Banking optimize

So you want to be a consultant?


You're thinking of taking the plunge and going into business for yourself as an independent consultant, but you're uncertain about your chances. From my experience as an independent consultant for the last 16 years, here are a few pointers:

  1. Make the transition as easy for yourself as possible. If you can keep your day job while you're developing your own gig, you'll ensure that you won't run out of money before you can get your business on its feet. On the other hand, a regular job can take too much of your time, so that you never really get going on your own. You'll need to weigh that out. I started my own business and did very little with it for almost a year while I was still employed by a software company. Once I was finally ready to resign, I was able to put my whole effort into my new venture.
  2. Don't jump into a void. Get at least one good client lined up for business before hanging out your shingle. How do you find that client? Use your network of contacts, and sell your core strengths. What qualities do you have that would make you a good consultant? Who would find those qualities useful?
  3. Stick with your strong suit. Sure, there will be times when you'll need to take on tangential work in order to pay the bills, but always try to acquire business in the areas of your particular strengths and interests. Your clients will be happier with your work, you'll be happier doing it, and you'll...
  4. Develop a niche. Don't be just another #{technology-du-jour} consultant. If you can become an expert in a particular segment of the industry, you'll rarely lack for work that's profitable and interesting (unless you get tired of that segment). As a software development consultant, I'm widely considered one of the foremost experts in Synergy/DE. It's a development platform that most people have never heard of, but because I'm the expert I get to do a lot of the high-paying fun work instead of the day-to-day application programming. So how do you become an expert? Just spend a lot of time learning as much as you can in one area, while not ignoring other related areas. How do pick your niche? Usually, it picks you. Go with what interests you, especially if little is known about it or if it can still use a lot of development. But make sure it isn't so esoteric that nobody needs it.
  5. Consider the financials. Talk to a tax accountant. In the US, you probably won't have tax withheld from your fees, but you'll have to make estimated payments throughout the year. Plus, you'll probably have to pay Self-Employment Tax, which is a big chunk of your net income. Depending on where you locate your business, you'll also have costs for business licensing and state and local business taxes. You may have additional costs for hardware, software licenses, and office supplies. While your market and your abilities will primarily determine the rates you charge your customers, you need to include these other costs in thinking about whether you can really pull this off.
  6. What rates will you charge? Some clients may decide this for you, but mostly I've found that they ask me what I charge. You don't want to say, "Gee, uh, I dunno... what sounds fair?" Have a number in mind, and then negotiate from there, if you can -- personally I've found that once you stick a number out there, they either say yes or no. So you want your number to be ideal -- not so high that they resent paying you, and not so low that you resent working for it. A number of online services, like Real Rates, can give you an idea of what other people are charging -- but remember that your value can be augmented by your particular strengths. Make sure your prospect knows about those before s/he hears a dollar figure.
  7. How will you charge? By the hour, day, week, month, or project? Or will you require a retainer in addition to hourly? Charging by the project can be dangerous -- bugs and feature creep can keep you working a long time for free unless you spell out ahead of time how those eventualities will be compensated. I've only used that method on a few short, easily delineated projects. Mostly, I charge by the hour, with no retainer. That lets me shuffle time between clients without feeling like they're paying for nothing. On the other hand, you have to be disciplined to give your client top notch attention for every hour you bill them.
  8. Never work without a contract. Some firms will require you to use their standard consulting agreement. Get a lawyer to review it with you, and don't be shy about challenging any red flags. For most of your clients, though, you'll need to present your contract to them. Get your lawyer to help you craft a standard contract that you can use for any client, and that's fair to both parties. If you're a software developer, pay particular attention to the rights and licenses you grant and retain to the work you create.
  9. Be dedicated to your clients. Making them successful is ultimately what they're paying you for. Think beyond their requirements to what they really need, and propose those ideas to them. Even if they don't accept them, they'll see that you're interested in providing insight into their business. That's why they call you a consultant, after all.
  10. Are you self-motivated? If you'll be working remotely from your own office, you'll need to be able to fight the procrastination demons. Set limits on how much time you'll spend gaming, blogging, surfing the net, doing household chores, etc. and stick to it. It's best if you can clearly delineate on-time vs. off-time.

What else am I forgetting? Do you disagree with any of the above?

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...

35 comments
arstringfellow
arstringfellow

Working with an employer of record can make it easier for new consultants trying to get started. You don't have to worry about keeping track of every little financial detail or being audited and your records being a mess. It made me less stressed when I started out while working full-time, plus it saved me some time because the company I worked with handled invoicing for me as well.

gb911
gb911

not moving in that direction quite yet. c-net, TechRepublic is wonderful. Lots of good help and time slips by. Process of packing for potential move. With many hours I still can not get this laptop wireless. Other computer is desktop will stay wired but this laptop cuts the internet off as soon as I remove the connection. I HOPE there is a simple no- frills wireless way for us who are fed up spending hours trying to finish this journey.

frokem
frokem

very insightful mate, cheers

rjkirk_50
rjkirk_50

Did anybody think to add Prayer to the list.

Moorthi_Pandi
Moorthi_Pandi

Obsoletely True. All your tips are secret of success for any consultant. Its also better to add more tips in relation to people behaviour in a working env.

cranand
cranand

Really nice article.

rtla111
rtla111

I am a project manager consulting for clients opening new retail ventures. This list is right on the mark. Another pointer might be to be dedicated to yourself as well...a lot of project managers underestimate the time and attention a project needs and have no healthy boundaries balancing the time within which the project should be completed. I make sure to outline a certain amount of hours per week to a client's project, making sure to calculate project timelines over a period of days or weeks that prevent me from feeling compelled or pressured to complete it sooner. A consultant never sleeps unless we are firm with our time boundaries. Also, using a project management software program (see basecamp.com) is paramount to keeping tasks in mind, the project moving forward, and is a great way for the client to "see" what you are doing for them mid-project. This keeps us accountable to our client and moving forward with an aggressive clip, and keeps their questions ("have you done this yet?") to a minimum.

Sterling chip Camden
Sterling chip Camden

This is my first post as a writer for TechRepublic. Even though I've been consulting for a long time, I'm always willing to learn more. I'd like to hear from you about your experiences -- what works, what doesn't. So, tell me your essential pointers for consulting.

bpate
bpate

Thanks to everyone who contributed to this article. I found it to be very informative. I would add one personal note "always give them what they want" no more no less. Don't try to do more then the client is asking for because then they will come to expect it. Don't do a half-baked job either and they will feel you were worth the money. Also always give them a detailed invoice including any free hours worked. I do have one question do you have any advice for invoicing and payment? Such as should I use an Excel spreadsheet and do manual invoicing or should I create a PHP form that will store my invoices generated in a MYSQL database? Should I use a program like quick books?

meryllogue
meryllogue

Nice article! And the replies have been good as well. I was going to add one, but it got covered already (note your free hours). In response to "never asked for a referral"... I NEVER hire a consultant without at least 3 referrals. AND... I always ask that one of them be a negative referral! I want to hear good and the bad, and I want to talk to them about the bad to see how they handled it, their perspective on it, etc. It gives me insight into how things might go if (when) the going gets tough. And it lets them off the hook of trying to look like Superman.

sales
sales

I've been doing this for a long time, PM in a wide range or project types. For the last 10 years I've mostly done Implementation projects, but it's not a full specialty for me. I've observed that the market has changed substantially. I mostly work for VERY large firms - 150,000 employees - that kind of thing. Rates have dropped substantially during the past 5-10 years, and it's mostly because the large firms have moved to a "third party" system to avoid the problems that made Microsoft independent contractors millionaires. The net result of the third party system is that the client pays more for the service, but insulates themselves from tax and benefit liability, and the consultant gets less as well. The third party get's 30-40$/hour to get you an interview and write you a check once a month. This is something you need to think about before going off on your own. I personally found it very easy to get started. No one ever leaves a job without that first client in hand. It's actually client 3-10 that get's a bit more difficult because you are busy working for the current client, and don't have time to market your skills, and, because you are working, it's difficult to add to your skill base. Another thing to consider - collect letters of recommendation. I've tried to do this as often as possible. Every client I've EVER worked with has asked me to consider joining them as an employee. That is a great time to consider asking for a reference. I found Quickbooks to be way to difficult to use - it won't let you fix a mistake, and billing for most consultants is just not that difficult. I run on a cash basis, so I try to keep it simple so I don't have to put too much effort into my accounting. Just a bit of food for thought. Good luck to those that give it a try - we all need to band together to make ourselves stronger.

zabius
zabius

thanks for the article the info was good will pass this on across the seas to a friend that needs work maybe it will give him more confidence and motivation Ron / California

apotheon
apotheon

11. Cultivate a network of friends among other consultants you encounter -- at least, among those consultants you like. Exchange contact information, and get to know them. Not only will you learn from each other (and don't be afraid to let them learn from you, since cooperation gets you further than hostility), but you'll also make friends who can fill in the gaps in your skillset when you need to bring on a subject-matter expert to help out on a project. Throw work to these contacts, as long as you trust them to do a good job, by recommending them to clients who want something done outside your areas of expertise. Such contacts can then do the same for you. Assuming there's some give-and-take there, you should hopefully end up with about the same amount of work, but each of you will have an easier time of it and happier customers because you'll be trading work outside your area of expertise for work inside your area of expertise. If you hook up a client with someone good, that client will then be more inclined to come to you to find help more often, for yet more projects outside your area of expertise. Don't be afraid to say "I don't know anyone that knows how to do that, myself included," if you must. It's better to be viewed positively for your honesty than to get one project contract and make your client unhappy. The better the job you do maintaining that network of consultant friends, however, the more you'll be able to provide your client with solutions to the client's problems, and the better you'll do overall. At least, that's my take on the matter. Congratulations on your move into the TR weblog authors' team. I look forward to seeing more from you. So far, so good.

Sterling chip Camden
Sterling chip Camden

That's a very good question -- one that I'll probably address in a future post. I have to admit that I still use Excel spreadsheets for accounting myself (even though I used to work for a firm that wrote accounting software!). I once started to set up Microsoft Small Business Accounting, but I already had so much data that I never got finished setting it up. I'd be interested to hear some other readers' take on this point.

apotheon
apotheon

I love the idea of asking for a negative referral. I'm a little concerned about the difficulty of finding one to provide, considering I for one don't tend to maintain contact information for people with whom I never want to work again as assiduously as I do those with whom I've parted on excellent terms. Still -- in concept, it's brilliant.

Sterling chip Camden
Sterling chip Camden

Thanks, Meryl! That's interesting about the negative referral. Anyone who's been in the business for any length of time will have at least one bad experience in their portfolio, and how they handled that says a lot more about them than how they succeeded on other projects. Still, I imagine some consultants find those negative referrals hard to put together. Do you ever get "negative" referrals that pull the old interview trick, saying that they worked too hard?

SnoopDougEDoug
SnoopDougEDoug

As one of the "Microsoft independent contractors", I sure as h*ll did not make a million from the settlement. Let me point out that now you have to take a mandatory 100-day break in service. I got a low five-figure settlement. How many years of 100-day periods on unemployment do you think it takes to balance that amount? Not so many. A couple of tips from the trenches: * If you have difficulty interviewing or selling yourself, forget contracting. It's like trying to find a new job every six months. Most folks hate the grind and return to being employees. * If you are not a detail person and cannot stand to keep track of money in and out, forget contracting. You have to keep records and do a heck of a lot more paper work. * If you are not self motivated, forget contracting. I work at home, so I get up at 6am, fire up the coffee, grab a cup and eat a power bar, and walk upstairs to my office by 6:30. Monday - Friday. On weekends I sleep in to 7. * Don't forget it is feast or famine. If you are not the ant type (putting away at least 3 months of income for a rainy day), you will go broke. Don't do like my friend Susanne, who got behind on her taxes when the gigs dried up for a couple of months. The IRS is not warm and fuzzy and will repo your stuff. * Be very careful when you accept work from an unknown client, especially small companies. Keep them on a short leash (net 15 days is what I try to do) and never let them get behind. I have a client right now who is behind their payment. All I can do is withhold updates from them until their check arrives and clears. When it comes in the mail today, I will likely drive to their bank and cash it on the spot. Once the money is in my grubby little hands I will email them the latest changes. So far this has worked well for my. In my 20 years I have been burnt only once about 15 years ago. Interestingly enough, it was on a contract where I worked with my friend Susanne. I don't use Quicken or any other financial software as I am a sole proprietor. I just have a couple of spreadsheets where I keep track of my daily progress (Mon 9/9/2007 Fixed bugs #123 and 245), any income or expenses (Tue 9/10/2007 Wireless book 19.97). It comes in handy when you go to do your quarterlies or someone asks for a status update. Good luck. There are tons of gigs out there. Be prepared to turn down work that you are not qualified for or that appears ill-managed. Don't be afraid to talk to job shops. Even the best can run into dry spells. Making 20% less is better than 100% less. I keep a list of about a dozen Web sites that I troll regularly, even when I am working two gigs as I am now. You never know when a client is going to just up and dump you. Small firms get bought out or go bust. Big firms are notorious for killing projects at inopportune times.

Sterling chip Camden
Sterling chip Camden

Those are some more fine points. Have you ever used those letters of recommendation when closing a client? Nobody's ever asked me for referrals.

Sterling chip Camden
Sterling chip Camden

Thanks, apotheon. And your #11 is very good advice. When I was first starting out, I tried to take on every job I could find, and sometimes ended up biting off more than I could chew.

TucsonGuy
TucsonGuy

I tried several different ways to invoice, and the most effective has been to buy Sales books from NEB and write one out by hand at the end of every job. 99% of the time, I get a check on the spot, so it helps cash flow, eliminates billing problems because any questions are answered on the spot, and avoids forgetting to send an invoice or letting too much time go by before sending one. Most of us love our work but hate paperwork and often invoicing suffers because we put it off for one reason or another. Or, maybe it's just me! :) I've been doing this for 20 years and have found that invoicing has always been a problem for other consultants I communicate with.

InnateDev
InnateDev

I started invoicing my clients with Excel spreadsheets, printed as tifs using Microsoft Document Image Writer for obvious reasons: private excel formulas, and email problems sending excel files. Excel works great, but eventually you'll have a bunch of excel files that you may need to refer to quickly, so a good naming convention is important - e.g: 0001_Client.xls and so forth. You can even group them into folders per month and year when you start getting real busy. I then found an awesome free PDF writer: PrimoPDF and still send my invoices as PDF's. As things got bigger and better, I got all excited about my "business" and called in an accountant for advice. I installed Quickbooks and started putting it all in from my first "financial year". The problem with this is that now you need to understand an additional software package as well as you understand your favourite code editor. This not only costs a considerable amount of money, but I still do ALL my books myself! It hasnt saved me time. Quickbooks or accounting software is there for accountants. If you pay someone to help you with your books - let them do ALL the work and save you time - at a later stage employ them or someone to do this task. The point I'm trying to make is: Time is money. I write software too and Im loathed to learn all the intracacies of quickbooks - I want to write software and lie on the beach in my free time! (not become an accountant!) There's also a whole bunch of extra costs this brings on e.g. TAX, employment funds, etc - you're better off staying small and getting paid in CASH - just make sure you get PAID (a point for another discussion?)

sales
sales

I wonder if this has more to do with the type of client and size. I only work for very large companies. The work I take is well within my competency and comfort level. Maybe I've just been lucky. I'm sure it's different with smaller clients, you are a lot more likely to run into personality problems, lack of professionalism, money issues - that sort of thing. I've interviewed with a few small clients, but I was left with some feeling that this might not be a good idea, and I didn't take the jobs. For me, it's been positive. The 3rd party brokers on the other hand, have been a uniformly unethical lot. I hope to find a good one someday, and work with them for a long time.

Sterling chip Camden
Sterling chip Camden

The bad experiences I can think of had to do with work that I shouldn't have taken on to begin with -- an impossible task that my hubris thought possible at the beginning. Unless you're the most humble person in the world and you can see into the future, you're going to have at least one of those sometime. The key is how you manage it once that becomes obvious. For me, in neither case was I able to keep the client -- nor did I really want to. But we parted on amiable terms.

apotheon
apotheon

. . . unless you've only had about five repeat clients over that entire 20 year period. The sad fact of the matter is that, in my experience, about one out of every five potential clients out there is looking for someone to blame, or for an impossible solution, and with such people even the most heroically endowed contractor is more likely than not to end up with a "bad experience".

sales
sales

Interesting concept, but it betrays more about you than the people you claim to be interviewing. It's a lot like the "when did you stop beating your wife" approach to an interview. It assumes something that simply isn't true. Not everyone has negative experiences with customers or co-workers. Personally, I learned long ago not to burn bridges, and I've never had a bad experience with a client. I've been asked to work as a permanent employee for every single client during the past 20 years, so that should speak volumes. Maintaining professional demeanor, offering respect for your coworkers, and always doing a superior job will do a great deal for a consultant. On the other hand, if I run into an interviewer who assumes that I'm not being honest enough to give him/her a negative experience when I didn't have one, well, I probably don't want to work there anyway, so you get to have the ones that don't get along well, and it's a self leveling proposition. Good luck to you.

meryllogue
meryllogue

I've not had that happen. I make it very clear why I want it. If they were to pull something like that, it would put them a notch down on the selection list. By being clear about why I want it, it seems to allay their fears about doing it. As you note, they can't have been 100% successful if they've done more than a job or two, and once they realize that we both know that, it tends to open the doors of communication as well. So far it has worked well for me. The other thing to note is that I don't do it for my long list; it is my short list. By then we have a pretty good communication going, understand each other fairly well, etc. so that helps too.

meryllogue
meryllogue

You make some very good points. I was independent off and on for about 5 years, and everything you say rings true. I also was registered with temp agencies for graphics and legal secretarial (anything to keep the bills paid!). I did it all. The hardest part for me was hustling new jobs while I was still immersed in one.

Sterling chip Camden
Sterling chip Camden

...especially the bit about feast or famine. There have been a couple of times when I had to tread water for a couple of months, and that can get pretty scary.

sales
sales

I don't use them as closers. By then, the customer is already convinced. Instead, I use them as a way to open the dialog. Getting recommendations and referals is the best way to gain entry to a client. After that, it's up to your experience, interview technique and personality to win the assignment. For me, I find the most difficult part is getting the interview. My qualifications are good, and on paper, they are very competitive, but after 27 years in the business I can't possibly explain everything I've done. Once I'm in the door, and I'm interviewing, I can bring things into the conversation which highlight my qualifications and ability to add value for the client.

ehamouda
ehamouda

your posting was very helpful for me, but i am trying to get an idea about where and how to start getting IT Contracting or consulting opportunities.

Sterling chip Camden
Sterling chip Camden

Too bad I don't have any 3D glasses. Yes, we enjoy living here. In fact we moved here because we love it. I don't have any clients here, and none active in Seattle. Thank you Tim Berners-Lee for freeing me from geographic dependency.