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The mistake that nearly killed my consulting career (and how to star in a Vegas show)

A TechRepublic member recounts how shifting his skill set when he transitioned to becoming a consultant allows him to earn more and work less.

Some consultants do really well and are profitable, while others struggle. Consultants who struggle may flounder for a while, trying to find enough clients and work to pay the bills, scared to raise their rates while thinking that they're charging too much or trying to compete with people halfway around the world who do the same work much cheaper. Eventually, they feel like they've failed as a consultant, and go back to being an employee. Or maybe they decide to join the circus -- but more on that later.

That almost happened to me. Well, not the circus part, but the struggling consultant part.

Here's what happened. Before I started my consulting business in January 2007, I worked for a software vendor for several years doing SQL programming and customizing the vendor software for clients. After the company was bought, management and morale went downhill (sound familiar?). I started looking for a new job -- starting a consulting business wasn't on my radar at the time.

Since I was in the job market, I figured it would be best to spend my time gaining more generalized skills and knowledge (for example, learning more about SQL Server and database development), rather than learning more about the proprietary software product for my then-current employer. Prudent as it sounds, that was a mistake.

Now, if I really wanted to find a "real" job, getting more generalized skills would have been just fine. But, I eventually decided to start a consulting business, working with clients who use my former employer's enterprise software product. If I didn't have that specific product knowledge, I wouldn't be able to work in my current consulting niche.

By being in a niche, you:

  • have less competition,
  • can charge a higher bill rate for your more specialized knowledge,
  • can stand out from competitors more easily, and
  • can be found more easily by potential clients.

Sounds nice in theory, but how does it play out in the real world?

For my general skill set, I could probably charge $75/hour, but I would have a tough time finding clients and would spend a lot of time rustling up new business. In addition, I'd be competing against other freelancers/consultants from India, the Philippines, and elsewhere who can charge a fraction for the same skill set. Talk about an uphill battle.

Instead, for my specialized skills and experience, I'm able to charge a higher bill rate -- currently $150-$175/hour. In my current niche, there are around 3,000 potential customers and a handful of competitors. Given that the clients are extremely profitable (I work with law firms), I can work less and make the same amount as someone with a lower bill rate. I really like earning more and working less -- it appeals to the lazy person in me.

What's more, my specialized knowledge and experience provide a barrier to entry for other competitors.

Besides all that, it's easier to find work in a niche. I haven't had to make any cold calls to drum up new business in the past 12 months. New clients find me instead of the other way around. In fact, in most niches, clients are looking specifically for specialized skills, and therefore can find specialized consultants more easily.

Specialization is the key to entry for a niche

Before I became a consultant, the thought of specializing seemed risky. I was worried that my specialized skills and knowledge would prevent me from getting a job, or that my specialized skills would become obsolete. In the consulting world though, specialization is exactly what clients want. Specialization is what will make your consulting life easier, and your business more successful.

What's a specialized niche? (And how can I star in a Vegas show?)

Here's what you've been waiting for: getting your own Vegas show.

Actually, starring in a Vegas show and having a specialized consulting niche have a lot in common. For example, cat training might be a specialty, but it's not a niche -- at least not a finely defined niche. But, big cat training -- where you train lions, tigers, and leopards -- is a niche. Now, compare someone who trains your granny's seven-toed tabby house cat to someone who trains white tigers. Who do you think earns more, has less competition, can stand out more easily in their niche, and can get their own Vegas show?

Now, if you can get granny's tabby to use those extra toes to play Beethoven's Moonlight Sonata, you could probably wheedle a Vegas show out of that too. (Personally, I think it'd be easier to get a Bengal tiger to stand on its hind legs, but I'd definitely pay to see a house cat rock out some Beethoven).

Either way -- big cats or musical kitties -- you're still talking about specialized niches. And whether you're into cats or consulting, the advantages are the same.

How do you define a good niche?

Now that you're hopefully sold on targeting a niche, how you define one? Here are my criteria:

  • profitable customers, which typically means:
  • a high bill rate,
  • a clear demand for consulting skills and knowledge,
  • low competition, and
  • barriers to entry, which you can realistically overcome.

There is a bunch of ways to find and evaluate a niche, but that's a conversation for another time.

Consulting and what the "gig economy" means for you

You hear a lot about the "gig economy" and the "freelance nation" these days. Especially for those of us in the tech industry, consulting can be a tempting move if you want to ditch your day job or just earn some extra cash. Just remember, although there are lots of freelance/consulting jobs out there, to be successful -- and be less stressed about paying the bills -- specializing in a niche is typically a better bet than relying on your general skills.

Who knows? Maybe you'll even be in a Vegas show someday -- if you trade your coding skills for a whip and a pocketful of raw meat.

About

Greg Miliates started his consulting business in 2007 and quadrupled his former day-job salary. His blog (www.StartMyConsultingBusiness.com) gives specific tips, tricks, techniques, and tools for starting and running a successful consulting business ...

12 comments
PaulCFry
PaulCFry

What Greg describes here is exactly the way I've been able to make money as a consultant. People find me online because my resume shows up near the top of search results, and I have never paid a cent for SEO. It helps to get good "intelligence" about rates and practices in your industry niche. That way you can show clients what a good deal they are getting with you. If you stick to your guns in negotiations you can pull off incredible contracts and still charge less than the big companies. This is not to say that the process is easy. It mostly comes down to providing a desired service level. If you can provide a personal service to a client directly, that goes a long way. A survey done some years ago showed that the biggest complaint that large firms had about services/consulting firms had nothing to do with rates, but responsiveness. The big consulting firms aren't hungry enough. If a company knows that you will answer the phone and return messages then you can be as good as gold.

casey
casey

Greg - your point about specialization is indeed true, providing your time window is a narrow one and your area of specialty has sufficient headroom to support you and your competitors. Generally over time if the specialty has enough draw, the market will produce competitors (barriers to entry aside) which will potentially erode your market share and revenue. And in the technology game, today's hot specialty - be it application, development platform, OS, etc. is tomorrow's orphaned investment. Which means that sooner or later, the thing you originally specialized in will no longer provide you with revenue opportunities. So while I agree with your basic premise, I would also add that 2 specialties (one new and one old) are the minimum you should invest time, money and energy into, if you are intending to make independent contracting your way of life.

kdf9buff
kdf9buff

I do not want to compete with zillions of people with access to freely available tools. Finding a good niche that is rewarding, in every sense, is tricky. Getting into it is even trickier. Maintaining a good network of colleagues and friends may give you an edge here. The "who you know" is significant in this context. I have rarely found learning new software a problem. It is developing a good process and being aware of the gotchas that is a major key. That is where your network can really give you an edge. Every so often something comes along that is really hard to crack, having someone to run through it with you really helps. I always document my findings once I/we have solved a problem. That is where you need to go the extra mile for others too. Helping others will always reward you. I would almost call it a law of life. Your document may be all they need. Some months later, it is all you will need. I think the article was timely. Thanks, Phil

PaleRider1861
PaleRider1861

I did read the article, and it's still a killer title. However, I can summarize in just a few words: Specialization in IT brings bigger rewards. There!!

hippiekarl
hippiekarl

occasionally it DOES sound like vanBeethoven (the 5th symphony!). Unfortunately for my Vegas aspirations, however, she's self-taught....

XoomXoom
XoomXoom

I agree with the niche approach and have done it for 16+ years successfully. One of the big things I've learned the hard way is you have to have multiple niche's in different verticals. I.E. I work for Law firms as well, but right now, lawyers are one of the most beat up areas in the recession. Many are going under and have had to cut staff, budgets and hiring. I used to be 90% in non-profits, but the previous recession in the savings and loan scandal years taught me what happens when you only have a single dominant niche.

realvarezm
realvarezm

Really nice article! made me realise the way i need to work.

Skruis
Skruis

It's a killer title :-)

Greg Miliates
Greg Miliates

You're right that--especially in the tech field--things move fast, and you need to be ready to shift to and/or develop new specialties. However, I've found that when a company invests a huge chunk of cash to implement a system, there's a vested interest in wringing out as much value for as long as possible. Because of that, you can stay in a niche longer because the technology churn rate is slower. Now, if the niche is profitable, like you said, it will attract competitors despite barriers to entry. Even so, you can still maintain your market share and continue to grow your business if you've established yourself in the niche. This may apply more to very small niches, but even in very small niches, there can be good money to be made. For my particular niche, I've been self-employed in it for over 5 years, and am still growing my client base and business--despite newer competitors entering the space--partially because of my depth of knowledge and partly because I've specialized within my niche (instead of focusing on something general like software implementation, I focus on creating customized automation & reporting). It depends on the particular niche though, so your points are well-taken.

Greg Miliates
Greg Miliates

Glad you liked my article--and my headline. :) You're absolutely right: specialization in IT does bring bigger rewards, and I think that's true whether or not you're doing independent consulting. That said, knowing how to specialize and how to target specialized markets for your skills/expertise can be a trickier question. Using some basic criteria will make it easier to decide whether a particular niche is worthwhile to pursue.

Greg Miliates
Greg Miliates

Glad you liked my article. For my law firm clients, I've seen the recession have varying effects, mainly due to the type of law they practice. Bankruptcy/foreclosure firms are struggling to keep up with the pace of work, personal injury and intellectual property firms have seen some slowdown, and overall, everyone's been a bit more budget-conscious. However, if you can spread your expertise around in multiple industries/verticals, you'll have even more financial security. Targeting highly-profitable verticals is a good strategy. I've worked with non-profits before, and they're always scrambling for funds--regardless of the economy.

Greg Miliates
Greg Miliates

Glad you liked my title. :) As I was writing the article, I realized how much IT and getting into a Vegas show had in common. Of course, the pay is a bit different...

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