I've seen a spread of around $900,000/year in revenue between an un-specialized indie consultant and specialized indie consultant, but there's a cubic shitton of implementation work that separates those two revenue numbers. Specialization is just part of it.
When you make the decision to specialize, there is no cosmic Human Resources department that bumps up your salary for you. This can be disorienting because when you first went indie, you probably did have some sort of tailwind involving others doing things for you, perhaps without you even asking.
The Just-Went-Indie Tailwind Effect
When you first became self-employed, there is a strong chance that your network of friends and colleagues rallied around your courageous decision and proactively tried to find business for you. They asked around and kept their ear to the ground for opportunity.
This is called business development, and at larger firms it is a job you pay someone good money to do. As a soloist you might spend 50% of your time doing it yourself.
When you first go indie, your network does business development for you, they do it for free, and they do it without you asking. That's a tailwind.
After a while, that tailwind dies out, and the only thing that happens without you MAKING IT HAPPEN is letters from your government tax authority. Yes, flywheels of ongoing momentum can be spun up, but you get my point. You make things happen with decision-making, planning, and execution.
Generating more revenue is the same way, even if you're specialized. Increased revenue is also the result of decision-making, planning, and execution.
Specialization itself might be a reason you can command more revenue from the market. A specialist might be able to name a price that gets accepted immediately while a non-specialist might get pushback for that same price, but this situation is more hypothetical than actual because the generalist is so infrequently competitive with the narrowly-focused specialist. They're rarely actually competing with each other for high-end consulting work.
Most of the revenue-increasing-power of specializing comes from the second-order effects of specializing.
1: Enhanced Value-Creation Ability
When you specialize, you become more ever more competent. This creates more value for your clients. Beyond this baseline of new value you deliver as a specialist, there are two special cases where specialization helps you create exceptional value: wasteful situations and advisory work.
What commoditization wants is to eliminate waste by modularizing and standardizing a system. If you look at a system that is currently commoditized, say electrical power distribution; the early days of that system look incredibly wasteful when compared to the current commoditized state. Smart people were figuring things out, and that cost money and time, and incurred opportunity cost. Commoditization wants the system to evolve from inefficient to efficient.
There are plenty of situations where businesses adopt pre-commoditized stuff (technology, systems, ideas, etc.), either willingly because they are early adopters or reluctantly-but-hastily because of some exogenous change like legislation or competition. These businesses are forced to be wasteful because they are dealing with stuff that hasn't evolved into a commodity yet.
Their wasteful spending may involve consultants. Those consultants may have chosen their specialization because they like figuring out stuff that hasn't commoditized yet.
If hiring an expensive consultant can turn a wasteful situation into a slightly less wasteful situation, the consultant can produce a positive ROI on their fees. This is a natural win-win, and it's one way that specialization can increase revenue for you if you're inclined to specialize in these "wasteful" situations.
Expertise -> Advisory Work
When you specialize, you focus, and focus accelerates your ability to cultivate expertise. If you choose a good specialization beachhead, then you can cultivate a kind of expertise that makes you a credible choice for advisory work.
Advisory work is very often sold using fixed pricing, which can de-couple your revenue from your time. This leads to situations with a seemingly insane effective hourly rate, like $10,000/mo and up advisory retainers where your actual scope of work is a 1-hour call each week plus being on call for emergencies that rarely happen.
While it's possible that you could generate 100% of your revenue from advisory retainers, it's unlikely. Instead, they represent one form of highly profitable work that can become available to some specialists. Because they are de-coupled from your time, they can add significant revenue without adding significant time commitment to your calendar. They're a fantastic addition to your portfolio of revenue sources.
No client loves the idea of spending multiple thousands of dollars an hour on a consultant (though some love the feeling of power that comes from being able to spend like this). However, in the wasteful situations described above, clients will see this expense as a form of insurance that hedges them against a far larger downside, and just as insurance creates value, so does the specialist who can frame their expertise as a form of insurance.
2: Mechanical Stuff
Specialization allows you to generate more value for your clients, and you can ask for a fair share of that value via your fees. That increases your revenue because you are doing more value creation in your client work.
Specialization also increases your revenue through what we might think of as mechanical means. Imagine that you are tuning an internal combustion engine. You can get more horsepower (revenue) out of this machine by increasing its ability to take in air (visibility) and efficiently combust the air + fuel mixture to rotate a crankshaft (internal efficiency).
Specialization allows you to earn more visibility for yourself and your services. Assuming you have services that are compelling to a segment of your market, more visibility will lead to more deal flow.
One thing that the rednecks I grew up with in the American South like to say is: the difference between a tractor motor and a racecar engine is the intake system. That's an obvious oversimplification, as is what I said about visibility above, but there's a large grain of truth there too.
If you want more opportunity, working on being more visible to your prospects is a good investment of time and effort, and specialization helps you get more out of that investment.
Perhaps you've encountered the delightfully illustrated "Where's Waldo" books, where you're challenged to find the titular character hidden in a huge crowd. Imagine if the complexity of those illustrations — the noise — was reduced to 25%.
You'd have a much easier time finding Waldo. That's what specialization does to your problem-solving ability. It makes you more efficient.
This increased efficiency can also manifest inside your business. With greater consistency in the client work you do, you can develop better processes; better internal efficiency. This leads to greater profitability and the potential of scaling your business by adding employees.
3: Pricing Power
The trio of second-order consequences described below relate to pricing power — your ability to charge more. Again, there is no cosmic HR department that bumps up your compensation when you specialize, and clients don't say "wow, you're specialized! What say we just add a zero to the price on your proposal!" However, when you specialize you do gain the ability to charge more. Here's how that happens.
There are times where your client values the work you're doing more highly than you do. You're both wearing poker faces. Under your client's mask: "That was a no-brainer price!" Under yours: "I can't believe they're paying this much for my work on this project!"
You want to move from this kind of under-valuing of your services to a situation where your clients think: "Ouch! That's more than I wanted to spend, but I know it'll be worth it." Sometimes getting there requires more credibility or deeper expertise.
But way more often than that, getting there requires a change in mindset. You merely need to value your own services more. Alan Weiss has an elegant way of saying this: "The first sale is to yourself." He means that if you're not convinced of the value of your services, then you'll never be able to convince a client of their worth.
David C. Baker, in his book The Business of Expertise, talks about how some folks just have this innate belief in their ability to deliver value, and others of us need the positive feedback loop of client successes to believe in our own ability to deliver value.
If you're in the latter camp, bear in mind that in many situations, the only thing keeping you from earning more revenue is your mind and its beliefs about your value. Our mindset is sometimes the hardest thing to change, but do give it a try anyway.
When enough of your market knows you by name, associates you with your specialized focus, and trusts you, then you have built a brand. If you have a brand and the market also really needs your expertise and doesn't need you to explain why, you have brand power.
Brand power allows you to price your services at a premium price. It's easier to build brand power if you've specialized.
Brand power is another contributor to higher revenue for the specialist.
Finally, specialists can package and make their expertise usable without their involvement. This is intellectual property, and this is another way that specialists can de-couple their revenue generation ability from their time and increase both revenue and profitability at once.
Final Thoughts on Revenue and Specialization
I haven't measured it rigorously, but based on experience I'd tell you that business revenue for successfully specialized indie consultants follows a normalish distribution centered around $230,000 USD per year. Getting up to the next standard deviation (let's call that $400k) is do-able with increases in visibility, efficiency, and deal flow. Getting to the outlier territory of $600k to $1MM plus comes from scaling, IP, and brand power. This is usually a multi-decade journey.
I hope that this article has helped you understand what kind of revenue specialized indie consultants can expect, and where it comes from. If you’re looking for more context and detail on specialization and positioning, then read my free guide to specialization for indie consultants.