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David C. Baker on Understanding and Using Your Leverage in Advisory Work

Liston Witherill
Liston Witherill
5 min read

About This Talk

This talk is by David C. Baker and was recorded on September 30, 2020. You can learn more about David by:

Also mentioned during this talk:


0:00 Intro
4:01 Deciding Why You Do Advisory Work
05:40 How Leverage Relates to Advisory Work
07:18 Distributed Control
11:10 Where Does Leverage Come From?

Deciding Why You Do Advisory Work

The first step in establishing your advisory work is the most fundamental: why do you do it? Moving the needle for your clients must be part of the answer. If not, you won’t get the results you need to build further leverage or gain word of mouth and referral business.

You also have to make money at your advisory work. Sure, it’s great to get clients results, but you can’t sustain it unless you make enough money.

Enjoying what you do is nice-to-have but not required. David doesn’t believe that you have a “right” to enjoy what you do, but it can sure help.

How Leverage Relates to Advisory Work

During your advisory work, you’ll be thrust into moments when you have to use your leverage, and it’ll be obvious when it happens.

Clients must listen to you in order to make use of your advice. Sounds obvious, sure, but a client who doesn’t listen is a sure sign of a failed engagement. When clients listen to you, it’s a sign that the leverage you’ve created has paid off.

And clients are more likely to listen to you if you aren’t interchangeable. This closely relates to your positioning strategy and whether you have loads of competition, some, or none.

And finally, having leverage means you won’t be a trapped, marginalized order taker. This, in and of itself, gives you leverage in terms of flexibility and freedom.

Have Distributed Control

In every business relationship, control is spread across the advisor and clients. David calls this “distributed control,” and it has implications in how you do business.

For their part, your clients can limit your access to them and their team. They can limit your access to their data and infrastructure. They can limit your access to their time and attention.

The only control the advisor has is to withhold their expertise. David gives two examples, both of which are preliminary but illustrate the point:

  1. Imagine a group of army buddies holding down their fellow soldier while a medic amputates both legs in the field. It may be traumatic for everyone, but it’s only happening because it’s the best of all possible outcomes for the soldier.
  2. Imagine a pediatrician and a parent holding down a child to give them a shot, like a vaccine. It may look like torture from the outside, but the parent and doctor know that it’ll help the child in the long run.

In the case of the advisor, you have control over providing a remedy, but you can’t completely control whether your client accepts it.

Where Does Leverage Come From in Advisory Work?

There are 7 different ways you can create leverage in your advisory work.

1. Positioning

Your positioning is such that you see similar situations over and over again, and start to identify patterns in your clients and prospects. It’s like having a hidden camera in your clients’ offices, and you’ll eventually have the ability to finish the sentences your clients starts. It’s as if you know your clients better than they know themselves.

Strong positioning also gives you the ability to feature unapplied insight that clients can find on your website. So for instance, I have an article about a sales process for professional services firms. While the article contains a lot of good information, it’s not applied to individual readers, and if they want that kind of help they need to hire me.

2. Excess Opportunity

Having excess opportunity is a form of leverage in that you’re more likely to hold firm to your requirements and ways of working with clients. If you encounter a prospect who you’re not excited about, it’s easy to walk away when you have an excess of opportunity.

Excess opportunity means your less likely to “overinvest in the sale,” as Blair Enns says.

One way to create excess opportunity is to simply limit your availability by working less hours. Another way to create excess opportunity is to generate more leads and opportunities.

3. Care Calibration

David suggests a thought experiment where you have only 100 “care tokens.” Each time you care about something, you give a token away, and you have one less thing you can care about.

Using your leverage means you don’t get too attached to any client or engagement, and you allow more passive engagements to happen. In other words, you shouldn’t care too much if your clients don’t.

Some signs that your clients care about the engagement include what they’re willing to pay, whether they show up to meetings on time (or whether they show up at all), and whether they take and enact your advice.

4. Black Boxes

Black boxes are frameworks, systems of thinking, or other intellectual property that you create throughout the course of your advisory work. Black boxes codify your pattern recognition into repeatable systems and protectable assets that you have complete access to, but your clients have limited or no access to.

Black boxes could be a research or work tool and always make for quicker diagnosis and more accurate problem-solving. David’s built 4 of these, so it takes 5 or 6 years for him to build each one, and he even spent over $300k on a black box that he developed.

Occasionally he encounters some firms that have developed their own black boxes, but it’s rare – about 1 in 20.

5. (Secret?) Data

Secret data is confidential and unassailable and allows you to be more objective and provide empirical support for your opinions and recommendations. So if you provide advice for clients on how they should structure their finances, providing data backing up your claims provides additional leverage, especially if the data is secret and validated.

David says that if you don’t have any data, you’ll be tempted to “make stuff up” – don’t do that!

6. Prepayment

It seems counterintuitive at first, but accepting prepayment gives you leverage in that you’ll be more honest with clients. If you don’t get paid until the end of an engagement – fully or partially – then you may avoid upsetting your client, for fear of not receiving your payment.

Prepayments also test a client’s seriousness to work with you and pursue change. David recommends you keep your prepayments in an “unearned” bank account so you’re not tempted to spend funds you haven’t yet delivered on.

7. Flexible Scope

Having a flexible scope throughout an engagement gives you leverage in that it doesn’t overcommit you before you have a chance to see how much they care about the work. If they care, expand the scope. If they don’t, contract it.

On Clients and Love-Hate Relationships

When should clients love you, and when should clients hate you?

There’s an arc to every client engagement, and it should start with clients absolutely loving you. Over time, they’ll come to hate you because you provide difficult or challenging advice. Perhaps you tell them exactly what they don’t want to hear. But eventually, clients should come to love you because they’ve enacted some of your advice and they understand that your advice was designed to improve their condition all along.