Looking Back: Best & Worst Ideas While Starting Sibyl

I recently revisited my old business plan from 2018. Needless to say, the brutal nature of startup Darwinism has morphed the "what" substantially over the past four years. There were quite a few stinkers in that old document.

But more interesting is looking back at the notes I made about the "how". Half of the list has stood the test of time, a quarter needed some adjustments, and the rest were just bad ideas.

I'll share some of the "how" winners and losers here.

The Winners

1. Charging Myself an Hourly Rate

I charge myself an hourly rate set at a 50% discount to my client-facing rate. For anything non-core, if I can pay someone less than I'm required to charge myself, I outsource it. Some of the activities where I couldn't afford to pay myself were office management, bookkeeping and payroll. This played a big role in keeping us overhead-light.

2. [# Contracts / # Clients] Must Be > 2.0

Every minute spent selling, is a minute not spent billing. Most consulting advice I see online suggests setting your rate at 2X your would-be-salary to account for the hidden cost work-winning. But I think that misses the mark. The focus should be on Retention. One-off projects are simply too expensive and will not scale your business. If I sense a project will be a one-off task, irrespective of outcome, I usually don't bother. Sibyl's rate is over 3.0 today, and as time goes by, we spend progressively less of our time selling.

3. Focus on Sizing Deals Through Value Creation, Not Time

Sure, our final quote will be broken down into various hourly rates - but our contract sizing starts with value. In strategy consulting, you are in a 10X game. A client will pay $100K to make a $1M problem go away, not more. So the logic is to work in reverse: figure out the size of the problem > divide by 10 > and ensure you can create sufficient value for that amount. If you can't, pass on the project, or you will not get repeat business.

4. Client Anonymity

This is really hard when you're just starting out, and the temptations are enormous to name-drop whatever clients you have to gain some credibility. Don't. In strategy consulting, you're entrusted with extremely sensitive matters. Your clients having absolute trust in your discretion is far more important than pasting some logos on your website. We've always left it to our clients to decide when, how, or if they want to mention us publicly.

5. Clean Chart of Accounts

I owe my younger self a beer for obsessing over the C.o.A. four years ago. We've hardly had to change it since. No account is too small that I don't care about it, and no account is too big that I don't know what's in it. There is zero ambiguity about what falls above or below the Gross Profit line. In my view, especially if you're not co-founding with a CFO, or if you're outsourcing bookkeeping, it's mission-critical that a Founder/CEO has complete mastery of their C.o.A.

The Losers

6. Rate Sheet Hell

A rate sheet is like a video game. You reward the client for good behavior, and punish them for bad behavior. And they should know the rules. If they set things up to be win-win, they get their reward in the form of discounts. If they don't, the trap door opens and they fall into the spiky snake pit. For our first two years, every proposal we did had bespoke pricing. I'd then try to negotiate my way into a decent deal. Today, every choice the client makes which helps us, also benefits them. And vice-versa. Every possible discount is transparent. Bespoke pricing and negotiated discounts were terrible ideas.

7. Not Having Client Personas

The Sibyl of 2018, was Gollum from Lord of the Rings chasing every shiny it saw. The problem is that it's easy to get first meetings, and easier still to feel like there's some opportunity there. Even when there isn't. The worst outcome is that you actually will win some of these low-fit clients, which just reinforces your poor decision making. If I was starting over tomorrow, I would craft a target persona on day one, and gradually refine my hypotheses. You need to identify personas where you're likely to have high win rates, high chances of repeat work, and satisfied clients. Our 2018 target market was "if it exists, and it has money."

8. Not Investing in a Good Contract

I'm 75% literate when it comes to legal matters, which is a dangerous place to be. It means I can't actually write a watertight contract, but also that it's easy enough to convince myself that I can. If you were to do a compare in Word of the 2018 and 2022 Sibyl Consulting Services Agreements, every difference you'd find is the result of some past black eye. It's no fun, as a small startup, having to invest thousands of dollars in a solid contract template. But if there were to be a "next time", a meeting with a good commercial lawyer in the first week of operations is on the cards. Someone like Faith Sing （沈信乐） perhaps :)

Hope this is of some use!

-- Theo