When I discuss the pitfalls, I'm not making a positive or negative comment about any of the items. I merely mention them as areas that are often overlooked and can create anxiety or pressure in the consultant's life.
Where possible, in each pitfall I offer suggestions on how to mitigate this particular area becoming an actual problem.
Business Planning: Taxes, Legal
As a self-employed individual, often working from his home, an independent consultant has some real planning to do in the area of taxes and legal matters. I will give my strongest recommendation right up front: Hire professionals.
Yes, I know, they are expensive, and a myriad of books is available to assist you in these areas. I ask you, however, to apply the same logic you apply to those companies that hire you. These companies could, theoretically, grab a book on the given technology for which you have been hired and implement their own solution.
But you are aware of the problems that can arise. You know about things that someone will overlook or not understand. Your expertise is needed if the company wants the project to be a success.
The same logic applies to planning for taxes and legal matters. Incredible opportunities are available for tax savings, deductions, and creative ways to keep your money. However, if done incorrectly, the impact can be financially devastating.
I am not implying that you not be involved or read up on these matters. In fact, I recommend the opposite. You should be able to bring to your tax professional's attention an article about some tax law change and ask how it applies to you. You are creating a partnership.
However, in the final analysis, your time is best spent winning and finishing billable work. That is where your money comes from.
Other than providing solutions for your clients, the most important function that you can perform as a consultant is billing. This is not a matter of greed. It is a matter of survival. Many consultants put off this function for a number of reasons—namely current workload and inaccurate records.
When the current workload is high, the consultant becomes consumed with completing that work. Billing and paperwork seem like a tedious and expensive endeavor. If you are billing, of course, you cannot work, and while the work is available, you should do it.
However, if you don't perform billing regularly, you'll find yourself quickly in a cash-flow crunch. Soon you'll begin funding your client's projects by pulling money from savings or credit cards. Both serve to reduce the actual dollars per hour you earn. Don't get in the business of funding your client's project.
I try to bill weekly, on Monday mornings. I know others who bill twice a month. Find a schedule that works for you, and stick to it. In addition, for projects that have a set number of tasks, I use a project initiation fee and then progress billing every week.
My personal model for projects of less than one month duration is a 50 percent work initiation fee to start the project and the remainder due at project completion.
If the project is longer than one month, I do a work initiation fee of 50 percent of the first month's estimated billing and then progress billing for specific milestones or specific time periods.
I negotiate extremely aggressive terms as a matter of course. Much of my work is done on a Net 5 or Net 10 basis. At times, I'm paid against a retainer fee. Have a frank discussion with your client. If the client's terms make life difficult for you, and the client cannot or will not change the terms, drop that client.
Even if a client pays well, the most difficult one can become a drain emotionally and lead to burnout.
Some consultants do a poor job of tracking their billable hours. They put off billing hoping to be able to go back and re-create the hours from two weeks ago.
I was taught by a mentor of mine to fill out a daily timesheet. It seemed silly at first; here I was an independent consultant, reporting to nobody, filling out a daily timesheet. However, I found that a timesheet helped me track the time I spent on billable work and, more importantly, the time I spent on nonbillable work.
A timesheet helped me gain a better understanding of what time was valuable and what time was wasted. I recommend this exercise for anyone.
You might be able to produce the most amazing solutions for your clients, but if you do so at a loss every month, it won't be long before both you and your clients lose out. Invoice regularly!
Trading Time for Dollars
One of the nicest parts of consulting is the rate. You can certainly earn hourly rates that, if extended over a full-time schedule, equate to a nice six figure income.
However, remember that you are in the ultimate trading-time-for-dollars position. This means that when times are good and work is plentiful, you are in fat city. But when the work runs out, times can be lean.
I know that working in a traditional job is also trading time for dollars. However, the difference is that business expenses, marketing, billing, and other ancillary functions are spread across a group. When work is slow, you are not as severely impacted.
Also, you must beware of the mindset that views all nonbillable time as lost wages. This is an easy mindset to adopt. In fact, I used to take every Friday off when I began consulting. I would take the time to have breakfast with my wife and spend time with my kids.
But eventually, as project work increased, I found myself viewing the time as having a greater cost than the two cups of coffee and scones we had purchased. I started to calculate the two hours of quality time in terms of the lost revenue.
This is a serious danger. Ultimately, I corrected it, but I mention it because many consultants I've spoken to share the same perspective.
I mentioned schedule before as a perk. However, it's also an area of concern. You must be disciplined with your time. To be profitable as a consultant, you need to schedule your work time carefully. It is easy to get caught up in busy work that produces no income.
At the end of the day, you will have put in a lot of work but have little to show for it. Consulting hours, when you are handling all aspects of the work, can be extremely long. Don't get caught up in this idea of the freewheeling maverick who answers to no one.
Others mistakenly believe the same thing. Many individuals who hold traditional jobs tell me that I don't understand their scheduling problems because I can make my own hours.
Although my initial reaction was a desire to strangle them, I came up with a more diplomatic response. I learned to smile and tell them that they were right. I made my own hours, which were 4:30 a.m. to 10:00 p.m.
If you are one of those who believes that you will have tons of free time by starting your own consulting practice, let me dissuade you from making a big mistake. There is certainly an amount of freedom in the consulting life. However, time is not really one of them. You will put in your time somewhere.
Although I was taking Fridays off, I was working 12 to 15 hours daily Monday through Thursday.
Enter consulting because you have proven expertise, enjoy and can manage the freedom (not free time) it affords, can perform all aspects of a business, and are not afraid to go it alone. If those things appeal to you, by all means, look into consulting.
Depending on which book you read, between 15 and 25 percent of your time as a consultant is spent on nonbillable business functions. A good portion of this time is spent in some form of marketing. In many ways, the consulting life is only as profitable as the next engagement.
To ensure a steady cash flow, which in turn reduces pressure, ongoing marketing must take place.
Marketing takes the form of cold calls, referrals, and publications:
- Cold calls— These calls are exposure to new prospective clients without referrals. Certainly the most difficult, cold calls require a commitment to ongoing calls and discussions.
- Referrals— These are by far your most effective and simplest marketing. When you are referred into a company by other clients, you stand a high chance of landing that client. This is similar to what I cover in Chapter 13, "The Job Search," where I explain how to get your résumé out.
Publications—The phrase "Publish or die" is common in the academic world. Professors and those who are pursuing advanced degrees understand the impact that publishing an article means to their career. An automatic sense of prestige is given to the professional whose ideas have been considered sound enough to put in print.
The same is true for the consultant. Having an article published provides an excellent discussion point for you and your potential and existing clients. You can forward a copy of your article to them with a note explaining how this idea or technology might be useful to their business.
Later, when you call to follow up, you are no longer the no-name computer guy, but the distinguished and published author. You now become a noted expert who the company should listen to. I cannot overemphasize the importance of publishing.
Ideas on Getting Published
If you have the ability to organize your thoughts and can effectively put them on paper, you can get published. Magazines are on a constant hunt for content. Every month, for every magazine, an editor is frantically trying to keep his advertisers happy by publishing articles that draw readers.
As a consultant, you are typically exposed to many different technologies and a variety of business models. Even the staff technologists can benefit greatly by having something published. Use the projects that you are exposed to and the solutions that you have developed as the jumping-off point for publication.
You must understand, however, that being published rarely equates to monetary gain. It is about professional exposure and the sense of prestige that you gain—which in turn will assist your career as both a technologist and a consultant.
The Process of Getting Published
The following lays out in simple terms how to find an editor who needs content.
First, you are probably already reading several magazines that you find valuable. If you like one particular magazine both in content and in style, start there.
It is likely that the magazine lists the editor or editors who are in charge of content. The magazine might also include submission guidelines or provide you with a website where you can find them. If not, simply call the paper or magazine and ask for the editorial or submissions department.
Submission guidelines list the format for the piece, the general length, and perhaps some pet peeves or personal suggestions from the editor. After you have these, create an outline for the article.
You can choose to write the article first or to query the editor first. I have taken both approaches. Personally, I like writing the article first. I'm confident in my ability to sell the article. If the article doesn't sell, though, I can use it personally as a newsletter/promotional piece.
The query letter should introduce you and the piece to the editor and should suggest both the length and content of the piece. For most magazines, especially those of a technical nature, e-mail is an acceptable way to query the editor. In fact, most now recommend electronic submission.
If you want tips on how to effectively write your query letter or e-mail, pick up a copy of The Writer's Market at the bookstore or library. The book contains numerous suggestions and examples of query letters.
After the magazine has accepted your piece, the work starts. I will caution you: If you don't have strong self-confidence, the editorial process might kill you. Editors have a way of taking what you consider some of your best ideas and reducing them to a sentence or two—or, worse yet, cutting them altogether.
However, editors are experts at both their readership and at what the magazine needs. Expect your work to be cut significantly. In hindsight, you will find that editors' alterations are typically correct. Avoid the mindset that every sentence you write is a sacred cow—not to be touched.
My wife edits much of what I write, and a single suggestion from her gave my writing its greatest boost. I have the tendency to draw out my ideas. I believe they are so good that I must explain completely the train of thought leading to my idea. After reading one of my earlier pieces, her advice was this: "Write shorter sentences."
Now as I write, and more importantly, when I do my second draft, I keep my wife's edict in mind. And I pass the same along to you. Short and to the point is understandable. It leads to becoming an "easy read," which will help you publish more writing.
If the idea of writing terrifies you, or if you would like to write but need assistance in the craft, consider taking a course. I have a short section on improving your writing in Chapter 7, "Communication Skills." The ideas I present in that chapter are not earth shattering, but they are effective nonetheless.
Don't be concerned if you don't or can't write. Certainly, writing isn't for everyone. Play to your strengths.
Marketing is, however, without a doubt one of the most critical functions you'll perform as a consultant. If marketing doesn't appeal to you, then the consulting field is not really an option.
Good consultants are treated with respect and benefit from excellent word-of-mouth marketing. But becoming a consultant/contractor takes more than an effective grasp of a given technology—that is, if you want your business to last.
A consultant must have good technical knowledge, have an excellent understanding of his client's business, and most importantly, be able to promote himself without crossing the line into a gimmicky sales rep.
Numerous books have been written on the consulting field. It isn't my intent to add to them. Instead, I'll offer suggestions from my experience and point you to resources that will be valuable if you're thinking about or have already entered the consulting field.