A subscriber of my newsletter asked me about my insight in getting into the consulting arena full time. He has twenty years of IT experience and is apparently very interested in pursuing the opportunity of working for himself.
I have been on my own for ten years now, and I can say that although I thought I was fully prepared to run my own company, there were some things that I had to learn the hard way.
I’m very fortunate in that my book sales and training programs do very well. I love what I do and enjoy the work. Even so, there are things missing in my business that I really enjoyed in a corporate environment.
Here is how I responded to the question. It might be worthwhile if you are thinking about a future consulting career.
These are thoughts I have based upon being on my own for ten years now after more than 20 years as an IT Manager and CIO in the corporate world.
1. Try to insure you have 1 to 3 solid clients to start with that will provide a minimal level of revenue for you. The amount you need is dependent upon your own personal situation. You need to establish positive references quickly and having more than one client will help you get started quickly.
2. Marketing and sales is the most important part of growing your business unless you are very lucky and word of mouth grows it for you. The technology services market is very competitive so don’t assume you will have clients by simply displaying your company sign. Talk to most consultants and you will hear them say that there is a constant need to develop new clients through marketing and selling. Do not underestimate the importance of this aspect.
3. It always takes longer to develop new business initiatives than you think. It took me three to four months to research, select, and implement a shopping cart and credit card process for my web site in 2001. I’m glad I took the time because I have been very pleased with the services I chose. Similarly, many of the basic products and services I now take for granted were developed after many hours of effort only because I had never done it before. When you can, connect with someone who has already gone through what you are trying to do and take advantage of their prior learning effort and experience; you will get there quicker with a mentor helping out.
4. Plan to work harder and longer, especially in the formative years of your business. There are weeks when I log conservatively 80-100 hours a week and I have no commute to the office. Part of this is just me enjoying what I do, but the other part is that it takes more effort on your part when you are a small company. A small business owner has to wear many hats: consultant, salesman, marketing, accountant, , , and “chief bottle washer”. In your early years, you will probably find yourself working a lot more, not less.
5. Don’t hire people until you have sufficient business to cover it. What I mean by this is that your business should be generating sufficient revenue before adding new employees unless you have a funding source to cover it. Unless you have plenty of funds set aside or some very lucrative revenue producing clients, you need to keep your overhead expenses low. There is a reason why most businesses do not make it beyond 3 years, , , they are under capitalized.
6. As much as possible you want to avoid building up Accounts Receivables. My business is great in that I’m almost always paid before delivering the service or product, but that’s unusual. In my consulting work, I’m obviously paid after the fact in many situations. I have intentionally converted my business model from 99% consulting to 60% training/education, 30% Internet sales, and only 10% consulting. It took three years to get there but it’s a model that allows me to avoid the “work an hour to be paid an hour” scenario that is prevalent in a pure consulting model. In a startup, you can’t afford to have many “slow paying clients”, , , same is true for most small businesses.
7. If you can, look for ways to generate recurring revenue. It’s the key to establishing financial stability and leveraging your capabilities. Creating a business that generates a predictable recurring revenue every month can position you to be more flexible and allow you to take risks that otherwise you may not want to when you are chasing the revenue every month.
8. Think about developing white papers or short, practical “how to” documents in your area of expertise or interest. It gives you the ability to take what you are doing for a single client and make the knowledge available for people all over the world. It creates leverage. You will need a web site, shopping cart with credit card processing capability, a product, and the ability to generate lots of awareness. I can tell you from personal experience that if you have information that helps others and can make them aware of it, you can generate additional revenue for your business that essentially runs on autopilot. This creates additional flexibility and helps your company grow.
9. Clearly define your products and services so it is easy to tell someone about your business and easy for them to understand what you offer. Your potential clients must be able to describe your service or products before they will buy. Develop a mission statement and state what you do in the simplest terms possible.
10. Networking is key. Again, you will be more successful if you have minimal capability but great marketing and sales ability than if you have great consulting capability but are weak in marketing and sales. I’m convinced that I could have tripled my income in our first three years with only 10-20% of the assets I had to offer if I had superior marketing ability. Networking with those who need your services will be key so take the time to develop a marketing strategy that gets your message to your target market.
11. There are lots of incidental costs but the tax deductions are better in having your own business. Don’t forget to take into consideration the income taxes you owe. Just because it goes into the bank doesn’t mean it’s all yours. Most governments want their fair share, , , if there is such a thing.
12. Build a business plan. I believe most companies fail because they don’t clearly define their objectives and how they are going to achieve them. Take the time to create a business plan that spells out what your project initiatives are going to be, how you will gain new clients, and above all the budget you plan to operate by. After finishing the plan, increase the budget by 25% to 40% because the reality will probably be that it costs you considerably more to operate than you think it will.
13. Create an office space that is conducive to getting work done. All too many people miss this one. We all work differently to a certain extent. In my case, I can get quite a lot done with family nearby because I can shut them out (to my wife’s dismay at times). If you need total quiet to be productive, then by all means create a cave where you have the solitude you need to get your important work accomplished. Your productivity and livelihood counts on it.
14. Be sure you are prepared for the potential isolation effect in working on your own. Many have a hard time making the transition from a more structured corporate environment to an entrepreneurial one. This has probably been the toughest part for me. I miss the involvement with professional staff on a daily basis and being part of a larger organization at times, , , but the 1-minute commute and flexibility to work in my pajamas more than makes up for it.
15. Many companies go out of business because of being under capitalized. To give your new business the startup time it really needs, you should have the funds identified to carry you for three years or more. Having sufficient capital will allow you to weather unexpected surprises and the time it takes to build a sustaining business.
Consulting or working on your own is not for everyone. It takes a strong sense of commitment and perseverance to do what it takes to run a small business. It also takes a lot of discipline, , , let’s repeat this, , , lots of discipline is required to succeed on your own.
The great thing with today’s technology is that you can create an image that rivals the big companies; but when it comes to getting everything done, it still requires lots of work. If you aren’t funded well, you will find yourself doing much of the work.
Unless you are fortunate to fall into a sector of consulting where the demand is extremely high and the resources far and few between, pay close attention to the importance marketing and selling plays into a company.
Sales and marketing is the key in growing a company!
I certainly do not say this because I have great sales and marketing expertise. In fact, I think my skills in those areas are average at best. Sure, I’ve learned a few things over the years but a great marketer will tend to be more successful than the great operator.
Item #2 above, Marketing and sales are the most important part, is really key from my experience. I’m much better at it than I was in the early years, but I still have a long way to go after ten years in business. My preference (and those from the technology side like me) tend to prefer to implement, improve, and operate rather than do marketing projects or try to sell.
I learned early on in my career that I wasn’t cut out to be a great salesman. Two years of selling at IBM helped me learn this about myself, and it’s still true. It’s simply not what I like to do.
Now, I’m a bit more mature (or older depending on how you look at it), and I understand and appreciate the value of marketing and selling more than ever.
The point here is that if you are looking to “cut loose” and start your own company, be sure you know how you are going to find new prospects, attract them, and turn them into new clients. Without new business, you will be like 70% of the start-ups that fail to make it past their first two or three years.
Most of us who provide consulting services would prefer to just do the work. We like it or we wouldn’t be doing it. Be certain that you include 30% or more of your time to do the marketing and selling activities as you plan your business. It’s an unfortunate requirement of growing a young company.
I hope this helps any of you who might be contemplating “taking the leap” and starting your own consulting business.