I wonder how many seemingly large businesses are actually mom and pops with no people and no money. My brief introduction to consulting has shown me that most consulting firms are exactly that. Some enterprising individual or two venture out to start consulting and grow from there. I’m not sure if any consulting firm starts as a venture with capital or investors. They are all decidedly bootstrapped and consulting more than any other business is bootstrap compatible.
That said, what makes a consulting business successful? How do the one or two founders go from doing all the work themselves, scrapping together a living, and enduring the long lag between payments to a multi-million dollar enterprise?
I think there are some core tenants of success in consulting.
1. Have funds available! Be it a line of credit, money in the bank, or credit cards. That’s the number one message I would tell anyone. When you start out, things will be slow. Be ready for it. Minimize expenses to a bare minimum. Sell everything you don’t own outright. Even if it’s upside down sell it and make up the difference in cash. You’re not going to need anything when you are on the road 100% of the time anyways. If you have a house, rent it out for the top dollar you can get. Let your clients pay for your accommodations in hotels, while you are working for them. Rent some hole in the wall while you’re in-between clients.
2. Partner! In the beginning it is a lot easier to partner with a growing consulting business or two or ten then to find new clients on your own. These consulting partners can help you pay the bills while you look for new clients. Keep in mind, that you are not going to get your preferred rate while subcontracting. Your partner is going to take somewhere between 10 and 50% off the top of the rate they sell you at anyways.
Another more valuable way to partner is to partner up with product companies in your industry. These guys will get leads to services work all the time that they can’t do anything with other than hand off to their services partner. This is a great way to start getting the kind of work that pays enough to enable the next point.
3. Grow very slowly! When you start landing well paying work, you may be tempted to hire and hand it off. FOOL! Let me show you an example. You just landed a $1 million dollar gig with XYZ corp. XYZ knew you were small, but they liked you personally and felt like you could really give them the personal service they expect so you look at the PO and decided I need 2 or 3 or 10 people now. So you start hiring.
You learn immediately that few people are up to your caliber. The people you want, don’t want to work for you so that leaves only the chaff. So you start hiring the chaff and place them with the client. Of course this chaff screws stuff up and you have to answer for it. After a while XYZ gets pissed off and fires you or worse, sues you.
Now you have no money and lots of expenses. Now you have to learn how to fire people and the time you wasted throughout all this has now ensured you can’t find enough new clients to weather the storm.
What you should have done instead is hire high caliber contractors. Your peers. The folks in your industry that you trust. The ones you know can do the work. Yeah, they will cost more and your piece of the million dollar pie goes way down, but in the end your client will be happy and you’ll be freed up to keep finding more business.