So I’m having trouble not posting about the huge economic news today, but the series I started earlier this week on starting a consulting business seems even more relevant today.
Also, Pam Campagna of Blue Sage Consulting posted a comment to my Part 1 that deserves repetition. She wrote:
My story is a bit similar to yours: After 13 years in the corporate world, I decided to “light out.” … and that was in 1997. I’ve never looked back.
I’d like to add a few things that I’ve learned along the way:
- There’s a real difference between “consulting” and “contracting.” A consultant practices the art of consulting and invests in the long-term value of building a business. A contractor typically looks for work while in-between jobs. It’s useful to be clear which of these two roads you’re heading down.
- If you decide to head down the consulting road, set limits for yourself. If you’re not successful/haven’t landed a client/don’t have defined products and services within a certain period of time, then acknowledge it and move on. The worst thing that could happen is that you have to look for a job (one of my personal mantras).
- Starting a consulting practice is a difficult thing. Don’t be fooled by many of us who “make it look easy.” There are no shortcuts, but if you stay with it, the rewards are well worth the investment.
Although that’s already showing in the comments, I thought it was worth an additional post here as well. I’m not organized enough to do guest posts, but this was so very much on point, so I wanted to share.
And since this is a bit of a catch-all post, I want to add some additional tips here, to accompany Pam’s. These are about selling.
As a consultant, on your own, you just became a salesperson. All your expertise is completely irrelevant until you have the client. If you’ve always hated selling, you’re in trouble. Deal with it, or do something else. Here are some tips that might help:
- Some vocabulary: It’s not a job, it’s an engagement. The consulting equivalent of asking for the order is asking the client to sign the letter of engagement. And deliverables is a good word for what you’re going to do for the client (presentation, analysis, report, business plan, facilitation or whatever). Fees are what you charge.
- Not everybody would agree with me, so take this with some healthy skepticism, but I believe in a simple letter of engagement written in plain English that defines deliverables and fees and establishes a schedule for both.
- Results–deliverables–are much easier to sell than hours, days or weeks. While I read about consultants on clocks and meters, nobody I know who was successful did it that way. It was by the job or the milestone.
- The job or milestone strategy, however, introduces scope creep into the mix. As you write the letter of engagement, be mindful of scope creep. Write your deliverables in a way that makes scope creep obvious. That’s when the client agrees on one thing but doesn’t accept it and gets you to do a lot more. There’s no easy way to deal with this (later on, you prune your clients; but in the beginning, you can’t).
- My advice, which might be wrong, is don’t get lost in contracts. Keep it in simple English. If you end up unhappy with the client, or the client with you, you’re not going to be fighting over the contract anyway. Furthermore, you’ve got as much chance collecting with a simple signed letter than with a formal contract. In my opinion.
- If you make it, you’re going to thank me for this tip (if you remember): Don’t set your schedule in calendar dates; set it in days or weeks after the signing of the letter of engagement.
- For the record, I never did that advance payment or deposit stuff with clients. Businesses don’t expect to have to pay upfront, and mine never did. The good news is that I never had an invoice that wasn’t paid.
- Take risks on the client paying. Don’t ask them to take risks on you.
- Start small. Find a small piece of the bigger job that will be easy to deliver and easy to demonstrate value. Do a small, visible job first, do it well, and then your client will be much more likely to continue to bigger things.
- Always focus on repeat business. Even in the middle of the night before the presentation, when it’s 2 a.m. and you’re tired and mad that you got caught in scope creep and annoyed at the client, remember that it’s infinitely easier to generate repeat business with an existing client than to find a new client.
So, wow, 10 points, from me, plus 3 from Pam. And I think this is just starting to scratch the surface. I haven’t even stated to talk about strategic focus, who isn’t your client and figuring out how to manage accounts receivable.
This entry was posted on Friday, October 10th, 2008 at 5:33 am and is filed under Uncategorized, business ideas, startup advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.6 Responses to “So You Want to Start Consulting: Part 3”
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October 10th, 2008 at 9:14 am
Wow, you’ve never been stiffed by a client? That’s pretty lucky; most of us consultants have been left with unpaid invoices. If you’ve never had this happen, then I don’t know if you’re doing something right (working with clients with stellar payment ability) or doing something wrong (never taking a risk).
You should use common sense with advance payments and deposits. If your client is large and creditworthy, then don’t require up-front payment. If your client is small, if you’re being hired to consult on a turnaround of a troubled company, if your engagement requires significant travel or incidental expenses that have to be covered, then get a downpayment. I have never had a problem getting advance payments when I asked for them. If you have a good reason to ask, then be leery of the client who can’t or won’t make that payment.
October 10th, 2008 at 3:00 pm
You wrote that starting a consulting practice is hard. Actually, starting a consulting business is easy. Growing it and keeping it alive are the hard parts. To become a consultant, you really just need to start calling yourself one. The real challenge comes from still being able to be in business several months down the road. It’s easy to start a consulting business, but it’s hard to have a consulting business for X years. I should know — I’ve been doing this for 12 years. Becoming a consultant was the easy bit!
October 12th, 2008 at 7:37 am
All of you seem to be very sucessful. What I want to know is did any of you start parttime while still working a regular job or did you quit your job and go full steam ahead into consulting?
Thanks
Alfred
October 13th, 2008 at 12:42 pm
Hello Alfred,
In response to your question: I was given an option to either take a package or stay in a role in a company that was going downhill quickly. I chose the former option, with 90 days to wind down my team and walk out the door. During those 90 days, I kicked into gear and started to outline many of the things that Tim talks about here. Before I had formally “stepped out” into the consulting world, I had a client already lined up. There are several books out there that deal with the topic of starting a consulting practice on the side while being employed elsewhere. Good Luck!
October 16th, 2008 at 4:56 pm
@Ken thanks for adding that skepticism, I think it’s good for this topic to maintain that attitude; but no, in my case, I did a couple million worth of consulting billing over about 12 years, never got stiffed. Just lucky I guess.
However, for the sake of good advice, Ken’s advice is more useful than my optimism.
Tim
December 2nd, 2008 at 3:58 pm
About Scope Creep: “Write your deliverables in a way that makes scope creep obvious.” Is it possible to give a brief explanation on how this can be done, knowing that the main reason of scope creep in software projects (in an typical Project Management environment) is the technically uneducated client.
As for #10, I think it much is easier said than done.