Project Management optimize

Devise a business plan before becoming an independent consultant

The first step in becoming an IT consultant is creating a business plan in which you evaluate why a client would use your services. Here's expert advice on this process.

Before you take the plunge and become an independent consultant, you need to have a plan for how you're going to make money at it. If you don't have a pretty clear idea about how that's going to work out, it might not. A lot of would-be consultants find themselves abandoning their independent business because they just can't make it work. Perhaps if they had been more thorough and realistic about evaluating their plan ahead of time, they could have saved themselves the trouble of experimenting -- or even have managed to succeed after all.

In order to gain and keep clients, you need to offer them a service that they will pay you to perform. To evaluate the likelihood of that outcome, you need to consider what their other options include, and evaluate the advantages and disadvantages of each relative to what you intend to offer. Let's consider some broad classes of options:

  1. They could do nothing. In that case, they consider your services a luxury. You need to be able to make the point that the cost of doing nothing outweighs the cost of addressing the issue, or to look at it another way, that the benefits obtained by taking action will outweigh the costs incurred.
  2. They could try to address the issue themselves.
  3. They could hire some other service that competes with you.

Options 2 and 3 really only differ in where your competition is coming from. There are numerous reasons why companies prefer to keep work in-house; those each weigh in as potential benefits or costs.

Now, what are some possible answers to the question, "Why are you the best option?"

  1. "There's plenty of business to go around in this niche. My competition can't possibly handle it all, and most of my prospective clients don't have the resources to address it either." That's a mediocre answer, because it relies on the current state of technology and the market. If the market suddenly shrank, it could leave you high and dry. If someone created a technology that made this a lot easier to do, then your competition might be able to handle more of that work, or the prospects could bring more of it in-house. You should try to have more going for you than the leftovers.
  2. "I possess special knowledge of my client's situation, which would take a prohibitively long time for anyone else to learn." That's a bad answer. It might work for a while, but nobody likes to be a hostage. In fact, you'll gain more in goodwill by documenting everything and making yourself easy to fire than you could ever hope to gain by trying to be indispensable.
  3. "All of my prospects have no clue about this, so I can snow them with marketing." That's the worst answer. It resembles the idea of "security through obscurity" -- you should never rely on ignorance for your business plan. When your clients become better informed, they'll drop you unapologetically.
  4. "I can demonstrate that I provide a better overall value." That's the best answer of all, because no matter what your client learns or what happens to the market, you're still their best option.

Value can take multiple forms; it could come from an overall lower cost for just as good or almost as good an outcome as a pricier alternative, or it could represent a trade-off between positive and negative factors that works in your favor overall. Ideally, you want to aim for providing a better outcome that ends up costing your clients less in the long run even though you charge more for your services up front. That will become possible if you really know what you're doing and apply yourself conscientiously to your client's best interest.

In the meantime, you need to honestly evaluate yourself to see where you fall along this continuum. Charge more than you're worth, and you just won't get the contracts. Charge less than you're worth, and you'll be shorting your own value proposition in this endeavor called consulting.

About

Chip Camden has been programming since 1978, and he's still not done. An independent consultant since 1991, Chip specializes in software development tools, languages, and migration to new technology. Besides writing for TechRepublic's IT Consultant b...

5 comments
PMPsicle
PMPsicle

From my experience, knowing where the money is going to come from is more important. After all, there's no point in providing value if there's no income coming from that value. Not to mention the fact that it's almost impossible to identify value without knowing who is buying and what they are buying. Having said that I agree with your points, Chip. Hal, I disagree that the business plan needs to be formal. The only reason that you need a formal business plan is if you are dealing with the bank or another outsider. Your business plan does, however, need to be complete and recorded (reviewable actually). Glen Ford http://www.vproz.ca

robo_dev
robo_dev

some customers are like that :)

Sterling chip Camden
Sterling chip Camden

The value proposition is only part of your business plan, but it's the most important part IMHO.

HAL 9000
HAL 9000

While the Value Part is [b]Very Important[/b] doing the Business plan properly is the most important thing you will ever do. I've lost count of the people who simply ignore the need for a Business Plan or worse still write out a bit of stuff on the back of a scrap of paper and call that their Business Plan. For some strange reason these people are the ones who fail or worse still scrape through nearly enough to almost live but work 100 + hours a week to get to that stage. Before you can have any sort of business you need a Great Business Plan though that also has it's disadvantages if you really do it quite well and can not say no to your clients. You could very well find you have more money than you know what to do with and are still working 100 + Hours a week because everyone wants you to fix the problem that they currently have. Though a Poor or No Business Plan almost always leads to failure and that's a certainty. Col

JohnMcGrew
JohnMcGrew

Most people don't know what insurance, taxes, and retirement planning really costs. This is all stuff that is largely invisible to your typical wage earner. My checking account suggests I'm rich the week before my monthly and quarterly payments are due. Not so much afterwards. And do you ever want to have a vacation or time off, better plan for that too. Nobody pays you when you aren't working.