Going Independent

    Some people join a consulting firm to make a career of working their way up through the firm politics and become a partner or director.  Others join firms to get valuable experience to manage in another industry.  Still others utilize their consulting experience to go independent, starting their own consulting firm once they’ve learned the ropes of how to sell and deliver consulting services with an established firm.  This week we address those consultants who wish to get consulting firm experience in order to set out on their own.

    1. Is it common for people to join a firm in order to go independent?
      • I’m not sure how many actually join a firm with the express desire to learn the business in order to go out on their own, or if they join a firm and decide later that that’s what they want to do.
      • I’ve seen people go a number of different routes after getting consulting experience.  Some stay with the same firm for years, some move from firm to firm depending on how their skills and interests match the firms.  And there are some who want to just get a couple of years of experience in order to be a manager in a non-consulting industry.
      • But there are a certain number of people who realize that while the firm is billing them out for over a hundred dollars an hour – and sometimes well over that – yet the consultant sees only a small percentage of that in their salary.
      • And that often gives a lot of us the idea that if we went out on our own, we could keep those billing rates all to ourselves and in essence, eliminate the middle-man.
    2. What is a common route for going independent
      • Some people spend several years in a non-consulting company.  And over those years, they may acquire some experience that is valuable to other companies.
      • So they may start a 2nd career, although closely related to what they did before.  Depending on what they do, they can contract with other companies on an ad hoc basis, working at say, a week at a time as different companies need them.
      • Or they may work on longer term projects for several months to run a large project.
      • I think the more common route for experienced people is to have done some work with a consulting firm for at least a year or two.
      • This gives them the opportunity not only to hone their skills and develop an expertise.  But it also allows them to learn about appropriate billing rates to charge, how to deal with clients, and one of the most important aspects, how to sell services.
      • Another advantage of spending some time with an established firm is to develop a network of contacts.  It helps a lot in the sales process if you already have a large cache of people that you can contact and solicit your services to.
      • But you have to be careful not to poach clients from your previous firm.  Many firms have non-compete contracts that restrict that, so you could be subject to legal action if you’re not careful.
    3. How do firms deal with employees who leave to go out on their own
      • It depends largely on the firm and the situation when the consultant leaves.
      • Larger firms generally maintain good relationships with their alumnus, as long as they don’t go on to a competitor.  I worked for a top tier firm several years ago and I still get notifications of alumni activities and outings.
      • Their strategy there is that you may end up working at a company that will want hire their services so they want to maintain strong ties.
      • If you leave the firm to start out on your own, in most cases, they will be disappointed to lose you.  But if you leave on good terms, they may see opportunities to work with you by either sub-contracting with you on selected projects, or even recommending you to clients for work that they don’t have the expertise or capacity to perform themselves.
      • As I mentioned, they’ll be concerned that you don’t take business away from them.  If you’re apt to contact all of their clients and try to steal business from them, you won’t be in good standing with your former firm.
      • When you leave, they’ll be interested in knowing how you’ll be targeting clients and how it will affect them.
      • And it may be that you will have a poor relationship for a while.  I’ve seen people go independent and the firm shuts them out.
      • But after a year or so if they see that you can co-exist without head-to-head competition, you may be able to open some dialogue with your former firm if you’re interested.  And you really don’t want to burn any bridges.
      • Your former colleagues are your best source of contacts.  They hopefully know you as a good and knowledgeable worker.  So you may get referrals from them if they can help you out.
      • Now I have seen people leave on bad terms.  I knew a group of about six people who were part of one of my firm’s practices.  They all left at the same time to start their own practice in the same area.
      • Not only had the firm had spent a lot of money training them in that practice, but the small firm they were starting planned to compete directly with my firm.
      • They were escorted to the door and my firm also considered legal proceedings.  They also watched this small firm closely to make sure they didn’t break any non-compete agreements that they had signed.
      • So as I said, it depends on the situation and the firm.  But it is often possible to leave to start your own consultancy on good terms.
    4. What are some good skills to have in order to go independent?
      • Well, we’ve talked in previous podcasts about key skills for a consultant being confidence, communication skills and so forth.
      • Those are just the basic skills needed to be able to work with a client who is paying our high billing rates.
      • But you also need a marketable skill.  I mentioned banking and insurance earlier.  If you have industry knowledge that people are willing to pay for, that’s a step in the right direction.
      • If you can combine that with skills in an area like IT, strategy or marketing, it will make you much more marketable because you have expertise that you can apply your industry knowledge with.
      • But all the knowledge in the world won’t do you much good unless you’re able to convince people to pay for your services.
      • So you need to have either a network of people you can contact, or some type of partner that can find leads for you.  This could be an individual who excels in the sales function in your industry, or a firm that specializes in matching consultants with businesses with a need.
      • If you have to rely on a partner or another firm to find your leads and make your sales for you, that may end up cutting into your profits because you’ll have to pay a significant premium to those that do the selling for you.
      • And even if you have a lot of contacts in your industry, that doesn’t automatically translate into sales. You have to be able to convince all of those contacts – or at least some of them – that your services are worth paying for.
      • That’s probably what most people going independent underestimate the most.
      • Anyone can put out a shingle and call themselves a consultant.
      • But I think the biggest barrier is the selling part.
    5. What are the pitfalls someone should consider before going independent?
      • Again, the sales piece is something a lot of consultants struggle with.  They often just assume that the world will just form a line out their door wanting their services.
      • In addition to that, as we’ve mentioned in previous podcasts, they find that they no longer have paid vacations, medical and dental benefits or even access to a free administrative assistant.
      • Independents also struggle with how much to bill their clients.  They may have seen how much their firm charged, but that’s often based on a group working on a project, and the firm may be able to charge more per person because of the additional intrinsic value the group provides.
      • If they came from a well-known firm, that firm may have been able to charge a premium billing rate because the value of their brand.
      • Independents can’t just assume they’ll demand the same billing rates that were charged for their services when they work for their firm.
      • They need to determine what the going rate is for their capabilities and figure out a way to differentiate themselves to show more value if they want to charge more than that going rate.
      • There can also be overhead involved with going independent.  You have to provide your own computer equipment and may have to pay for your own travel to make sales calls. If you don’t hire an administrative assistant, you have to spend time doing a lot of coordination yourself – and that won’t be time you can bill to a client.
      • Another pitfall is that some consultants struggle to be better than a Google search.
      • There is an amazing amount of free content available out on the internet.  An independent consultant isn’t just competing with Joe-consultant down the street or even a small firm across town.
      • An independent has to provide knowledge and advice that provides more value than the prospective client could learn by just doing a Google search and reading the content that’s available for free.
      • That’s where taking their industry knowledge and combining it with some application area or customize your advice based on the specific context, that adds value that the client can’t usually find doing in internet search.
      • Finally, I think another pitfall is that you’re not just continuing to be a consultant. You’re starting your own business.  And there are so many aspects that need to be considered.
      • It’s like the person who is a terrific cook and decides to open their own restaurant.  They think it’s all about making great meals and pleasing your diners.
      • That’s a big part of it, but what they don’t realize is that they have to advertize, hire and train employees, do the books and pay the bills, file business income taxes and a thousand other things that have nothing to do with creating new recipes and cooking.
      • Independent consultants learn quickly that much of that billing rate that they saw so little of, goes to all of the overhead that they now have to pay for out of their own pocket – either through time or money spent.
    6. What do you suppose is the appeal that makes people want to become independent consultants?
      • Well, as I mentioned earlier, I’m sure money comes in to play.  Seeing how much they take home versus how much they’re billed for really makes a consultant think about how much more money they could pocket themselves.
      • There is also the problem of getting pigeon-holed into one specialty with a firm.  People often want to go independent to have the control to focus on what they want to focus on.
      • And that can often work.  The challenge is getting clients that want to pay for what you want to do.
      • But that’s really the entrepreneurial spirit of having the freedom of being your own boss.
      • In addition to just going independent, some have dreams of building on that.  They may be independent for a while and then start hiring staff.  I’ve seen small firms start that way and become good sized firms in their own right.
      • That one-time independent is now the CEO of a small or medium sized firm, with a sales staff and a full staff of consultants.
      • And that can translate into significant income if you can manage to keep enough of that staff deployed on billable clients.
    7. So what’s your take?  What is the best route to go, independent or working for a firm?
      • Well that’s a question that only each individual can answer for him or herself.  I’ve seen a lot of people get a few years of experience working in a consulting firm and go off on their own to be wildly successful.
      • I’ve also seen people try the independent route and be unsuccessful.  Some go back to working for a firm and others just hire on at another company never to give consulting another thought.
      • In my 18 years of consulting, I’ve always been affiliated with consulting firms.  Although I wouldn’t rule anything out, I find a certain comfort working with a firm.  I like the teamwork and camaraderie of it.  I also like not being 100% responsible for selling.
      • There’s a security associated with working for a firm that I like.
      • So if I ever did go out on my own, it would probably be with a few partners that would allow me to have that teamwork sense and be able to rely on others to help with the sales function.
      • But it’s something that every individual has to answer themselves.  Everyone has their own risk tolerance and their own level of entrepreneurial spirit.
      • No one can answer that for you but you.
    8.  So if someone wanted to set out on their own, how would you recommend they go about it?
      • Well one way to do it is with some fellow colleagues.  If you know one or more people that have similar or complementary skills, you can pool your skills – and your capital – to start a small partnership.  That way, you’re not just one person all on your own.
      • As I mentioned, if you all work for the same firm, it could create some bad blood between you and your firm, but that’s a decision you need to make regarding whether you want or need to maintain a good relationship with your previous firm.
      • You never want to burn bridges – you never know when you’ll need a reference from your former boss, but sometimes you have to do what you have to do.
      • Another tactic, as long as it’s not a conflict of interest with your current firm, you could begin freelancing in your spare time.
      • I’ve seen this in the IT industry, where a developer for a consulting firm does web development by selling his services on a site like Craigslist.
      • Once they get a few small projects under their belt, they start building on it, getting repeat business and eventually larger projects.
      • Once they reach a critical mass, where they have a large enough sales pipeline that they can count on some steady income, they’re able to leave their day job and make their side work a full-time gig.
      • I’ve seen that work for several people.
      • I’ve also seen people just leave and try to start out cold.  If you’ve got a lot of savings or can rely on living with your parents or on a spouse’s income, you can make it work.
      • It just takes a lot of time to get up and running.
    9.  Any final thoughts on going independent?
      • There’s a lot of opportunity to make more money and do what you want to do by going independent.
      • But it’s important to be aware of the risks and additional costs and not to overestimate your ability to acquire paying customers.  You may want to have that first paying customer before handing in your resignation.
      • But working for a consulting firm can be an excellent training ground for learning how the industry works, developing a network and learning the sales and execution aspects of it before heading out on your own.

    Next week’s topic: The Consulting Industry Defined


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    Consulting 101: 101 Tips for Success in Consulting



    Images: www.freedigitalphotos.net / chanpipat

    Music:  Kevin MacLeod – Incompetech.com

    Consulting 101: 101 Tips for Success in Consulting

    Consulting 101: 101 Tips for Success in Consulting

    Consulting 101 provides you with 101 useful tips to optimize your professional performance and jump-start your consulting career with success.

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