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Note: This is the first of a two-part discussion of what it takes
to become successful as an independent consultant. For the purposes
of this article, being an independent consultant is limited to running
your own business operations outside the auspices of a contracting house.
Your clients come directly to you for your services; there is no agency
farming you out to others.
Ah, the life of an Independent: Be your own boss, work when you want,
accept only the most interesting projects, and make lots of money. And
do it all while increasing the time you spend with your family, reducing
your commute, and eliminating your dry cleaning costs. Sounds sublime,
doesn't it?
That's what comes to many people's minds when they start thinking about
going out on their own. But striking out on your own involves a reality
that is usually well-hidden from all but those of us who've been doing
it for a while.
Jack-of-All-Trades
In the corporate world, you have a multitude of resources at your fingertips.
Computer problem? Call IT. SME's balking at your requests? Chat with
your manager. Need some time off? Submit your vacation request to HR.
Need new software? Don't look now, but the company just bought seat
licenses for the whole department.
An independent consultant, on the other hand, has to do it all. Ask
any Independent out there and they'll tell you that they are the CEO
of their own firm, the Director of HR, the VP of Finance, the Chief
Operating Officer, the Executive Vice President of Sales and Marketing,
as well as project manager, business development specialist, administrative
assistant, and… oh yeah: That profession they practice, whether
it's technical writer, usability specialist, business analyst, web developer,
or Indian chief. And that's all in a single day!
Not only do successful Independents have to switch gears at a moment's
notice, but they also have to continually market their services while
completing the projects they already have.
If you don't enjoy multitasking, or if multitasking compromises your
ability to excel in your area of expertise, it is likely that being
an Independent is not for you.
Do the Math
Everybody knows they need to do the math before they jump over the
side of the Good Ship Corporate Employer. Becoming an Independent means
casting off from the security of traditional employment and casting
your fortunes to the whims and vagaries of the open market.
The most common errors I see new Independents make as they try to analyze
how they should structure their new enterprises fall into a few categories:
- Determining their worth on the open market
- Estimating the amount of time unpaid work requires
- Projecting how much time it will take them to establish their reputation
or a client base
What You're Worth
You're worth no more than the market will pay. Period. Ya wanna earn
more? Be worth more to your clients.
Determining what you're worth is an on-going exercise. When you first
start out, you may need to accept projects that pay less than the market
average so you can establish a track record of successful projects.
The risk to this is the temptation to accept your "Beginner's Rate"
as the only rate you can ever quote your client when follow-along projects
come your way. If you've done a good job at your initial, getting-to-know-you
rate, there is nothing wrong with letting the client know that since
you've now proven yourself and they have clearly benefited from the
value of your services, your rates have gone up to better reflect what
they would pay going with someone who hadn't already proven themselves.
Take Aways:
- When you're a newbie, quote for value and to gain the follow-along
work.
- Once you've gained some experience, quote fair market rates and
don't be afraid to walk away from a deal if the cash for the task
isn't what it should be.
The Cost of Doing Business
You can not recoup every cost. Remember that among the reasons you
decided to become an Independent was to fulfill some intrinsic needs:
autonomy, variety, flexibility, etc. Gains in these intangible areas
have to be considered when you do your cost/benefit analysis.
As you grow your enterprise and you are able to command more profitable
rates, you will be able to mitigate some of the costs of doing business,
but not all of them. Especially during your early years (yes, I said
years), you will spend at least 50% of your time, and likely as much
as 80%, marketing your services. You ain't going to get paid for this
time, at least not in the near-term, so just suck it up. At best, your
early, unpaid efforts will lead to rewarding projects some time down
the road.
Take Aways:
- Make sure that your financial expectations for your initial start-up
period (which can be as much as 3 years) are scaled to accommodate
your working for "free" as you build your business.
- As your consultancy gains traction, adjust your rates to help offset
the overhead costs of your unpaid work—work which is key to supporting
and building your business for the long haul.
Give it Time
There are no overnight sensations. Success takes time. Lots of time.
Don't underestimate how long it will take to get your practice off the
ground. Business advisers agree that it takes somewhere between one
and three years for your practice to meet expectations. My experience
and that of my colleagues who have also struck out on their own shows
that just under three years is the magic number.
Before you begin, set a reasonable time table. Decide on both project
goals and revenue goals for your first three years. These goals should
be independent of one another. In year one, securing a good volume of
high-quality projects for well-respected clients will help you succeed
in year two. In year two, begin shifting your focus slightly to adjusting
your rates to help you come closer to your targeted revenue goals. By
year three, begin moving away from revenue goals and use your project
and billing history from the previous years to help you do more formal
business forecasting in which you now take into account the cost of
doing business.
Take Aways:
- Set a reasonable timetable for incremental successes.
- Plan on allowing up to three years to achieve your initial goals
for your business.
- Continuously fine-tune your plans as your business matures.
On Your Mark, Get Set, SELL!
Sales is a major part of independent consulting. After all, most independent
consultants are not in positions to hire sales forces when they first
open their doors. If you are going to succeed, you need to be prepared
to sell your heart out.
If you are not comfortable with your selling skills, consider enrolling
in a sales training course.
Marketing and sales are the keys to the success of every independent.
Almost no beginning independents are in any position to hire a sales
force. The few I've known who have gone ahead and engaged a sales/marketing
professional during their initial startup period have been spectacular
failures.
So, if you're going to succeed, you'd better be ready to market your
socks off and sell your heart out. Very few of us are truly born salesmen.
We learn what works through trial and error and some of us even take
sales and marketing classes. If your strong suit is not in these areas,
either look into learning how to add these skills to your repertoire,
or reconsider your plans to go independent.
If I Only Knew Then What I Know Now
In Part II, we'll look at how the experience of others can benefit
you.
If you have questions about being an independent
consultant or how to perform as though you are a consultant, send me
an e-mail at thinking@dghenterprise.com.
I will share your questions and my answers in a future column. Until
next issue, take care!
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