneously lowering your operating costs. In the end, our project outsourcing company became smaller for sure, but it also became more profitable during the payoff period and allowed us to do more of the kind of work we wanted. And as I always say, I would rather have a small business with fat margins than a large business with thinner margins any day.

In the end, we all need to provide value to our clients to stay in business. If you can productize your expertise in such a way that your business can expand by allowing others to deliver services on your behalf based on your program, you may just find a way to extract value from your business by monetizing these service assets. And that is worth the effort.