Time to hand in your homework… to yourself! 🙂
At this point, you have an inventory you made based on the first installment of this micro workshop. Now, you need to enrich it with some rough quantitative measures.
Go back through your inventory and score each item according to the criteria below. As you do this scoring, use a scale of 1 to 3 (whole numbers only) to keep things simple and avoid analysis paralysis. 3 represents a lot of something (access, credibility, etc.), and 1 represents very little of it.
You’re using a spreadsheet for this inventory, right? If you’ve listed each item in your inventory on a different row, then just add more columns to keep track of the score you give each item along each of these aspects:
Access: how deep does your business or personal network extend into this market vertical or area of opportunity? Score from 1 (very little) to 3 (a lot).
Credibility: how credible will prospects find you? Have you produced results for them before? Can you “read their mind” during a sales conversation? Score from 1 to 3 (whole numbers only!).
Impact: For rows on your inventory that describe actual client work (rather than verticals or horizontals or entrepreneurial theses that you are interested in but have never worked in before) score the impact your work had for your client. Did it make them money, save them money, increase efficiency, or help them achieve a strategic advantage of any kind? If so, that’s impact. Your scores should be relative to other work your business has done, not work other businesses or your competitors have done. Score from 1 to 3. (For example: imagine you have completed a project in each of 3 different verticals. The projects saved your clients 5%, 7%, and 10% of something, respectively. At one of those clients, you are aware a competitor saved that client 15%. You would rate the impact your work had at each of those 3 clients based on your performance, not your competitors performance.)
Profitability: For rows on your inventory that describe actual client work, score how profitable the work was for your business. Score from 1 to 3
Interest: What is your personal level of interest in this area? If you’re a small firm or soloist, your ability to delegate away uninteresting stuff may be limited, so set a low score for stuff you’re un-interested in. Score from 1 to 3
Assess Your Risk Profile
There’s no “scientific” way to measure risk or a person’s risk profile. This is part of what makes it such a fascinating phenomenon to study. It’s somewhere between falling in love (quite mysterious; very unmeasurable) and predicting the weather (possible but always imperfect).
If you find this upsetting, that in itself tells you something important about your relationship to risk: you dislike the uncertainty part!
That said, your answers to a few simple questions about your feelings about and behavior with uncertainty, potential financial loss, and volatility can lead you to a reasonable understanding of your risk profile. As you answer these questions, you certainly can try to fool yourself, but that’s on you. 🙂 If you attempt to give honest, objective answers, this risk profile self-assessment will be more useful.
Here it is: https://philipmorganconsulting.com/risk-profile-self-assessment/
Please take a few minutes to complete this self-assessment now.
Create A Shortlist
At this point, you almost surely have a big, messy inventory. Let’s turn it into a more usable shortlist.
You’re using a spreadsheet for this inventory, right? I hope so, because I’d recommend at this point you add two columns containing formulas:
Aggregate score = Impact score + Profit score + Interest score
Risk score = 7 - Access score - Credibility score
Your spreadsheet will look something like this:
At this point, each opportunity described in your inventory has a rough quantitative score describing the potential attractiveness of that opportunity and the risk of that opportunity. Is this scoring perfect? No. Can you totally delegate your decision making to this score? No.
What you do have is a simple, useful way to prioritize opportunity and weigh risk. This is profoundly useful for moving you into a more objective place from which to make the specialization decision.
Sort your inventory in a way that puts opportunities with the highest Aggregate score at the top of the list.
Flag opportunities that are too risky. You’ve got your risk profile score from the self-assessment, so flag any items on your inventory that have a risk score that’s higher than your risk profile score. The measurement scale of the risk profile self-assessment is designed to match the measurement scale of the inventory risk score, so you can use your risk profile self-assessment score as a simple “risk threshold” and discard items on your inventory that exceed that risk threshold.
Now flag opportunities that have one of the following deal-breaker flaws:
Low importance: Buyers see the service offering as un-important. Trying to change their perception is somewhere between difficult and impossible, so treat this as a deal-breaker flaw.
Excessively long buying cycle: If you have the runway to handle a long buying cycle, great! But if you don’t, it’s a deal-breaker flaw.
Accessibility: A market with 10,000 prospects that you can’t reach is the same thing to your business as a market with 0 prospects. Do you have a repeatable way to access at least a few buyers or decision-makers or recommenders? If not, then you’ll need to create one to successfully move past this potential deal-breaker.
External forces: Are any external threats to your market apparent? Keep in mind that external forces (changes in regulation, disruptive competitors, economic impacts focused on a single sector) are not always a threat to you even if they are a threat to your clients. Your value as a specialist consultant may come from helping your clients navigate external threats.
Marketing approach: Do you understand what marketing approach will work well for the prospects you want to reach? You can not dictate to your prospects which marketing approach is ideal for reaching them. They get to decide that, and you can only decide whether you want to work with their preferred approach(s) or be ignored.
You now have an inventory that’s sorted by the attractiveness of the opportunities, and you’ve flagged specialization opportunities that are potentially too risky or suffer deal-breaker flaws.
You have a shortlist.
Tomorrow you’ll learn how to apply “guardrails” to this shortlist to further narrow it down.