Categories
Articles

A few cash flow tips for IT consultants

When trying to improve your cash flow, it’s easy to focus on the things that are outside of your control when it comes to clients paying you. But what about those things that are under your control and in their current state are hurting your cash flow?

If you focus on all the things that are outside your control, well, you’ll quickly convince yourself it is a hopeless endeavor and overlook opportunities to improve things. That usually leaves good consultants accepting their weak cash flow positioning. (It’s also a terribly frustrating way to run a business and to live.)

That’s why we end up in cruddy positions time and time again, wishing it were true or possible to do something about our cash flow (or complaining to a friend over a beer the day before the mortgage is due).

Start with the things you do control

When trying to make improvements it can be helpful to return to the fundamentals to confirm that you are working from a solid foundation. (And before doing anything too drastic.)

Today I’m going to walk through a few of these “foundational” techniques for improving cash flow in a small IT consulting / freelancing / service business. These are some of the most basic elements that impact cash flow. And, thankfully, they are most definitely under our control.

You have more control than you probably think

I had no idea of this until I sat down and inventoried everything last week, but at last count I have made 31 specific adjustments in my consulting business over the last 5 years to optimize my cash flow. (Wow!) And I’m pretty certain I’m still overlooking a few…

These are techniques I use at various points within my business, mostly at various prospect and client touch points. Ranging from how I send my invoices, how I discuss fees, what my payment terms are, how I disclose my terms, how and when I do invoicing, how I handle late payments, the specific language I use, who I talk to about money, when I ask for it, how I position myself and my business, when I follow my own rules and when I decide to break them intentionally, when I charge on an hourly versus fixed fee basis, how I scope and frame the work I do for clients, what milestones payments are tied to, when I start work, how I help prospective clients self-select themselves to filter out the incompatible ones, etc.

Don’t worry, just improve

Even now it is a very imperfect process. After all, there are only so many things under your control as a consultant. And, in my case, sometimes I fail to follow my own advice or I screw up in some other way. 🙂

I’m still learning and experimenting, which is also why I’m still able to improve. This is my challenge to you as well. Learn and experiment. Take a few steps forward …and a step or two back. It is the only way to improve.

Your clients are not your adversaries

Your clients are not your adversaries. Just because they do not give you exactly what you think you want (or, worse, deserve), without you even having to do anything to make it happen, does not make them your adversary. Good consulting relationships are built on mutual win-win arrangements. One party does not have to lose for the other to win.

It is your responsibility to get what you need, while finding ways to make it happen within the confines of a genuine partnership. To do that you need a couple of things. First, to decide what you need. Second, often in parallel, to wrap your head around what is possible. Third, you need to do something about it.

In fact, it is your professional responsibility to establish a viable business so that you can serve your clients better. This does not mean giving away your life and your business, little by little, to those who want to abuse your relationship and goodwill.

Are there clients that don’t think win-win? Sure. And I’ll give you some options to address those eventually too (just before you get rid of them for good), but — as I said at the start — focusing on the exceptions and the things you can’t control isn’t going to get you anywhere you want to be. Those things are a distraction. They are just noise.

Alright, lecture over, let’s get down to this week’s techniques. 🙂

A solid foundation

At first I was a bit embarrassed to tell you about a few of these “foundational” techniques. That is because some of them seemed obvious. Nor are they clever or exciting. Yet that is precisely why they are overlooked or, worse, taken for granted.

I also realized, thinking back, that I’ve had to learn the subtle nuances of these seemingly obvious techniques on my own. Make sure you are doing the absolutely best you possibly can in these first three areas — because quite a bit of the other techniques build on these.

The professional invoicing technique

I look back now and can’t believe how I used to invoice my clients, when I first started out (this was years ago now). I had text files strewn around in client specific directories and post-it notes in client folders (if I was lucky). Once a month I would manually add the time up and try to get everything all formatted just right in a Microsoft Word file that I copied for each client invoice as a template. I manually modified it for each one! Oh, and I had to get the alignment just right for the addresses to line up neatly in those stupid envelope windows…

Thankfully, things are much better now. We have excellent off-the-shelf options available to us, that are very low cost and even free. And just about everybody will accept electronic invoices these days.

So this first technique should be pretty easy (minimal time investment) and low-cost to accomplish. That said, don’t mistake using some of the excellent off-the-shelf solutions, with using (configuring) them in the best possible way to head-off issues that your clients may use — intentionally or not, consciously or sub-consciously — to keep you from getting your cash when you want it and with the least hassle.

  1. Your invoices should be professional, clear, simple, accurate, and consistent in appearance and formatting. Easy enough, right?
  2. Yes, but the value is all in the details, which you control (and thus, if you’re anything like me, can still screw up from time to time)…
  3. Every invoice should have just enough information to know, at a glance, what they are for, when they are due, and who the buyer is.
  4. An invoice should only be for work and results previously agreed upon with the buyer (the person who directs you to get paid — the person who literally agreed to hire you for the work). I typically include a reference to the proposal date, proposal title, and buyer. If it was emergency work the approval is generally implicit, but I still document each line item.
  5. If billing by the hour, rather than on a fixed fee basis, there should be a reasonable explanation for all itemized hours / hour blocks so that a buyer (or his staff) taking a “trust, but verify” attitude can rapidly make a sanity check assessment to confirm that there’s justification for the hours backed by documentation.

You can manually format things in Word/OpenOffice or use some other homegrown solution, but I highly recommend against it. Instead, use something like FreshBooks, which will not only meet the aforementioned requirements, but also reduce your time investment (or, procrastination) and, critically, enable lots of the other techniques we’ll be getting into in the coming weeks.

The professional time tracking technique (if you bill by the hour for any of your work)

If you charge by the hour it is reasonable for the client to expect some explanation of your hours worked. This means not just having a line item that says “42.25 hours x $100 = $4,225” and expecting payment. (Don’t laugh, I’ve done this before.)

How does this mean you are more likely to get paid or that you’ll get paid faster? Think about it from the client’s perspective: they’ll feel confident you are being honest, that you embrace transparency in your billing practices, and they’ll be less likely to ask questions or, worse, dispute an invoice. It creates trust in the relationship and they’ll like you more.

Operating this way is the right thing to do, and it’ll help you get paid faster to boot, get it?

While you could come up with the explanation text for your hours afterward, I find it not only easier to remember and keep accurate but also more difficult to dispute if you do it as part of your work flow. It’s also more honest.

For example, when you sit down to do something or immediately after you finish up a period of work (but not necessarily your entire task or project):

4/12 – 12:50 – 1:50 Looked at server configuration; noted a few concerns, more later

4/12 – 4:30 – 5:30 Looked more deeply at the areas of concern I found earlier; adjusted NIC configuration

When you add up these (and, likely, several more) at the end of your billing period and send along your invoice, make sure to include each of these on your invoice too before totaling, so that the client can have confidence and be comforted that you didn’t just pull some numbers out of nowhere and see that you clearly have good and concise record keeping. The client will relax. e.g.

4/12 – 1hr Looked at server configuration; noted a few concerns, more later
1hr Looked more deeply at the areas of concern I found earlier; adjusted NIC configuration

When you are using something like FreshBooks this is even easier as it is designed around time tracking in this way and then automatically incorporates your comments into the invoice. That’s how I do it.

If a dispute does come up, rather than getting defensive or simply giving in even if you disagree, you’ll be able to calmly discuss the issue with the data in front of you. This is super powerful when you start to realize, later on, that most billing disputes aren’t really about the dollar amount, but covers for other problems that really need to get discussed and worked out. You can’t do that if you are mired in uncertainty with regards to what hours were for what.

The consistent and on-time invoicing technique

When I first started out, I had a love — and a hate — relationship with invoicing (which, at the time, was supposed to happen every 1st of the month). Sure, I wanted to get paid, but the whole process was tedious and boring. (It didn’t help that my first introduction to invoicing was manual which also made it a lot of work.) It should be no surprise that this all lead to one thing: procrastinating.

Some months I billed on the 1st …others on the 11th.

Later, when I streamlined the process and things got WAY easier, I still found myself sometimes procrastinating when invoice time came around. Eventually I discovered that the more consistent and on-time I was with invoicing, the more consistent and on-time my clients paid. This was both because I invoiced sooner (obviously), but — this is my hypothesis — also because clients took me more seriously. I was viewed as having “my act together” and it showed.

Wow, did I have everybody fooled or what?

What I understand to be going on is that people respect — and are more likely to pay — those who they work with that have “their act together”. It also seems to reduce billing disputes, incidentally, and I’m fairly certain that it is easier psychological to cut a check for work that has happened recently (days or weeks) rather than 60 or more days ago when it no longer seems as important, a million other priorities have come up since then, and the consultant is probably even a distant memory (at least until the next time your services are needed).

Here are a few ways to make it easier to do invoices on-time and consistently every single time:

  • Use tools such as FreshBooks to track your time (if applicable) and to generate professional invoices. This makes the process simpler, automates certain aspects of it, and cuts the time commitment per invoice down to <1 minute each. Another free option is Wave, which I use for keeping the books in my businesses, and also does invoicing and payment acceptance. (I’ve only personally used it for keeping my books as I haven’t had the time/motivation to attempt to fully replace my completely working and well understood FreshBooks invoicing and time tracking set-up).
  • Choose a consistent (specific) day in your calendar (an appointment with yourself) during each billing period when you will do invoices
  • Do less work that requires time tracking. This simplifies your invoicing, but you obviously need to have some other things in order first before you get rid of hourly fees entirely.
  • Invoice more often (e.g. every 14 days rather than every 30 days) so that you have less to review and to do at once, and client concerns are caught sooner (and before balances are bigger). Plus the excitement of getting paid sooner and more often adds a little extra motivation to the process.
  • Get some (or all) of your money upfront. There is nothing like invoicing for the initial payment required, for an already agreed upon project, and knowing you’ll have payment in your business checking account before even doing any work!
  • If you bill the same amount each month to a particular client, such as under a retainer or for any sort of regular services, utilize recurring invoicing functionality in your chosen billing solution (FreshBooks has this, for example). Once you trust the system enough you can have it auto-send these invoices after generating them, but you may start out just having it auto-generate them and requiring a single-click from you to approve and send.

Those are three of the most essential foundational approaches to improving your cash flow. Remember, these are supposed to be the more obvious ones. A lot of the pieces under our control, even the most advanced ones, require these foundational pieces to be in place and operating smoothly. Don’t overlook the cash hidden inside the above areas. I’ll share some more techniques next week.

Cheers,
-jr

P.S. If you got value out of the above, I’d love for you to share it with your network and encourage them, if they want more like it, to join the e-mail list. Each week, for the next couple of weeks, I’ll be sharing more content like the above so it’s a great time for someone to join us.

P.P.S. As always, I’m here if you have any thoughts on today’s email, or even just a “this rocks” or “this really stinks” response. I’m not picky.

Categories
Linked

Why Self-Employed Consultants Fail

Karen E. Klein did a solid interview with Alan Weiss on the topic of “Why Self-Employed Consultants Fail”:

Many former executives who have been downsized or have taken early retirement in recent years are consulting today. Rather than making a healthy profit, most scrape by or fall on their faces, says Alan Weiss, president of Summit Consulting Group in East Greenwich, R.I.

Why Self-Employed Consultants Fail

This interview is nice overview of a lot of the themes Alan Weiss hits on regularly. I built a lot of my practice on the things he teaches in his books.

Categories
Linked

Productizing a Freelancing / Consulting Business

Patrick McKenzie recently shared a thought provoking piece entitled Productizing A Freelancing / Consulting Business:

If the fundamental unit of value in a consulting business is professional expertise applied to a business problem, then the fundamental unit of value in a product business is capturing one thing learned into an artifact and then reproducing that artifact at scale.

Just because you’re selling your time chunked up into engagements doesn’t mean that the business has to be a hamster-wheel of death.

If you enjoy it, you may want to also get on his mailing list or read some of his most popular blog posts, several of which have great lessons from his software consulting activities.

Categories
Articles

Employee-like cash flow for freelancers

Why do freelancers have cash flow concerns that employees do not?

It’s superficial and shortsighted to say it’s because employees get a paycheck every other week. Employees simply work for corporations, which are certainly not immune to cash flow problems. Things happen — missed payroll, delaying reimbursements, and layoffs — just to name a few that impact employee wallets / purses directly.

Even so, businesses with large quantities of employees do tend to be better at insulating their employees from cash flow problems in the business than freelancers are about insulating themselves from cash flow issues in their practices. Organizations of any substantial size are able to “roll with the punches” a bit more.

Why?

It seems big business has an advantage, but it’s only because they’ve engineered things that way. Alas, they do not have magical cash flow sources that I can reveal to you. What they do have is something close though: high-impact, proven strategies for improving the cash flow in any business situation.

Specifically, for increasing the likelihood that, at any given point in time, they’ll be able to cover the bills, pay employees, and keep in progress projects moving forward.

What a typical corporation has is options and flexibility. Even solo/small technical service businesses can have these things, but it has to be engineered just like it does for the big companies.

Let’s break down what a typical corporation has in its “cash flow toolbox.” Then let’s figure out exactly how we can replicate these in our own situation. Even a solo IT consultant can learn from this. I know because I am one and I have.

How cash flow is engineered in a typical corporation

Much of the flexibility in a bigger business comes from things that any organization of any reasonable size is expected to have. As smaller businesses — especially in my experience with solo IT freelancers, consultants, and service businesses — we often don’t think about these things. Or, more accurately, we don’t know how to make them happen. After all, we don’t have a professional and experienced Chief Financial Officer (CFO) who is dedicated to living and breathing cash flow and balance sheet data. At least I’ve never considered myself one …and I am the de facto CFO for my own business.

Some of the cash flow “levers” in a typical corporation

Here are some engineered cash flow levers available to a typical corporation. We need to identify them so that we can figure out equivalents for our own business activities.

It’s not necessary, by any means, that we have equivalents in our own business for every single one of these levers. It’s only necessary that we have some, and possibly add to them over time as our own business activities mature and our risks and needs change.

  • Customer/client diversity (e.g. individual customer/client, different regions, etc.)
  • Product/service diversity (e.g. multiple offerings appealing to different customers under different conditions)
  • Capacity to borrow funds (e.g. lines of credit, bank loans, payable notes sold to investors)
  • Capacity to raise money (e.g. equity sold to investors)
  • Tangible assets to move around and/or sell (e.g. cash, physical assets, real estate, subsidiaries, etc.)
  • Intangible assets to sell or license out (such as trademarks/patents, intellectual property, distribution rights, etc.)
  • Dedicated as well as excess capacity – brains, energy, labor, manufacturing, or distribution capacity (e.g. dedicated management and staff with ideas, energy, and time to focus and tackle problems and opportunities as they come up)
  • Planning and forecasting — tools, people, data to do it
  • Budgeting — tools, people, and data to do it
  • Ability to defer expenditures (e.g. maintenance, new capital expenditures, freezing of new hiring, delaying planned and in-progress  projects, etc.)
  • Ability to delay payment — to vendors, contractors (!), and government
  • Boosting marketing investments — in areas proven to have the highest (or the shortest, depending on which is more important) return on investment (while reducing investments in lower ROI, albeit still profitable, areas)
  • Boosting sales efforts — just like marketing, focusing resources on areas proven to have the highest (or the shortest, depending on which is more important) return on investment (while reducing investments in lower, albeit still profitable, ROI areas)
  • Creating limited time price incentives (e.g. for customers to buy now, for customers who pay earlier than typical, or for customers who buy in larger quantities than they normally would)
  • Requiring payment before shipping product
  • Requiring a set-up fee before delivering a new service
  • A willingness to make investments for the long-term

These are just a few of the biggies. 

Engineering your own freelancing business for maximum cash flow flexibility

What lessons can be learned from what a typical large corporation does that can then be translated into things in your own consulting practice? Quite a few it turns out!

Here are some ideas:

  • Diversify your client base
    • In quantity (e.g. if you have two clients, get three)
    • By industry (e.g. if all of your clients are in one industry, get one from another industry)
    • In revenue percentage (e.g. if one client accounts for >50% of your annual income, get another one)
    • By region (you get the picture)
    • By size (e.g. small business, large business)
    • By type (e.g. for-profit, non-profit, government)
  • Diversify your engagements 
    • Lots of project work? Balance these out with more retainers.
    • Lots of retainers? Balance these out with some project work.
    • Lots of new clients? Increase the repeat business you get from past/existing clients.
    • Few new clients? Improve how you generate leads for new potential clients.
  • When cash flow is good (or, at the very least, you have some cash in the bank), establish a credit line associated with your business that you can draw upon when needed
  • Use your good personal credit history to establish one or two business only credit cards
    • Use these to pay bills/overhead and pay them back promptly, building up your credit profile for increased access to credit in the future
  • Look at your expenses/overhead
    • Trim unnecessary subscriptions (including for software/services) expenses, even if you think you may want them later (you can always resubscribe later on if you don’t find alternatives in the mean time)
    • Give some thought during the good times to what expenses are most discretionary in case adjustments need to be made quickly
  • Invoice your clients sooner and more often — don’t wait until the first. Switch to billing every other week or even every week. Bill immediately upon project completion as well.
  • Require a portion of project fees be paid up front
    • 50% of the estimated total fee, if hourly
    • 50% of the total fee, if using fixed or value-based fees
  • Offer a 10% discount for full payment, upfront, of the total fee
  • Package up your services, expertise, or access to you in new ways then encourage clients to buy them by making it worth their while (e.g. buying hours in bulk, buying special access to you via email or phone, etc.)
  • Defer investments not related to creating new revenue within <x> days
    • Where <x> is a criteria you set depending on how much of a crunch you are in
  • No matter what, keep investing in your main client acquisition approach or you will put yourself in an even worse cash flow situation (e.g. in my practice I have one monthly activity that entails investing in a monthly mailing of a specific type to my house mailing list every single month; at most I skip one or two months per year)
  • Re-focus resources constantly
    • Limit cash/credit use to investments in direct revenue generating activities, less on overhead and unnecessary things
    • Defer planned projects that aren’t in the top 1/2/3 (or whatever) in terms of near-term cash flow generators
  • Look for low-risk, low-investment, high-potential opportunities to boost revenue – e.g. smart marketing arrangements such as joint ventures with complimentary businesses to do an endorsement to their own customer/client bases of your services with a special offer
  • Manage your working capital / keep some cash in the bank

That’s just a start to get your brain used to the idea of thinking this way. Go back and look at the corporate list and brainstorm ways to adapt versions of the corporate approaches to your solo practice.

Let me know what you are doing to increase your cash flow, whether it’s on the above idea list or not.

Regards,
-jr

Categories
Linked

How to lose a client in 7 easy steps

Rhonda Abrams, in USA Today, shares some good reminders:

Most entrepreneurs who are self-employed or run small businesses can be classified as consultants or contractors. I was a consultant for more than 15 years. Now, I hire consultants. Some of them help me build my business and are part of my team. In all that time, I’ve learned a lot about how to manage clients and how to keep clients happy. And, also, how to make them unhappy.

Of course, if you want to build a sustainable business over time — to keep clients coming back and making referrals — you want happy clients. But if you really don’t care, I’ve got seven easy steps for you to take:

How to lose a client in 7 easy steps – USATODAY.com
Categories
Linked

Making Money != Starting a Business

Today is my birthday.

(That really isn’t relevant, but it seemed like a good way to open today’s blog post.)

The other day I ran across an article in the current issue of Inc. Magazine (thanks to Ryan Healy for mentioning the article so I would take a look at it). Last night I finally got around to pulling up the article online and to reading it through this morning.

The article caught my eye because it is by Jason Fried of highly successful 37signals, but it kept my attention because he starts off early on in the article by stating a principle I’ve long held (in fact I based the founding of the IT Consulting Success Strategies community upon it). Jason states it like this:

You can be the most creative software designer in the world. But if you don’t know how to make money, you’re never going to have much of a business or a whole lot of autonomy.

Readers who signed up to be on my e-mail list in the past year or so may recognize the parallels that statement has with the premise for the e-mail list described on the page you signed up on.

Jason’s credo is “It’s simple until you make it complicated.” He has built a very successful business, seemingly wrapped around that philosophy. Thankfully, he is also great at communicating his thinking and approaches and, fortunately for us, seems to enjoy sharing his insights in order to help others.

Here’s a more extensive quote from Jason Fried from the first part of the article (though I suggest you go read the full article entitled “How to Make Money in 6 Easy Steps: Entrepreneur Jason Fried offers the most fundamental of all small-business advice: how to get good at making money.“)

One thing I do know is that making money is not the same as starting a business. For entrepreneurs, this is an important thing to understand. Most of us identify with the products we create or services we provide. I make software. He is a headhunter. She builds computer networks. But the fact is, all of us must master one skill that supersedes the others: making money. You can be the most creative software designer in the world. But if you don’t know how to make money, you’re never going to have much of a business or a whole lot of autonomy.

This is not about getting rich (though there’s certainly nothing wrong with that). Instead, for me, making money is about freedom. When you owe people money, they own you—or, at least, they own your schedule. As long as you remain profitable, the timeline is yours to create.

It took me a long time to figure out how to make money. Here’s how the lessons unfolded.

If the above intrigues and/or resonates with you, go read the full article here. It includes six specific lessons that are both highly relevant to technical consultants and highly actionable.

Hope you enjoy it as much as I did,

-jr

Categories
Articles Linked

Consulting versus Contracting: A Costly (Lack Of) Distinction

So what!? What’s the difference?

There are many folks who call themselves consultants. There are also many who call themselves contractors. Humorously — and I only know this because I fell into the same trap — there are many folks who call themselves one when they are really the other. Clients, especially those who aren’t used to working with consultants, often aren’t really thinking about the labels either. Legally, at least in the United States, you’re generally paid the same way (1099). But the two roles — namely the value delivered and the expectations — are very different from each other.

Not being completely clear about which role you are operating in — and thus what the expectations are — is costly, for both you and the client. Costly in terms of money, frustration, and mismatched expectations.

Alan Weiss has a wonderful post on the subject and even mentions “IT consultants” specifically:

If you call yourself a “consultant” but are usually hired merely to complete a task for the client, you are not a consultant, you are a subcontractor or part-time employee. This is especially prevalent among “IT consultants.” If you are paid to write code or program some sequence simply because the client has no one around who can do it—and a thousand people like you can do it equally well and exactly the same way—you’re not a consultant. (And you’re subject to enormous price pressures, because you’re a commodity.)

Sometimes, in your IT business, you may switch back and forth — depending on the client and the project. Let me explain what I mean so that you can avoid this costly and frustrating mistake.

On Consulting

I like to think of consulting like this: you (pretend you are the client) call up a trusted friend or respected colleague. You ask them to join you the next day at your place of business. You share with them some of the current goals, concerns, troubles, and hopes. You ask them to take a look around, to observe, and to ponder what you’ve shared and what they see. You encourage them to not hold anything back. You tell them that you know things are so-so in some areas, quite weak in others, and perhaps excellent in still others.

Unfortunately, it can be tough to sort everything out amidst day to day pressures and priorities. You also know you cannot see nor become an expert in everything. You ask your friend to stick around a bit, that you’ll compensate him for his assistance, and that you’d appreciate his perspective, expertise, and unique background applied to your business. You may also suggest, because of his background or a particularly nagging problem you are having (or both), that he take a close look at one area or situation in particular.

The consultant is your trusted advisor, perhaps one among several that you have. He or she helps you unlock — or at least get a bit closer to — the best version of your organization — and yourself.

On Contracting

Contracting is different. It is more akin to asking a friend, associate, or friendly looking stranger to “pitch in” because you are short of hands — temporarily because of peak demand, a special project, or because of an intermittent shortage of staff.

The line may seem a little blurry if your new contractor is also something of an expert in the work you’ll be having him do, but he is still primarily there to DO rather than help you figure out what to do.

Some consultants, perhaps most, can and do help with implementation, however the advice they provide is central to the relationship and engagement. In theory someone else could be substituted in to DO (implement) what they help you architect around your business objectives, but as a matter of convenience, flexibility, or risk reduction you prefer they DO the implementation as well — or at least remain involved in it alongside you and/or your staff.

It is for this reason that the most value is delivered when consulting, whether or not the consultant is involved in the implementation. On the other hand, sometimes all you need is some help with implementation, and hence a contractor, even one that is a specialist in the area you’ll be using them, is what you should be looking for.

The Value Difference

With consulting, the value is in your brain: insights, observations, ideas, and suggestions drawn from your unique background, experiences, skill set, and area(s) of expertise. You are not a commodity. Typically, focused on the right business problems, consulting is extremely valuable to the client who needs guidance such as help making a decision, fixing a serious business problem, or figuring out how to go after an attractive business opportunity. Generally, you are working with management.

With contracting, the value is in the labor: having an extra set of hands around to complete a pre-defined task. Your expertise may be involved, but only so far as is needed to implement a task that is already well defined. You aren’t involved in helping the client come to a decision as to which path to task (such as choosing among this project or several others). Any assistance in decision making you provide is ancillary. Generally, you are working for management.

Both roles are important. Both have quite different value propositions. Both are delivered differently. Both are priced differently. Both are different businesses, with different competitive concerns, marketing, sales, and proposal processes.

Some examples of differences:

  • Consultants can, generally speaking, charge more per hour of labor input into a particular project (whether or not they charge literally by the hour is irrelevant). This isn’t to say that consultants “work less” — it’s just that much of their work was done long before the client came into the picture: they are charged with applying their unique background of experiences and skills and perspectives to a the client’s situation. Contractors are literally paid for their efforts (inputs). Consultants are paid for their thoughts and guidance and, optionally, their assistance with implementation. It is a subtle difference, but a critical one.
  • Consultants are more likely to structure their proposals differently and charge differently for different types and phases of the project. For example, a common situation would be a hybrid project: Phase 1 being analysis and advisory work, Phase 2 being design and project management, and Phase 3 being implementation. The consultant would definitely do Phase 1, while they would optionally do Phase 2 and Phase 3 which are closer to traditional implementation (contractor) roles. Phase 2 is something of a hybrid: while, in theory, any project manager (internal staff or contracted) could be put into place to implement the project as designed, there is still added valued from having the consultant play this role (assuming they are also good at being in this role). Phase 3 could be internal staff, contracted labor, or some combination. With the analysis and advisory work done and a firm design and project management handled, the actual implementation can relatively easily be done by just about anyone skilled and motivated enough. The task is to — essentially — follow orders. Important, but more of a commodity than the other roles. If the consultant is to fill all of these roles, they should consider what they charge for for Phase I to have little relation to what they charge for Phase 3. One thing that must be taken into account: The value declines and commodity-like nature of the work accelerates between Phase 1 and Phase 3. If you are a so-called contractor, yet find yourself doing lots of Phase 1 and 2 work, perhaps you should re-think your positioning, proposal structure, and fees — after all, you are doing the work of a consultant withing charging for it (Gary Klaben, head of Protinus, would probably call this “shadow work”, which comes up a lot in his industry of financial advisors). On the other hand, if you find yourself mostly doing implementation work and mostly whatever you’re told by your client, than you are a contractor with a very different value proposition than a consultant: you are face a very different competitive situation as a result.
  • Any given consultant may be more of an expert in one particular area than another. The best consultants (and business leaders) realize, however, that all organizations with a mission are complex living organisms. There are goals, rules, and guidelines to keep everyone organized, but there are also humans involved, human nature to integrate, and creativity and innovation to apply constructively. Even seemingly unrelated things have an impact in other areas. A consultant, regardless of his area of focus, takes an interest in understanding the client business as a whole. While 80% of his efforts may be targeted in a specific area, having a holistic perspective of the client’s business will help him help the client in the best way possible within that 80%. Even a contractor will benefit from doing this, but a consultant benefits the most.

It’s important you know which role you are in. It’s probably important you know which one you prefer.

Questions to Ask Yourself

  • Are you a primarily a consultant or a contractor?
  • Which does your client want?
  • Are the answers different depending on the client and project?
  • Do you prefer one role over the other?
  • Are you doing “shadow work” and not getting compensated for it?
Categories
Articles

The Time Management Matrix That Changed My Life

One of the biggest shifts in my productivity was finding a way to sort out what is important, not merely what is urgent. The funny thing is that once I started to get a handle on identifying the important items, I was able to spend more time on being pro-active, preventative projects, and the like (and not feel guilty about it either). This created a feedback loop which further reduces the urgent items that come up on any given day. I can’t completely eliminate urgent items, but I can do a far better job at reducing how often they occur in my work and life.

So how do you do this?  And what exactly do I mean by Important versus Urgent?

You start by putting your tasks into four quadrants:

  1. Important & Urgent (emergencies, pressing problems, deadline-driven projects, scheduled activities)
  2. Important & Not Urgent (preparation, planning, clarifying goals and priorities, true relaxation/recreation)
  3. Urgent & Not Important (interruptions including many types of calls & emails, things that easily distract and fool us into being busy but don’t get us closer to our priorities)
  4. Not Urgent & Not Important (trivia, time wasters, escape activities, junk mail)

I find that most individuals, including highly dedicated professionals, spend a considerable amount of time in #1 and #3. Folks that really fool around spend a considerable portion of their time in #4.

The goal, presuming you want to productively work towards your priorities and shift as much of your work away from fire-fighting as possible (and towards value creation), is to spend as much time as possible in #2. Ideally, any other activities that don’t justify being in #2 should at least fall into #1 (both of these quadrants represent important work).

Here are some images (including a nifty mind map) to visualize this:

Click on the below image to download the mind map image (pay particular attention to the comment bubbles in yellow and connecting them):

And here is a PDF to a blank matrix to help you brainstorm this for yourself:

Covey 7 Habits Time Quadrants

These concepts and framework is all drawn from Steven Covey’s two books:

If you found this post interesting, in addition to checking out both of these books, you may also find Randy Pausch’s Time Management presentation insightful:

[first 7:30 minutes or so of video are folks introducing him if you feel like skipping over those]

So what do you think: Are these concepts something you can utilize in your work and life?

Categories
Linked

Why Marketing Really Matters

A business does marketing and sales for the money, but that’s not the sole reason to get good at it.  One of my favorite mentors, authors, and consultants is David Maister.  One day a while back I was reading through his archives and snipped this nugget from an article entitled “Doing It For The Money” (if you’ve been on my e-mail list for awhile you may have seen me mention this quote once before):

What getting good at marketing can do for the individual is to help him or her find the clients they could care about and be eager to help, and the types of work that would be truly stimulating.  The better you are at marketing, the more truly professional you can be, because you are not forced to take money from anyone and everyone just because you need the cash.

David’s original article is a bit long, but there are some other tidbits wrapped around this quote if you feel inclined to dig them up.  The link to the article is above.  I recommend reading two of his books, “The Trusted Advisor” and “Strategy and the Fat Smoker“, or spending a morning with your coffee in hand while perusing his articles and blog archive.

Categories
Articles

How to Find, Reconnect With, and Revive Your Professional Network


In early 2007, several months after moving on from my last venture, I found myself sitting on my butt a lot doing — well — not much of anything (I did get a lot of reading in).

I wasn’t getting out all that much to interact with other people and wanted to re-connect with folks. I did not have any system for tracking my various contacts. I had no centralized address book. And what information I did have seemed to be incomplete and usually out of date.

Which was a serious problem since I was supposed to be freelancing and consulting while I decided what was next. And that required doing some hustling to get gigs, which was best started within my existing professional and personal networks.

At some point, I stumbled across LinkedIn.com, which is a well established online networking community for professionals. It is NOT the place where you go to find out whether your drunken college buddies are, well, still drinking.

It turns out that LinkedIn.com is a wonderful automatically updated “rolodex” of sorts. I found it useful to remind me about people I knew (some well, many casually or very loosely), but had fallen out of contact with due to changes in jobs, organizations, projects, and engagements …as well as changed email accounts, phone numbers, and addresses.

Now, the interesting thing about this, is that based upon a couple of studies and references I’ve read, the average person “knows” about 250 people or so. That may sound like a lot to you (or not). Most people can come up with at least half of those people within 30 minutes or so if compelled to do so. The balance will pop into their mind over the next couple of days, if they keep thinking about it every so often as well as through reminders from reviewing the initial list of ~100 people they came up with (remembering one person often reminds you of another).

This is good news for those who are bad about cultivating their professional networks because, chances are, you know more people than you think already! You don’t have to use LinkedIn.com to do it, but I found it VERY helpful for me. I don’t really use its other features (I just have the free account).

By using LinkedIn.com to track down old colleagues, employees, employers, friends, and even relatives(in their day jobs) you’ll be putting in place a good foundation to stay connected with these folks no matter where they — and you — end up going in the future.

Sending a connection request on LinkedIn.com to someone you know also provides a convenient excuse to touch base with them. I do have one important suggestion though (which I’m embarrassed to admit that I didn’t realize myself until sending out 150+ connection requests): change the default connection message text. You’ll have far more luck getting people to acknowledge your connection and it’s far more polite and friendly (bring some humanity to the process — heh social media!). The default message text I’m talking about (and suggesting you customize) is the dreaded:

I’d like to add you to my professional network on LinkedIn.

Once you start using LinkedIn.com it also becomes helpful in two other really cool ways:

  1. Checking out a bit of the professional background for someone you just met …or are about to meet (or talk to on the phone). Think a prospective client, referral source, or simply a friendly face.
  2. Re-enforcing a contact you just made off-line (or even on-line) by offering to connect with them on LinkedIn.com (and sending them a connection request as part of your follow-up with them to re-enforce it). This will help both parties remember some of the professional details of the other person and increase the likelihood of actually staying in touch.

Good luck!

Have you found it helpful to re-connect with your professional network more centrally and formally? Have you discovered a useful technique, approach, strategy, or tool that others should know about? How did you find this post helpful in showing you some new ways to re-connect and cultivate your professional network? Share your thoughts by posting a comment attached to this post.


Originally published on December 7, 2010, with minor revisions.