Solo Consulting
Have you thought about starting your own consulting business?
Consulting can be a nice "bridge" between jobs. You might even find that you like it! In fact, some companies prefer this approach - it's safer and they can check you out first without making a commitment.
Management consulting is growing fast
Management and technical consulting is one of the fastest-growing industries. At 44% in 10 years, it's grown four times faster than the workforce growth rate.
You can consult from anywhere. Take JobBait for example - we consult with clients around the world, by telephone and internet. It's rare that we actually meet our clients in person.
You can consult in almost any field. One of our $500k+ CEO clients found businesses who could not afford to engage him full time as a CEO, but wanted his expertise. He negotiated a handful of engagements with several businesses - some one day a week, some for a few hours a week, and some for a couple days a month. He is now working fewer hours and making more than $500k per year. In one of our conversations, he remarked that he would never go back to a full time job.
How much should you charge?
The formula is simpler than you think. The starting point should be three times your equivalent hourly rate. If you used to make $200k, that's $100 per hour, and three times that is a billing rate of $300 per hour which can easily be buried in a project or contract. At a minimum, charge two times your equivalent hourly rate.
How much should you spend to market your consulting business?
Large consulting firms spend about 33% of revenue every year on sales and marketing. Regular businesses spend 20% to 25%. Microsoft, a virtual monopoly, spends 22%.
As a solo consultant, you should plan to spend at least 20% of your revenue on marketing. In other words, you'll have to spend money to make money. You can market your business with our direct mail campaigns to get started quickly - just ask, we'll explain how it works.
If you're planning on networking to find consulting work, you're in for a long haul. Most solo consultants who depend on networking fail for the first several years. Those who spend money marketing their businesses succeed very quickly. Those who continuously spend money marketing their business are the winners.
Business website
Having a business website not only makes sense, there are significant benefits.
According to the McKinsey Global Institute report on "What business can do to restart growth," a study of 4,800 small and midsize enterprises found that those with a strong Web presence grew more than twice as quickly as those with a minimal or no presence—and created more than twice the number of jobs.
Managing clients
Find a few clients who need your help part time - that's
often much easier to achieve than a full time consulting job.
It's also safer - when you lose one of your clients, you still
have income with the others. If you can find two clients who
need you one day a week, you can make as much or more than a
full time job. If you find 3 or 4 one-day-a-week projects,
you're making much more.
Many companies desperately need
heavy-weight talent, but can't afford a full-time person.
Interim full-time consulting engagements are problematic, resulting in classic rags to riches. If you avoid the interim engagements from the start, you can build a nice book of business that has a steady stream of income over time.
The process
Here are several things that will help you start solo
consulting.
- Test your idea. Are you going to be a consultant or entrepreneur? A consultant gets paid to work. Entrepreneurs makes money while they sleep. Is your product or service remarkable, and significantly better than the giants who offer the same thing? Don't compete with the giants; set yourself apart. Pick a niche where you excel.
- Test your passion. Do you really love what you're about to do? Or, are you doing it because you might make money? Can you do both? Passion is a natural and powerful motivator. Get together with others who are doing the same thing, and learn from them.
- Develop a business plan. Do you have the assets, tools and technology you need to get started? Can you cover the cash flow needed in the beginning? What are your strengths, weaknesses, opportunities and threats (SWOT)? How does your SWOT compare to competitors - do you stand out? Keep your business plan simple and short.
- Choose your structure. Are you going to be a sole proprietor, or limit your liability through an LLC or corporation? You tax preparer can probably give you good advice.
- Pick a business name. Start with a domain name so that there's a direct connection between your business and your domain. If your business name is JobBait, your domain name should be JobBait.com. Get a dot com and avoid all the other extensions.
- Get a REAL web presence. Get your own website with your own domain name and email address. Don't settle for anything that has strings attached and avoid third-party providers. Here, you must be in FULL control, forever. Learn how to publish to the web, hard as that may seem to be. All told, a website will cost you about $150 a year, and publishing software costs about $200. Get over it, resistance is futile.
- Get a business bank account. Keep your finances separate from your personal account.
- Get health insurance. For many, this is the hardest and most-expensive part. If you are leaving a full-time job, COBRA can provide a soft landing for insurance for 18 months. To check out the possibilities in your state, click here.
- Establish your value proposition and price.
Compare your value proposition and price to your
competitors. Can you offer more for the same price? If so,
you've got a powerful selling point.
- Get REAL stationery and business cards. Each of these should clearly show your REAL website and email address. We recommend REAL engraved stationery and business cards, not thermography and not offset printing.
- Use your down-time effectively. Starting up a new business typically requires lots of hard work in the beginning that does not bring in income. Whenever you have down time, work on your website, value proposition, breakthroughs, etc. Keep ahead of everyone else.
- Market your business. Here's the rule: early to bed, early to rise, advertise, advertise, advertise. You can use JobBait's direct mail process for example - the #1 way to reach the decision-makers who might need you. If you can use services like Elance, Guru, or GetAFreelancer.com, you'll be competing with thousands and that will depress your billing rates significantly. All marketing strategies take either time or money. And marketing is expensive - get used to it.
- Getting paid. Are you going to chase your accounts receivable? Or, will you get paid up front? Be ready to explain to your customer how your services work in detail.
- Manage your finances and taxes. There are plenty of software programs available to help you do both of these. Or, get an accountant to do them for you.
FYI, JobBait helps executives start up consulting businesses. Holler if you need help.
Solo Consulting - the Dark Side
Going solo has enormous benefits, but you may be tempted along the way to join up with an established consulting firm, especially when you see their well-written ad in the paper, or impressive website.
There are good consulting firms and bad. Some firms prefer recent MBA graduates and seldom invite savvy, six-figure executives. They say they do, but it's rare.
Do you know why they focus on recent college graduates? You'll find out in a minute.
If you get the chance to interview with a firm that has a "colorful" reputation (easily done), chances are high they will send a very well-dressed person to meet you, perhaps near an airport, and this person will follow a well-rehearsed script. The interview will probably be arranged by a telemarketer sounding like the interviewer's secretary, not the person who will interview you, and the whole process will appear to be very formal. They will probably tell you how lucky you are to be selected for an interview!
Your ticket to success
Working for a consulting firm can look like an easy ticket to success.
They typically have a three-way split of fees, and the
likelihood of travel is very high. You should expect to get
one-third or less of your billing rate, and the consulting firm
gets the rest. And then, just when you think that the firm is
spending their cut of your fees on marketing and sales, you'll
find out that you eat-what-you-kill. You will be expected to
drum up your own business!
And then when business gets soft,
who do you think gets laid off?
Scams are plentiful in consulting
They come in all shades of grey. Here's how one of them works - a consulting company we'll call THE FIRM. They have thousands of consultants working world wide. Read the box below to see how some of them work.
THE FIRM
FIRST: THE FIRM's front-end telemarketing crew lines up
appointments for a salesperson with a prospect. The
salesperson's job is to sell a canned financial analysis for a
price between $300 and $6,000 (depending on what that person
thinks he or she can get out of the prospect). They often
concentrate on very small companies in the $500,000 to $5
million range.
SECOND: Then a business analyst flies into
the city the morning after the salesperson's meeting, rents a
car from their personal funds, does the analysis and collects
the analysis fee. That analysis fee then goes to THE FIRM and
commissions are paid to the telemarketer and salesperson - but
NOT the business analyst.
If no fee is collected ... no one gets paid.
THIRD: The business analyst then goes to a motel (using a small per diem), works into the wee hours of the morning to finish the analysis (heavily laden with boilerplate) ... and reports back to the client in the morning for another almost full day. They try to sell a follow-on project, typically for $20,000 or more. The price can be set ONLY by THE FIRM.
No follow-on project? No commission.
False alarms
When the business analyst arrives at the prospect's location, he/she may find that no appointment ever existed (which happens) and all the expenses were for nothing. The business analyst just had the privilege of spending his/her own money to further THE FIRM's cause. The strategy (and your clue) is this: upon arrival and at the last minute, the business analyst will get the name and address of the prospective client from THE FIRM, but not the phone number. Calling to confirm the appointment is not appropriate because the prospective client might cancel. THE FIRM doesn't want that!
Getting paid
Even if the business analyst sells the follow-on project, no commissions are paid to the business analyst unless money is COLLECTED for the project by a project manager. THE FIRM has a whole department that works on collecting funds (many of them lawyers). The numbers get very big - millions of dollars!
It doesn't take long for the business analyst to realize the losing battle ... and resign ... only to find out that any commissions in the pipeline now go to THE FIRM and NOT the business analyst. That's a great business model for THE FIRM .... not so great for the business analyst. And so on up the chain.
The sales approach to the client is canned and tightly scripted. Over the years some of these consulting firms have developed, tested and refined the techniques that work best; and perhaps what cannot be challenged and litigated later.
Turnover is high because so many new employees (like you, the
former-employee-turned-business-analyst) get discouraged after a
few months. When new consultants like you leave, they find out
that they must pay their own expenses that would otherwise have
been covered by future engagements. THE FIRM has just reduced
expenses and increased their profit with your money.
These
FIRMS always need fresh blood, and can take advantage of your
services free while you're getting established. If you quit,
it's better for them! Some refer to this dilemma as white-collar
indentured servitude. Others call it golden handcuffs. Be very
careful before you join!
The truth, the whole truth, and nothing but the truth
Some consulting firms don't always tell you everything. As a seasoned and savvy six-figure executive, you will probably recognize a slippery sales pitch.
Now do you see why these firms recruit from the ranks of recent college graduates? They also prey on desperate job-seekers.
If you've done your homework, found a reputable consulting firm, and agree with their approach, jump on it! Many executives have found wonderful careers in consulting.
