The Reason New Consultants Often Go Back to a Regular Job

New consultants routinely return to a regular job within a few months or a couple of years. In my experience there are two primary causes: insufficient levels of business (i.e. income) or inability to handle the ebbs and flows of client payment cycles and from the hopping from engagement to engagement.

Insufficient levels of business (i.e. income)

Most consultants seem to exhaust the capacity of their personal and professional contacts to bring project work and refer business their way within a few years of starting out. These are typically the first folks a new consultant turns to as they announce their availability. There are only so many inquiries and referrals that can come in from this resource pool.

Also, people have finite memories and attention spans. It’s easy for someone to forget they know someone with specific expertise in their network – particularly after a few years have past since their last encounter.

The result is insufficient business to maintain a reasonable income. And, in turn, the consultant naturally seeks to return to a regular job with a predictable paycheck.

The Cause

The underlying culprit is their failure to develop systems for generating new business (assuming the consultant’s expertise is in demand). For technologists that have not built a business before from scratch nor ever had to do such personalized marketing and selling, it’s understandable this situation arises.

The Solution

The solution is that – regardless of the area of expertise of the consultant – they must also develop expertise in business. And specifically in the unique attributes of the business of consulting. In general, we’re talking list building, encouraging referrals, selling and marketing in an effective manner, generating new business from existing client relationships, communicating with clarity and effectiveness, and cash flow management.

Where to Start

Anyone can do some consulting on the side (that is, alongside their regular job) if they’re not interested in or prepared to tackle the business side of consulting. They likely wouldn’t make it as a full-time solo consultant for very long (certainly not a happy one) if they jumped right in expecting to replace all of their prior income. Plus the lack of business knowledge means probably overlooking a lot of opportunities and leaving a lot of money on the table.

My first time around I got snagged by a lack of business experience. I ended up going back to work for someone else after about a year. I nearly had to do the same the second time around (and probably should have given the amount of stress and frustration I sustained as a result at the time).

Even if you aren’t sure you can tackle the the business side of consulting, there is hope because you can always go back to consulting more as you develop your business skills and even test out a lot of them while you’re still employed (since these business skills are just as applicable to side gigs).

You have to start somewhere. But be honest about where you’re starting so that you know where you need to focus to grow. It’ll avoid a lot of extra frustration and confusion.

And if you’ve been tossed into things involuntarily? Well, there are no quick solutions. I’d probably say something like: set appropriate and realistic expectations for yourself, learn as much of you can, experiment and iterate quickly, and be willing to do things sub-optimally to live to fight another day.

The art of engineering consulting

Cal Poly professor and veteran engineer, Dr. Frank Owen and engineering marketing consultant Patrick Klima write in Consulting-Specifying Engineer:

There is a common error that engineers are prone to as they explore their entrepreneurial ambitions. Having arrived at what seems to be a valuable idea, engineers will often launch into development of a solution before truly evaluating the market potential for that idea. In their enthusiasm, they develop a solution for a problem that does not exist or that customers are not willing to spend money to solve

Consulting – Specifying Engineer | The art of engineering consulting—Part 1: Getting started

Stop leaving money on the table with your freelance rate

Ryan Castillo writes:

When I took on my first client, I had no idea how to set my freelance rate. Asking for too much would make me seem greedy. Asking for too little and I would fall into the trap of being overworked and underpaid. It has taken a couple years, but I’ve finally come up with a system to set a rate that is best for me and my client.

Stop leaving money on the table with your freelance rate

Speak with prospective clients with less worry

C.J. Hayden writes:

It’s a rare self-employed professional who has no qualms about talking to prospective clients regarding doing business together. Much more common is to feel anxious, resistant, or awkward about those conversations. Sometimes enough so that you find yourself avoiding them completely, or delaying for so long that someone else gets the business.

But it is possible to speak with prospective clients with less worry.

When you find yourself delaying or avoiding talking with prospects, don’t ignore it or try to push through it. Instead, take time out to identify what may be making it so hard.

How to take the angst out of talking with prospective clients and how to make the whole process easier.

Time and Solo Consulting

It’s difficult for a small organization or a dedicated craftsperson to run an operation as punctually as a large bureaucracy. After all, the bureaucracy exists mainly to be sure that deadlines are honored and variances are not exceeded.

Your customers are aware of this. It’s one reason that they chose you–because you’re doing the work yourself, you’re a person, not an industry.

Seth Godin, writing on his blog in “Craftspeople and Time.”

Tech Consulting in a Tight Economy: COVID-19 Edition

During the Global Financial Crisis of 2007-08, I published a post of a similar title as this one. In light of the current humanitarian crises and resulting economic fallout that COVID-19 has triggered, it seemed worth revisiting that old post as well as sharing an up-to-the-moment opportunity example.

My opener is just as relevant today:

Independent consultants may be in an enviable position within the world of business. Our services – by their very nature of not being tangible – allow us to be more agile. We can adopt to changing market demands.

Adapting, accepting reality, making adjustments, experimenting, learning, brainstorming, analyzing results, incrementally getting better – these are things an entrepreneur does. And make no mistake: consultants and freelancers are entrepreneurs.

Aaron Cruikshank of Friuch Consulting writing on his blog around that time period said:

Find new pain points, serve them.

And also:

People starting out in consulting today might think that they need to go down market to succeed in a shrinking economy. I respectfully submit that such thinking is bunk. What you need to do is find a niche that is not something everyone else is doing and sell it at a premium. For example, when the economy is tight – offer a service that makes people think they’re saving money. You’re a webmaster? People still need websites, even when the economy is in the toilet. Make your niche designing websites in the most affordable way possible or link your design techniques to a measurable return on investment (ROI) so that the client can be sure they got their money’s worth.

I don’t think his statement just applies to those just starting out. It applies to all of us at all times.

Expanding on his example, I’ll dig into this a bit deeper so that you can see how it might apply to your own situation one way or another.

SITUATION: Restaurants (and other businesses too) are focusing on pick-up / take-out service with an emphasis on contactless service, social distancing enforced through scheduled pick-up and pacing, and the like.

OPPORTUNITY: Many restaurants have sub-par to horrible ordering processes on-line and off-line. They’re also suffering from cash flow and liquidity problems. They need orders, they need streamlined processes, they need a good customer experience, they need low hassle, and they don’t have any extra capital to invest in accomplish this.

SOLUTION: Utilize your web skills, business process skills, availability, and expertise with third-party technical solutions to pull together a tailored solution for a restaurant client in exchange for a % of sales (up to a fixed dollar figure roughly equivalent to what you’d have charged for the same work with paid ahead of time payment terms – or even 15% to 25% higher – to compensate for the added risk you’re taking on).

“We’re not paying invoices due to the pandemic” – How to Handle These

A thread that is not to be missed on Twitter on this topic, started by the ever thoughtful Patrick McKenzie:

You’ll have to click through to read the thread in its entirely, including additional suggestions on how to address more complicated situations.

Recurring revenue: a path to sustainability in your solo freelancing firm

Becoming independent is easy; remaining independent is difficult.

Some of my low years have been so deep that I arguably really should not have continued my solo practice. While the high years generally made up for it, that wasn’t helpful when in the middle of those low points …when I really needed to pay myself a living wage (not to mention my overhead).

There are numerous ways to maintain a baseline of revenue. One way I’ve found sustainable income is retainer arrangements, which work well for the types of clients which benefit from being able to periodically access me for advice and small requests, and which desire priority access to me when something important and urgent arises.

I happen to like recurring revenue because it reduces my ongoing sales and marketing needs (to an extent) and makes my short-term cash flow more predictable. This frees me up to serve my clients, to pursue newer (more risky or less predictable) business opportunities if I so choose, and helps stabilize my income in a way that I haven’t been able to meet through any other technique.

I also personally prefer it because I like to work with the same clients over long periods of time, and retainers focus my energy on those types of clients.

Retainer arrangements are like Membership offerings — Only Better

I view retainer arrangements essentially like a paid membership offering — only better. Membership has its privileges (that is, after all, why someone joins) and in and of itself — with some creative thinking — you can create something valuable to your types of clients.

But even more interesting — each individual arrangement can be customized — one can tune the specific benefits and specify other perks that are appropriate and valued by each individual client in question. Costco can’t do this. You can.

This increases value to the client. This, in turn, increases conversions of proposals into sales, better retention (renewals, which decrease time devoted to sales and marketing and increase your operating profitability), and boosts what you can charge. Win-win!

Payment Terms

My retainer arrangements are typically one of monthly, quarterly, or annual. I automatically invoice at an appropriate point near the end of the current period for renewal. I also require a heads up a reasonable period prior to renewal if the client won’t be renewing.

One difference between retainers and other types of work, is that full payment is always required prior to each period — not during or after. This is important, as it’s helps justify the discount you’re effectively offering in exchange for your receiving prepaid guaranteed income; this goes away if you bill after the period is over.

How to start offering retainers

I got my feet wet with retainers by offering them as an optional add-on to existing client projects at proposal time. I spent time thinking about each project and determining where there was value-add to ongoing follow-up of some sort. Not everyone went for it, and some projects were better fits than others, but enough did… until it donned on me I could make this a central part of my practice not just a small revenue bumper tool.

I suggest this route because it allows one expand their comfort zone in a low risk manner, without scaring off clients or cannibalizing existing business. And, over time, it’ll give you a better idea of which opportunities make the most sense to explore and which clients really see the value in this sort of arrangement (many clients won’t and that’s fine).

What to include in retainers

This is really something that you will know best as you know your specific types of clients best and your market. Here are some suggested places to look for ideas that worked for me:

  • Look at past project proposals and ponder what types of add-on or ongoing value-add offerings might have been appropriate
  • Look at existing projects in progress and do the same
  • Chat with clients about their ongoing non-project needs.
  • Brainstorm ideas, even ones that sound far-fetched and commit to selecting one or more of them to tack on your next few proposals as optional add-on offerings. Ask for feedback after proposal acceptance, from those who did not opt for it.

Should project work ever be included in retainer arrangements?

Should project work ever be completed as part of a retainer arrangement? That depends on your goals. Some of my retainer arrangements have been about establishing predictable income and basically are designed to be cash cows for me, albeit heavily discounted versus if I’d performed the same duties on a project by project basis. I was willing to accept this because my priorities were different at the time. There’s nothing wrong with this, but know why you’re doing it if you do it.

Most of my retainers include a discounted rate for project work, applied either to my hourly rate or to my quoted fee for any future projects we do together during the term of the retainer arrangement. The client will still be paying separately for the project work, but gets a discount in recognition of their membership status.

Final thoughts

I think retainer arrangements are a good component of a well rounded solo practice. They bring additional value to clients, encourage long-term client relations (leading to more project work), often can make project work more successful (by incorporating ongoing maintenance and adjustments), can reduce firefighting (by encouraging reaching out for advice and assistance with small tasks), and can bring stability to our cash flow and income.

How to immediately start closing more freelancing deals

One of the biggest reasons prospective clients don’t proceed with a project after having you provide a thorough proposal is because they are concerned about their options if you mess up. Take that risk away: Offer a strong guarantee. Here’s how I do it in my consulting practice.

Something like this will do:

The quality of my work is guaranteed. If you do not believe I have met the mutually established objectives for this arrangement, I will continue to work toward those goals with you for no additional fee. If, after such an additional attempt, you still believe I have not met your objectives, I will refund your fees in total.

I borrowed this idea from Alan Weiss years ago, include it as boilerplate in every proposal letter, and haven’t looked back.

Is the above scary? Are you taking on more of the risk? Yes. That’s why it’s powerful.

Do you have to use exactly this language if it makes you too uncomfortable? No. But make sure you pick something that makes you a little uncomfortable. Otherwise it’s meaningless and not compelling. And therefore not of value.

(Also, you’ll have to adjust the language if your projects aren’t fixed fee — like mine predominantly are — but the spirit can be similar.)

Not incidentally, offering a compelling guarantee is also justification for charging higher fees. Accepting risk — taking it away for the client — has value. Clients aren’t simply paying you for your advice or your labor, but everything you bring to the table.

If accepting this level of responsibility for your work isn’t acceptable to you, that’s fine. Just expect to close fewer, smaller, and less profitable deals. Which is fine if it helps you sleep better.

But I sleep better doing things this way[1].

[1] You don’t have to go crazy. Try it on a proposal or two and see what happens.