A founder recently asked me how to structure their new consulting firm: “Should I build a marketing team, sales team, and delivery team from day one?” My immediate thought: Bhai, why? When pressed, they admitted they hadn’t considered how this structure would generate revenue—they just assumed it was “what businesses do.” This mindset, coupled with a story from my past, reveals a critical blind spot: scaling fixed costs without a revenue-driven strategy is like building a palace on quicksand.

Let’s grab a chai and dissect why this happens.

The Fixed Cost Fallacy: When “Looking Professional” Becomes a Liability

Many entrepreneurs—especially in consulting—think hiring teams or slapping “CFO” titles on business cards will magically attract clients. Reality check:

  • Fixed costs (salaries, swanky offices) create financial handcuffs. They demand cash even if clients vanish. Look at Carillion, the UK construction giant. They chased £5B revenue with aggressive accounting and overexpansion, racking up £1.5B debt. When projects stalled? Bankruptcy. Poof.[1]
  • Premature scaling kills agility. A solo consultant spending £3k/month on a “marketing team” before securing clients? That’s like buying a Rolls-Royce to deliver groceries.
  • Growth ≠ validation. Remember that overconfidence in growth leads to reckless spending and collapse.

Cautionary Tales: Ambition Meets Reality

  1. Wework’s Global Implosion

    • Leased posh London offices at £50/sq ft before securing tenants. Result? Bankruptcy. Lesson: Fancy glass doors don’t pay bills.

  2. The Consulting “Floundering Syndrome”

    • Most consulting start-ups fail due to cash flow issues. Why? Many founders hire “delivery teams” before they’ve delivered anything. Or worse—rely on 1-2 big clients. Lose one, and game over.

  3. Wise Acre’s Ice-Cold Lesson

    • Not UK, but relatable: This popsicle start-up hired 13 staff and leased a factory before securing £1M funding. The 2008 crash hit, the investor backed out, and… bankruptcy. Revenue first, ego later.[2]

How to Grow Smart: 3 Rules for Surviving Year 1

1. Start as a “One-Person Army”

  • Delay hiring until revenue justifies it.
  • Ask: “Will this hire directly bring in £?” If not, skip. That “CTO” title can wait.

2. Validate Like Your Life Depends on It (Because It Does)

  • Close 5 clients manually before even thinking about a sales team.
  • Use variable costs: Co-working spaces, freelance designers, pay-as-you-go CRM tools.

3. Obsess Over Cash Flow, Not Vanity Metrics

  • Model “worst-case” scenarios: What if 50% of clients delay payment? You can probably survive a recession by keeping at least 6 months’ runway.
  • Ditch time-based billing. Switch to fixed or value-based fees.

The Bottom Line

Growth isn’t about org charts or titles—it’s about survival. As they say: “Jaldi ka kaam Shaitan ka” (Hasty work is the devil’s work). Before scaling, ask: “How will this decision put £ in my pocket next month?” If the answer isn’t crystal clear, slow down.

The UK consulting graveyard is full of firms that prioritised “looking corporate” over being cash-flow smart. Don’t join them.

Also, just because you can write good code does not mean you can run good business. Business is a multi-faceted responsibility in addition to the personal responsibilities you already have. So, learn the basics before jumping in.

Citations:

[1] https://www.bbc.co.uk/news/uk-42731762

[2] https://www.cbsnews.com/news/my-company-grew-too-fast-and-went-out-of-business/