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.
Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.
