There is certainly something attractive about a consulting gig. Being your own boss. Setting your own hours. Wowing your clients with your brilliant insights. And, unlike startup entrepreneurship, there is no venture capital to raise or boards to report to. It’s the life!
But how do you get started? And, more importantly, how do you sustain yourself doing consulting for a living?
I am often asked for advice about how to be a full time consultant, by close friends and new acquaintances alike. Not just how to freelance (though, that is part of the puzzle). How to make an actual business out of consulting.
I have been consulting a long time. In fact, I have consulted for about 14 of the total 18.5 years that I have been in the tech scene: 2 years as a freelance web developer, 9 years running my own web shop, 1 year as a senior consultant at an agency, and now solo consulting again for the last 2 years under the Startup Patterns brand. So, while I have had full time roles in many startups and a few large companies along the way, consulting is kind of this default position I can take whenever I am not sure what my next move should be.
I recently had one of these advice sessions with a buddy, and he was kind enough to give me his notes from the meeting, suggesting that maybe I write it up as a new blog post. Here it is.
It Takes Time
As with all career shifts, you cannot expect to be successful overnight. For reasons that will become apparent through the sections below, to really get good at consulting and to build a reputation of being so, you will have to work hard and be patient.
If you quit your day job right now, and start working on building a full time consulting operation, expect to be under-employed for at least 6 months to a year while you design your service offering and hunt for your first anchor clients.
And you will have to quit. Just like startups, no one can do this seriously working only nights and weekends. So, don’t jump in until you have enough money in the bank to support yourself for at least 6 months.
Start As Narrowly As You Can
Consulting has a natural hierarchy built into it. The more senior you get, the more general advice you can give. But when you’re just starting, you are only hired for specific, and usually technical, problems.
That’s OK. Expect it to happen at first. You may want to be your clients go-to “Growth Strategist”, but they will probably only hire you to build them an analytics dashboard or to set up a few Facebook ads. You have to earn their trust before anyone will hand you the responsibility of “strategist”.
Start working in an extremely narrow niche that you know very well. Gradually, you can work your way out into adjacent subject areas on your way to being more of a generalist. Most consultants get business through referrals more than other channels, so you want to be known as the key person to call for that specific problem area.
Know Your Client’s Pain Intimately
In your specific niche there is a client pain. If there is no pain, there is no reason to hire you, so there certainly had better be pain.
It is your job to completely and thoroughly understand the context for that pain, and all of the possible causes, and to have a ready-made solution for addressing it. Maybe you’ll need to do some kind of assessment work first in order to diagnose the problem. That’s fine. Just make sure you’re really equipped to solve the client’s problem before you issue a proposal.
If you discover a client problem that isn’t within your niche, it can be tempting to take on the project anyway because you need the money. Don’t do it. Instead, refer the client to another consultant who specializes in the area. In the long run, your reputation will grow as someone who can be helpful with referrals even if there is no money in it for you. That’s much better than trying to take the job anyway, and then doing a less-than-stellar job because it’s not your focus.
Networking And Referrals Are Critical
We hear a lot about the importance of networking these days. For a consultant, this is not to be understated. It’s a very good possibility that you will get a significant amount of your work — once successful — from referrals. That means you need to devote a significant portion of your time to getting out and meeting new people and building that network.
Ideally, these are people in your target niche market. Or they are people who also service that market but offer complimentary services, rather then directly competing with you. Make sure that you have a clear pitch or value proposition to share with these people when they inevitably ask that classic question, “so, what do you do?” Don’t just sit there blubbering incoherently. Tell them who your clients are, what their pain is, and how you help alleviate it.
And don’t forget to also ask them what they need? Can you refer anyone to them? Can you help them find some resource or opportunity? Don’t just be a taker. Get known in your network for being a pay-it-forward type of person.
Expect to spend 20% of your working time to just networking (or public speaking, content creation, and other activities that connect you with your possible clients).
Never Take Your Eyes Off The Pipeline
As a consultant, you need to always, always, always keep your eyes on your next project. Early on in my consulting career I repeatedly made the same mistake. A large contracting gig would come up, one that required 40 hours per week, let’s say. It seemed like good work at good rates, so I took it. But then I was so busy that I didn’t have anything else lined up when the contract finally ended.
Unfortunately, if you’re working 40 hours per week, you have no time to continue to do the 20% of your time devoted to networking mentioned above. In addition to networking, you need to spend about another 20% of your time just doing business development.
By business development, I mean all of the effort required, once you actually find a prospective client, to meet with them and understand their needs, prepare and submit a proposal, and negotiate a contract. It usually takes a lot of time (if it doesn’t, something is probably off). None of that is billable time. So, you have to make sure you have bandwidth for it. And make sure you’re billing enough hours with existing clients to cover for that time.
Anchor With A Big Client, But Beware
Speaking of which, it can be tempting to take on one big client. Indeed, from a short-term financial perspective it can be great. But beware the trap of getting tied to one big client, which I wrote about elsewhere.
Paradoxically, having one or two big, reliable “anchor” clients is always nice if you can keep it balanced. Just make sure that you constrain those projects to less than half of your total billable time (not your total work time). Leave the rest of your time open for servicing other smaller newer clients that come along.
Charge More Than You Ever Thought You Could
You’re probably starting to do some math in your head. So let’s talk rates. You’ve probably surmised that I recommend only billing 60% of your total work time to clients, because you need the other 40% for networking and business development. So, if you’re like most of us, we’re talking maybe 20 hours of work in a week. That means you had better charge a rate that makes it possible for you to survive at 80 (20 hours / week x 4 weeks in a month) hours per month. Calculate that rate for yourself, and then maybe tack on another 30% for safety.
How the hell do you charge that much?! Relax. I am sure it seems like a lot of money if you’re used to working in a salaried position. But keep in mind that your tenure with your client is limited, so it’s not usually based on annual labor costs. Further, don’t forget that your employer has to pay fully-loaded costs for their employees, including benefits, facilities, PTO, and other overhead. Not to mention employer contribution of taxes. After all that is added up, consulting rates don’t seem that bad by comparison.
But taking it one step further, what if you don’t have a rate at all? What if, instead, you simply charged a project fee? Then it doesn’t matter what your hourly rate is — you no longer have one. In fact, for clients, it’s usually beneficial to have a single project with a known cost than an open ended relationship with some hourly consultant. Consider how you can solve your client’s pain reliably in a fixed cost way. That will help you immensely in the long term.
The only catch to this “value-based pricing” approach is to make sure that you can deliver on that business outcome for the fixed cost that you promised. It will probably take some time for you to figure that out, so it’s OK to work hourly until you do.
Your Competition Is The Recruiter
You may think that your competition is other consultants. But most of the time it is between hiring you as a consultant or not hiring a consultant at all.
Companies strongly prefer to solve their problems with in-house talent (talent they are already paying) if possible. For them to even consider bringing in outside expertise, there must be a truly painful problem (see above) and one that no-one inside the company has the particular expertise to solve.
Therefore, your biggest competition is really the recruiting team. If you are selling something that is easily gained by hiring a “growth hacker” or “data scientist”, you may be in trouble. Make sure that your value proposition is not something that can be easily handled by expanding the client’s hiring program to include your skill set.
Turn Your Service Into A Product
Consultant can be a dirty word in some contexts. The reason for this is long and complicated, but it comes down to the idea that usually consultants embrace problems that are hard to understand and harder to solve. And that means, in the client’s mind, an open-ended contract or retainer with variable outcomes.
You need to find ways to ensure that your client will receive a reliable positive outcome when they hire you, not just a pile of advice they may or may not use. The best way to do this is to package your consulting solutions into something that is as concrete as purchasing a product.
Turning your consulting service into a product can take many forms. But essentially, it means having a very clear context in which your package of services will operate, charging a consistent price for all of your packages, and having a repeatable, proven, and reliable process for executing your package.
The more you can reduce your client’s uncertainty around the outcomes of hiring you as a consultant, and packaging is one way, the more likely they are to be comfortable bringing you in to help.
Opportunity Is Out There
I’ve erected a lot of walls here. There are plenty of hurdles for you to jump over on your way to being a consultant. And, yes, I am doing that on purpose — not just because you’ll be competing with me! 🙂
There are many really terrible consultants out there, wasting client’s time. Some of them are extremely large operations, whose terrible work I have all to often found myself undoing. I don’t want you to just go out there and repeat what they are doing.
But if you really feel like you have something special to offer, that there is a problem area that you’re really passionate about, you can make this consulting thing work.
Good luck, and tell me how it goes!