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 youYou 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.
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 on the cheap. He trained his house cats to sit, shake, and give kisses, but found they had no musical ability. He has no plans to do a Vegas show.