By Clair Schwan
As a follow-on to Kevin’s recent articles about how frugality comes into play as an entrepreneur, I’m offering a four-part series to suggest that the business of consulting is a good one to consider. Perhaps this line of work has a limited application for the general population, but it’s a legitimate career path if you’re in any field that one might consider to be “professional” in nature.
Being frugal means being a good steward of resources, particularly financial resources, but it also means that me make certain we’re getting good return on our investment of time and effort. The bottom line is we’re not wasteful. Although consulting can have its expenses, especially in the area of travel, it can be a business with low startup costs, low risk, and little wasted investment, something the frugal among us can appreciate.
In this first part of the series, let’s look at startup investment, and then I’ll use future articles to address expenses, potential problems, and what we might expect in terms of income.
Startup Investment
If you’re like most consultants and other professionals, you’ve spent years with one or more firms learning the ropes, acquiring technical skills, and polishing your ability to sell work, win jobs, and package your work products in a meaningful and attractive manner. You’re not necessarily smooth or slick, but you’re very good at what you do. That’s why you’re thinking of striking out on your own. You’re tired of making money for others; it’s time to build wealth for yourself instead of company management.
Before leaving the “mothership,” to get the best return on investment of your time and effort, you’ll need to busy yourself establishing good relationships with your customers and associates. You’ll want to get “tuned up” with respect to a broader range of technologies and methods, so you won’t be a one trick pony. You’ll also need to become familiar with other consultants in the industry, as they might become your associates. Most importantly, you’ll need to challenge yourself to get immersed in the business and project management aspects of the work so you’re not just a soldier, but a top notch field commander as well.
You’ll also need to have your ear to the ground so you can start to cultivate a number of clients who have needs for services, but are tired of being treated like just another customer standing in line. You’ll also want to strengthen the personal business relationships you have with your customers. If you can’t win work from them, you’ll want to have them as references.
You might even quietly cultivate your first few jobs, or at least the potential for new work, long before you jump ship. One way to do this is to get involved in jobs that are tailored to your unique talents such that no one else can take over the project and be successful. That’s a good way to get your soon-to-be previous employer to contract back to you right away to finish up your work. Voila, ready-made project work so you can hit the ground running.
When to Start
Since you’re going to be a “one-zee” out there, you’ll be fast on your feet, capable of making decisions in minutes, and not beholding to anyone in upper management, unless they’re upper management in your client’s organization. If a good customer or associate is ready to use you regularly, and right now, there’ll be nothing stopping you except your own misgivings about making gobs of money and being your own boss. Gee, that ought to be a tough decision to make!
Another consideration for startup is market timing. If the budget preparation cycle for your customers starts in the fall, you ought to consider a September and October start time as optimal. I used to work for someone who called it the “selling season.”
For many, the key to starting is when they’re ready. It’s good advice. If you’re not ready to put your all into it, you probably need to hold off. Running your own business can be dicey, so you’ll have to be your own best cheerleader when it comes to keeping things moving along, and keeping a positive attitude. It helps to be jazzed; it helps to be sure you’re ready.
Coming Up
Next in the series we’ll take a look at expenses. For the frugal-minded, this may be the greatest concern of all. I hope to show you how the consulting business can be quite a low cost operation, and that’s important because it’s your revenue minus expenses that equates to how much you’ll place in your own pocket.
Clair Schwan hosts Sensible Small Business Ideas where he encourages people to start their own enterprise. He believes that the only business you’ll truly ever be part of is your own.
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Kevin, as funny as it sounds, I started my consulting business with about $14,000. So, the graphic depicting $20,000 is a good ballpark to think about, especially if your consulting work is going to be travel intensive. If it’s a stay-at-home gig, I’d think that it could be done for something along the lines of $5,000. Of course, that’s seed money, not “hold your breath” money until you get paid. Holding your breath is a whole different issue as it largely depends on your personal cost of living, irrespective of the cost of business startup and operation.
Clair Schwan´s last [type] ..An Archaeology-Style Shaker Sifter
It’s times like these that I’m thankful for Flickr Creative Commons! Hold your breath money–that’s an excellent metaphor.
I think that in today’s economic environment, it’s critical to be able to start a business on the perverbal shoe string–you may need as much capital as possible to pay the bills for a while, maybe a long while. The central component is the ability to bring business in the door. The sooner you can do that, the sooner you can breathe!
Great tips! I’ve chosen the freelancer/consultant since being laid off, and decided this was the most frugal route for me.
Briana @ 20 and Engaged´s last [type] ..Marriage Monday: We Need Married Friends
Hi Briana–I think a lot of people are going that route. Somehow I doubt many/most are chosing it as much as it’s the route of necessity. There just don’t seem to be any jobs out there so we’re getting forced self-employment. I know a lot of people in that situation right now.
I know someone who applied for a job at a company doing the exact job she is doing now, but was turned down! Can you imagine, being turned down for the same job you’re already doing? Others I know have been looking for jobs for YEARS! It might help anyone in that situation to start some sort of business while they’re looking, and obviously one that won’t cost much to enter. Clair’s “Frugal Entrepreneurs” is a message in itself.
This post is excellent advice since I believe many people will be looking at a future of on-again/off-again employment done in conjunction with some form of self employment. This is especially true for people over 40.