It’s simple to start a consulting firm.
All you need is a clearly defined area of expertise, a strong network of contacts and the ability to deliver results.
If you’re already successful in business, it may even seem like a natural career progression. After all, if you achieve outstanding results with XYZ Corp, you can probably do the same for any or all companies in your industry. Right?
You’ve got the skillset, but do you have the mindset?
Before you take the plunge into consulting, take a moment to consider the following critical success factors:
1. Managing your ego
Right now, you’ve got a role and title. Possibly, a senior role with a well-known company.
Doors open because of it. You get to call the shots. Pretty much everyone returns your phone calls and answers your emails.
You’re going to trade the corner office for a permanent home office. Your team will shrink to just yourself or you and a partner.
You’ll establish your own consulting firm. You’ll become your own boss. That can be a great feeling. But you won’t yet have a business.
You may be captain of your ship but without paying clients your pleasure cruiser will be stuck in dry dock.
When you reach out to your industry contacts you may be surprised to find that although they’ll be delighted to meet you, they won’t yet have any consulting assignments for you.
When you contact people from outside your immediate network it may come as a shock to find that as John Smith from John Smith Consulting, few people will return your call, reply to your email or accept your LinkedIn connection request.
Is your ego ready for this?
If the answer is yes, then you’ve passed the first big hurdle on your journey to becoming an independent business consultant.
2. Securing paying clients for your consulting firm
It’s not easy to land paying assignments. Especially, when you’re only just starting out as a consultant. Even when you’re well connected and recognised as an expert in the work you do.
That’s because companies normally have experienced and qualified people to do their work. They’re called employees and they’re already on the payroll.
So, ask yourself:
“What is it that you can do, that employees cannot – either because of bandwidth, specific expertise, or deep industry knowledge?”
Why should an organisation bring you in as a consultant and what value will this add to the bottom line?
And finally, are there additional business benefits such as coaching and training that you are ideally placed to deliver?
Also, do bear in mind that just because you’re an expert in the work that you do, this does not mean that you’re an expert in getting the work that you need.
The hard truth is that you still have to sell yourself and the quantified value that you will bring.
Moreover, few companies have specific consultancy budgets to splurge. However, many organisations are able to engage consulting firms provided that the projects that they lead, or support demonstrate a clear ROI.
If you don’t like the idea of selling, then don’t become a consultant. According to consulting.uk there are over 60,000 consultants in the UK alone.
It’s a hugely competitive marketplace. No matter how good you are, don’t expect businesses to approach you with paid work. You have to reach out to them – repeatedly.
If the answer is yes, then you’ve now got to figure out how to navigate the next consulting conundrum.
3. Balancing getting work with doing work
There’s an old consulting cliché that says:
“When you’re working you can’t be selling. When you’re selling you can’t be working”
As anyone who has found themselves unemployed can testify, getting a job, is a full-time job. It’s similar with consulting.
Finding consulting work can be all-consuming but at the same time completing a consulting project on time and on budget can also be extremely challenging.
Somehow, consultants have to do both simultaneously.
There are only so many hours in a day. As an independent consultant you must make them count. However, try as you may, you will undoubtedly find that on occasion events conspire against you.
Perhaps, a client has system problems. Or, a deadline is unexpectedly brought forward. Maybe, you‘re feeling under the weather or have an emergency at home to deal with.
Whatever, the reason, you still need to deliver on your consulting commitments. And that often means working additional hours, sometimes long into the evening or at weekends.
Are you ready to work harder than you’ve ever worked before?
If the answer is yes, then you need to think about whether your consulting firm can make enough money to support you and your family.
4. Making enough money from your consulting firm
If you’re just starting out in consulting, it might take a few months before you get your first paying assignments.
And it could be a further 45 to 90 days after you send your invoice before you actually get paid.
So, if you don’t have money to live off in the meantime, you may not even be able to get your consulting firm off the ground.
Once established, be prepared for your revenues to fluctuate from one month to the next. And, if you struggled to continue selling, while you were working, you may even find that you have fallow months.
If you’ve been used to a regular salary with generous benefits in kind, to find yourself with ongoing costs and no income, could come as a nasty shock.
However, over time, the low months will be balanced out by high months.
Are you prepared to accept the revenue highs and lows?
If yes, then you’ve one last thing to consider.
5. Knowing when to quit
You are just about to start out, so why would I mention quitting?
The reason is that all good things must come to end.
Some consultancy careers last for decades others for just a year or two. Before getting started you should give some thought to your exit strategy.
There are a number of scenarios worth mentioning here.
Firstly, an early exit contingency. This might kick-in 12 to 18 months after setting up your consulting firm.
Perhaps, you’ve struggled to find clients, make enough money or you’re missing your former life as a corporate executive?
Don’t hobble on hoping things will get better. They probably won’t. Put your effort into finding a new position. Rest assured, your experience as a consultant won’t be wasted.
Secondly, there’s the sell-out scenario.
If you’ve built up a client list and employed people in your consultancy business but no longer wish to work within it or to manage it, you may decide to sell it to your employees and move on to something entirely different.
Thirdly, there’s the retirement option.
Many former executives set-up consulting firms towards the end of their careers with a view to leveraging their experience and expertise for so long as it remains relevant. Over time, they take on less work until they eventually shut-up shop.
Starting a consulting firm can be a great way to become your own boss and truly fulfil your business potential.
However, consulting is definitely not for the faint-hearted. I hope that you’ll find the 5 factors highlighted in this short article helpful in considering whether consulting is right for you.
If you’re ready to take the plunge, dive right in. The water may feel cold and choppy, to begin with, but you’ll soon be swimming with the tide. Good luck!