The gig economy is in full swing, and it has forever changed the work world as we know it. For various reasons, people are leaving their traditional 9-to-5 jobs and working in more agile roles instead—even starting their own businesses.
Sometimes this is by choice; sometimes it’s not. Either way, the massive shift away from the full-time employment model and toward contract, freelance, and other non-traditional arrangements has made it easier for those who prefer a more flexible, self-directed work life.
In other words, there’s never been a better time to start a consulting business. It’s the new normal. And as the workplace continues to change, more and more companies will be on the lookout for talented consultants.
Many businesses turn to consultants because they just can’t do everything in-house anymore. In our fast-paced world, companies lack the specialized skills and expertise to handle their growing needs, and they often don’t have the staffing flexibility to complete special projects that require more manpower.
Further, they may benefit from fresh new ideas, outside opinions, and the speed and efficiency of bringing in an expert. Consultants solve all these problems and more. No wonder consulting is a $250+ billion industry, and still growing.
Making the decision to become a consultant is easy. The tricky part is knowing how to become a successful consultant. It isn’t the right choice for everyone. Yes, being a consultant can be incredibly rewarding and lucrative, but there are many drawbacks as well. Here are a few tips and insights to help you understand what you’re getting into and to make sure you get started on the right foot.
1. Don’t buy into industry myths
You’ve probably heard the following about consulting: You’ll make tons of money for less work. You’ll have plenty of leisure time. You can say goodbye to office politics!
It’s time for a reality check. You’ll likely be working more than you work now; taxes, business expenses, and benefits will quickly eat into your higher pay rate; and, as a contractor or sole proprietor, you will find yourself answering not just to one boss, but to many.
2. Know that your expertise alone won’t make you successful
Your area of expertise will take you far, but it can’t prepare you for the unique challenges of being an entrepreneur.
3. Make your business plan first thing
There is a lot of planning you must do up front before you set out on your own. Don’t even think about becoming a consultant without writing a business plan, a marketing plan, and a financial plan. These are essential and will pay off for you once you are working for yourself.
Not sure where to start? Check out Bplans’ library of sample consulting business plans to help you get started.
4. Test the waters before quitting your day job
If you’re unsure about becoming a full-time consultant, give it a trial run by doing it part-time while working at your current job. (Always get your employer’s permission before doing this.) Take on a few small projects to do on weekends or during vacation time.
5. Don’t lowball yourself on price
You may be tempted to set a low rate when you’re first starting out. This is usually a mistake. It’s important to set your fees high enough that they generate a comfortable salary that also covers your various business expenses.
One method for figuring out this number is what I call “Elaine’s 3X Rule.” For example: In order to earn a salary of $100,000, you need to bill $300,000 each year.
6. Also, don’t lower your rate once you’ve quoted it (this is unethical)
For instance, if you say that your rate for a project is $15,000, and the client has only $10,000 in the budget, then you should walk away.
Agreeing to work for the lesser amount is a surefire way to ruin your reputation. Why did you ask for $15,000 if you can do it for $10,000? This makes clients question whether you had $5,000 worth of fat in the proposal.
7. A great accountant can make your transition easier
Find an expert accountant to advise you as you grow your consulting business. A good accountant can offer advice and help you make smart decisions regarding the structure of your business, your plans for growth, profitability, and accounting procedures.
8. Focus on reeling in large businesses
Don’t waste your time seeking out lots of small accounts. Instead, go for the medium and large businesses. They are used to hiring trainers and consultants and may be more willing to give a new consultant a try. Plus, their larger budgets mean they will be more likely to bring you in for repeat business.
9. Have a plan to combat isolation
Working alone creates a sense of isolation. Make a game plan to alleviate your loneliness. Set up frequent lunch dates with former colleagues and friends. Meet up with other consultants and attend industry events; even if the talk does turn to business, you will appreciate having some social time.
10. Keep a file full of raves
Clients who love your work will be more than willing to sing your praises, so start collecting those testimonials now. Place them in a file, along with any notes thanking you for a job well done. These will come in handy for prospecting letters, proposals, and brochure copy.
11. Find creative and cheap marketing strategies
Don’t be afraid to get creative and thrifty in order to bring in business. There’s no limit to inexpensive marketing tactics.
Start a blog. Agree to be interviewed on a podcast. Send a lumpy envelope for a holiday: a gourd for Thanksgiving or candy hearts for Valentine’s Day. Submit articles to your professional journal.
12. Maximize your clients’ ROI
Your goal should not be to make clients dependent on you. Instead, ensure they receive the maximum return on their investment by enabling them to sustain the changes you have helped them make. Before you leave, make sure your client owns the solutions. Achieving this is the best way to be hired again.
13. Do everything you can to generate repeat business
Did you know that it takes 7 to 10 times the investment to sell your services to new clients? That’s why earning repeat business is a smart goal. Try to bill 50 to 75 percent of your annual revenue from repeat clients. This helps you avoid having to constantly hustle to find new clients.
14. Be optimistic, but plan for the worst
When you believe in your success, your clients are more likely to believe in you as well. Yet while you should keep a positive attitude and act as if you’re living the best-case scenario with your clients, never spend your money until it’s actually in your hands! This rule will help you avoid financial trouble when you’re just starting out.
15. Put your clients first, always
Remember that you are only as good as your last client says you are. This is why it’s important to put your clients ahead of everything, even your profitability. Projects end, but your client relationship will not. If you make a pricing mistake, you will learn from it and not make it again. Even if a project goes into the red, it is a small price to pay to maintain a great reputation for life. Don’t compromise, and your clients will reward you with repeat work and great word of mouth.
Yes, starting out on your own can feel frightening. But don’t let the fear of the unknown hold you back from reaching your career potential. Take a page from other consultants who have found their new place in the gig economy and find out what you are capable of. You will be rewarded with an exciting new career you love.