Outsourcing

Questions independents should consider before joining a consulting firm

Before signing on with a consulting firm during difficult economic times, Chip Camden advises you to ask yourself four tough questions and get thorough answers.

Independent consultants always have to keep an eye open for new business. Our pipeline can drain quickly and leave us high and dry. During lean economic times such as we have recently endured, the search for new business can sometimes turn desperate. You might even be tempted to try working for someone else for a while, and let them worry about finding the business so you can concentrate on putting in billable hours.

Before you hire on with a consulting firm, though, you'd better ask some tough questions and obtain thorough answers.

What's the financial impact?

These people don't work for free, so their take has to come from one or both of two places: (a) what you charge your clients, or (b) what you get to take home. In my experience, consulting firms lean heavily towards (b). In fact, they rarely charge clients as much per hour as I do, yet they expect the person doing the work to receive an even smaller share. Perhaps if you have no better prospects you're thinking that you'll take what you can get, but make sure that it's enough to pay the bills or it isn't worth the trouble.

Are they worth it?

In consideration for their cut, in what ways does the consulting firm enhance your business? In all fairness, there could be several ways in which they might add value: marketing, closing deals, accounting, billing, collections, project management, client liason, training, customer support, etc. List out all of the duties that the firm will provide, and then consider whether that compensates for what they take out of your fee. If you had a choice, would you pay someone that much to perform those duties? Hint: you do have a choice.

What will this do to your reputation?

Before you sign your name to their roster, ask yourself if you want to be known as one of "those people." Find out what their past and current clients think of them. Do they have a history of one-time engagements? If so, maybe there's a reason for that. Not only do you want to protect your reputation from contamination, but your practices will also suffer if you allow yourself to get used to working in an organization that mistreats its clients. You'll not only seem worse, you'll become worse. On the other hand, if the firm has a stellar reputation, then working for them could be good for both your resume and your business practices. Let me know if you find such a firm.

Will it crimp your future?

Naturally, you won't be allowed to compete with the consulting firm for the same business, but do they allow you to take other jobs outside of the firm -- or must everything go through them? Read the agreement carefully. What about after you leave the firm? Even if non-compete clauses won't stand up in court, they could still make trouble for you if you sign one. Furthermore, make sure you understand all of the agreements with regard to copyright and patents. These agreements are often worded so broadly that they might be construed to grant the firm a right to use all of your work for any purpose they see fit, as long as it "relates to current or contemplated business" -- even if you developed it completely outside your assigned projects.

If the answers you get to these questions satisfy you (and you're not just hearing what you want to hear), then perhaps working for someone else might be a good option. Personally, I've never been happy to trust others with my business to that degree.

Another option, if you're just having trouble getting business, might be to use a recruiting firm. They still take a cut, but it's probably less. Furthermore, in my experience they usually know what they're looking for even less than the client does, so you often end up paying their fee for a barrier instead of an improvement to communications. Even though it's a lot of work, I still think scaring up your own business leads to better results. Your Mileage May Vary.

Thanks to TechRepublic member Bob Eisenhardt (reisen55) for suggesting yet another great topic.

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...

20 comments
reisen55
reisen55

Anon on the name of the franchise. In early 2010 I joined, as an independent consultant, up with another company and the first task was to configure and build a 2008 Server for a small, 20 user company. The firm had a 2003 server that crashed all of the time. Dell sales rep put together a new server and I was given the job of installation. THE CLIENT WAS SO HOSED IT WAS NOT FUNNY. The server had 3 terabytes of data for a 20gb rotational storage need, the OS was in Spanish, the server had capacity for over 900 users and ... the existing HP server had only 1gb of MEMORY!!!! GEE, I would have FIRST recommended more memory, but then again I am just an independent consultant. Awful experience.

loren.saunders
loren.saunders

I myself chose to opt out and not sign the agreement with the consulting firm because: 1. they changed their tune from 25% to 100% travel (I actually like my wife so that was not acceptable to me) 2. after 6 interviews and me telling them repeatedly what my base salary requirement was they undercut my base by 25% with their offer 3. their non compete was ridiculous So instead I took a new contract with a firm overseas for a few months as an independent (it just happened to land in my lap at the right time) and never looked back. The thing is, with the financial down side, the stress it would have put on my family and the noncompete risk, it would have been a huge mistake. But this whole discussion begs the question... if consulting firms are so stupid and evil with their high overhead, bad consultants and satanic sales forces... why do they exist at all? Are there just a lot of firms out there dumb enough to hire them?

reisen55
reisen55

I found part time work with two local franchise firms to fill in empty time. In the course of a year, my cash analysis showed that 90% of my profit came from my own work and that the per hour rate franchise firms paid to me for equivalent work (at my own rate) was about 1/4 of the going rate. It was not worth the effort. For one, after a year, my work was only 40 hours, that's all - one week if I paid it out at their rate, a total joke. Only one firm, based down in Florida, do I consider active as they send me out on an occasional job that is just strange, fun or both. But my local franchise relationships have been a monetary waste of time.

biancaluna
biancaluna

I'm currently working for a small consulting firm (started a few months ago), they have been in the business for 20 years and have a good reputation and chased me something chronic to come work for them. I did my home work. I am missing a few benefits in the list, Chip. I joined as I wanted some additional development and mentorship from senior consultants I worked with from this firm. And I wanted to break into some industries so I can move interstate in the near future. In addition, I am getting sick leave, annual leave and carers leave plus training and pay for performance (proof will be in the pudding on that last one) so for me it added up to more entries on the positive side. I don't have to worry about workcover, public liability and all those administrative processes that used to take up so much of my time. I am however, a challenging employee for this firm as I have expectations about management and capability maturity, leadership, skillsets and I have goals for development this year. If I find in several months time that I am not finding what I am looking for, I will be revising my direction. I suspect that I might find myself mentoring and developing some of their more junior consultants. I am getting a bit older and I am realising I have felt somewhat isolated as an indie. I agree with Amir, it cuts both ways. The sales is done by the consultants themselves, I was involved in a proposal in week one of my employment and this means there is no real snake oil salesman brigade. But I remember them from larger corporations and the bait and switch they would pull. The firm I work for has some values, but needs some maturing in areas - I am currently the only consultant with ITIL certification and experience. So the range of consulting gigs is a bit limited. I can take 4 weeks off now and still get paid, or I can get sick and not have to stress about not getting an income, and losing contracts. The rates are fairly similar to recruiting agencies and independents and by adding up the benefits, I am not unhappy with the loss in remuneration as it adds some work life balance that I really need. Life changes, you take side tracks at times and it meets my needs at the moment and enables me to scale down a little bit, I want to semi retire by 55 so this is alll part of some cunning plan. But I do a good review of my As Is state every 6 months so by the end of this year I may decide it was not for me - by that stage I will have a good solid experience to add to my resume.

amir.toister
amir.toister

I've spent most of my career as one and look at it from a different point of view. Although you can find me on consulting and coaching firm sites, I tend to think of them as organizations that work for me and not the other way round. They do my marketing, bargaining and money collecting for me. If they fail my expectations or do not provide sufficient value to me, I can fire them, just as if they were my employees in the same situation.

JohnMcGrew
JohnMcGrew

A not-insignificant amount of my time is spent on client management, accounting, and other overhead-related functions that do not get billed out to anybody. So theoretically, these are hours that you'd now be getting paid for. Something to consider if the spread between the two isn't all that great. 2nd, I've never seen a scenario where a "firm" charged significantly less than an independent did. In my experience, it's usually been they other way around by a significant factor. I've seen many people motivated to become consultants because they saw how much their firms were billing for their time (2x-3x) and were convinced that they could do much better on their own, plus be in control.

Sterling chip Camden
Sterling chip Camden

Does anyone have a positive experience to share about working for a consulting firm?

JohnMcGrew
JohnMcGrew

...between dealing with a "consultant" and a "sales person". A true "consultant" serves as the filter between the client and the salesperson.

amir.toister
amir.toister

Sometimes you don't have all the necessary skills needed and you need a complimentary consultant to help you. Sometimes you don't have the time to do by yourself all the interviews that you need to do. Sometimes the client feels more confident in the consultancy when there is a large financial backing that will ensure (in his mind) the completion of the task. Sometimes it is great to have expert feedback on your ideas before you present them to the client. Sometimes it is easier to get the job because the client thinks a consultant can be easily replaced if needed. Most of the time it is nice to share overhead expenses with other consultants. I could go on and on... Not all consulting firms are stupid and evil. It boils down to quality of management, like in any other company type.

biancaluna
biancaluna

I think we are generalising a bit, it is a self fulfilling prophecy to believe that all consulting firms are stupid, evil, high overhead, bad consultants and satanic sales forces. It is also generalising to see indies as cowboys and fly by night unreliable lone wolves, know what I mean? There are always pros and cons, the drivers for larger consulting corporations are different, and they do attract a certain type of consultant as most hire mirror images. But I have seen some guns in the larger consulting firms, so it is not black and white. For project audits and for some government consultancies, there are standards and sometimes that means EY. I know some really good people in EY, some former independents. But there are corporate cultures, sometimes American corporate culture that does not always match. The non competes you have if you are an engineer or an account manager in a Tier 1, I don't let that scare me. Just be careful we don't put all big firms in the incompetent basket, that is not a reality.

Sterling chip Camden
Sterling chip Camden

... it usually means that somebody thinks they have no better options. Sometimes that's due to an effective snake-oil pitch, or a restricted market, or just ignorance.

Sterling chip Camden
Sterling chip Camden

If the firm stays small enough so that every part of the business stays unified in the attention of qualified people who care, then a firm can work. It's all in the execution. Good luck!

bond.masuda
bond.masuda

i use to work at a fairly large consulting firm and the experience wasn't all positive. i also worked as a manager at a large corporation where we hired consulting firms and that wasn't all positive either. Seeing "both sides of the coin", I can tell you that I think the biggest problem with consulting firms (other than my own) is the sales organization. I don't know where they seem to find these people, but the sales folks always seem to be the "snake oil sales person" type. When I was the consultant they'd send to clients, I always had to help re-adjust the client's expectations because the sales guy told a good story that was too good to be true (aka, they would lie to the client). That was always an uncomfortable position to be in.... showing up at a customer location and having to explain that "X Y Z you were told is not true, I don't have 20 yrs experience with this technology..." One time, the sales rep told the client that his consultants had 10yrs experience with Java programming when Java was still only 4 yrs old! On the other hand, when the group i managed was hiring consulting firms, we would always have to grill the consultants they sent us until we found out what was true and what wasn't. I sometimes felt bad for the consultants, some were pretty green and you knew they were just being throw at clients without much thought. But the only way we could get at the truth was through the consultants themselves as nothing that came out of the sales rep's mouth was reliable. so, maybe the lessons learned here is to see if you can get an interview with key people in the sales organization at the firm you're considering joining? or, even better, ask if you can shadow the one of their busiest sales person for a day and observe how he/she performs their job?

Sterling chip Camden
Sterling chip Camden

... and would also demonstrate a keen business sense to your prospective employer.