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 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!
When you provide consulting services for a
client, and the client likes what they see, you may
be asked to come on board full time.
In fact, some
companies prefer this approach - it's safer and they
can check you out first without making a commitment.
How much should you charge?
The formula is simpler than you think. The
starting point should be 3x 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 2x
your equivalent hourly rate.
How much should you spend?
Large consulting firms spend about 33% of revenue
every year on sales and marketing. Businesses spend
20% to 25%. Microsoft spends 22%. Are you ready to
spend this kind of money to market yourself as a
consultant? Or, are you hoping you can make a few
calls and get lucky?
Do the math: If you used to make $200k per year,
and bill at $300 per hour, and work 50% of the time,
you'll make $300k per year ... providing you spend
20% to 30% of this on sales and marketing. That's
what it takes. It's the difference between being a
real consultant and a wannabe, and there are plenty
of wannabes out there, living on the margin, hoping to strike it rich.
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.
The process
Here are several things that will help you start
solo consulting, or to go into business for
yourself.
- 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. If you need a $10 per year
solution to get started, let us know.
- 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 or
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,
networking, 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.
Or, you can use Google Adwords, Elance, Guru, or
GetAFreelancer.com. 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.
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