Ask HN: What is your experience in tech consulting?
I just started my consulting firm moving from a lead tech role at startups, and I wanted to see other's experience in the forum regarding initially starting the firm, networking etc...
I started with 2 pro bono clients that in return will write a testimonial. I have got also potential paid clients in negotiation, I am focusing on writing and entering podcasting but I am not sure how.
Would also love to hop on some calls if anyone is down anytime.
129 comments
Just a few random thoughts from ~10+ years of doing this. These are not ordered, as I've been out of this for the past few years.
- Contracts, contracts, contracts
- Immediately stop all work when any customer doesn't pay an amount owed. There's a natural inclination to keep going, but this is a firm of pathetic cost fallacy.
- Work with an escrow provider and eat the fees. You'll generally have a 10% non-collectable rate, until you work with an escrow provider. This can be lowered to 1-3%, meaning you stay far ahead. More importantly you reduce the time spent in administration, and running after customers.
- Downpayments / upfronts are key. Any customer that is unwilling to engage in this practice, is a customer likely to not pay.
- Maintain ownership of your code, if you can. True, consulting code has little value - usually. But sometimes, you can legally, reuse the same blocks, or segments across multiple projects. Your rate of return increases dramatically here.
- Your name is your bond. When people learn they can trust you, even in just a handshake (remember: contracts!) they happily recommend you to your friends
- Digitize it all. Do everything in your power, pay for every web service that makes sense, to reduce your overhead. I was incredibly happy to pay for receipt scanning (shoeboxes), book keeping / invoicing, and accounting (xero). Most people view this as an expensively monthly cost - which it is at the beginning. It will also, eventually cost less than an hour of your consulting time. Scale.
- Never price at the top of the market. It's better to be 100% busy at 80% of the fee structure, than it is to be 50% busy, at 125% of the base rate.
- Contracts, contracts, contracts
- Immediately stop all work when any customer doesn't pay an amount owed. There's a natural inclination to keep going, but this is a firm of pathetic cost fallacy.
- Work with an escrow provider and eat the fees. You'll generally have a 10% non-collectable rate, until you work with an escrow provider. This can be lowered to 1-3%, meaning you stay far ahead. More importantly you reduce the time spent in administration, and running after customers.
- Downpayments / upfronts are key. Any customer that is unwilling to engage in this practice, is a customer likely to not pay.
- Maintain ownership of your code, if you can. True, consulting code has little value - usually. But sometimes, you can legally, reuse the same blocks, or segments across multiple projects. Your rate of return increases dramatically here.
- Your name is your bond. When people learn they can trust you, even in just a handshake (remember: contracts!) they happily recommend you to your friends
- Digitize it all. Do everything in your power, pay for every web service that makes sense, to reduce your overhead. I was incredibly happy to pay for receipt scanning (shoeboxes), book keeping / invoicing, and accounting (xero). Most people view this as an expensively monthly cost - which it is at the beginning. It will also, eventually cost less than an hour of your consulting time. Scale.
- Never price at the top of the market. It's better to be 100% busy at 80% of the fee structure, than it is to be 50% busy, at 125% of the base rate.
I would push back on a lot of this. These seem like strategies to avoid getting ripped off by shitty clients, and I'm sure they work, but they're also a strategy to avoid closing business with great clients. Try to focus on the kinds of customers you won't ask for down-payments and up-fronts --- the kinds of customers who will routinely delay a full quarter or two on payables, and you'll put up with it, because they're paying for several people's salaries, and the people you work with there don't control the accounts payable people to begin with.
It is absolutely not better to be 100% utilized. The math at the end of this comment suggests that the difference between 100% utilization and 50% utilization is marginal, but the real pricing difference you're playing with is probably something closer to 2.5x-3x the rate you think is competitive. It is better to be 50% utilized at 2.5x what you were making at the rate that had you 100% utilized.
It's actually bad to be 100% utilized at all; if you are, you're treading water building your business. When you exceed 80% utilization, do one of two things: raise your rates, or start hiring.
It is absolutely not better to be 100% utilized. The math at the end of this comment suggests that the difference between 100% utilization and 50% utilization is marginal, but the real pricing difference you're playing with is probably something closer to 2.5x-3x the rate you think is competitive. It is better to be 50% utilized at 2.5x what you were making at the rate that had you 100% utilized.
It's actually bad to be 100% utilized at all; if you are, you're treading water building your business. When you exceed 80% utilization, do one of two things: raise your rates, or start hiring.
100% agree, if you're 100% utilized than you're working for your business not on your business.
I have three other pieces of advice.
One you need to decide whether you want to run a consultancy or be a consultant. The first means scaling by hiring more people the second means scaling by increasing your rate. You can make more money doing the first but your job will eventually be 100% account management and sales.
The second piece of advice is you need to come up with a business plan. The most important part of this is an actual plan for predictably acquiring new customers.
Third general piece of advice is 98% of the time being a general software consulting company is a shitty business. A good first step is pick a specific problem and/or a specific industry. "We build custom CRMs for enterprise sales organizations.", "we do custom ERP work for Oil & Gas" or "We help startups scale Postgres databases" are all much better businesses than "we write software". This is for two reasons. One you have a specific product you're selling to a specific customer which will help immensely with sales/marketing. Two the margins are much better.
I have three other pieces of advice.
One you need to decide whether you want to run a consultancy or be a consultant. The first means scaling by hiring more people the second means scaling by increasing your rate. You can make more money doing the first but your job will eventually be 100% account management and sales.
The second piece of advice is you need to come up with a business plan. The most important part of this is an actual plan for predictably acquiring new customers.
Third general piece of advice is 98% of the time being a general software consulting company is a shitty business. A good first step is pick a specific problem and/or a specific industry. "We build custom CRMs for enterprise sales organizations.", "we do custom ERP work for Oil & Gas" or "We help startups scale Postgres databases" are all much better businesses than "we write software". This is for two reasons. One you have a specific product you're selling to a specific customer which will help immensely with sales/marketing. Two the margins are much better.
This is all real, down-to-earth advice that corresponds with my observations after three years doing this.
> A good first step is pick a specific problem and/or a specific industry
To add, I prefer thinking of three levels of specialization:
1. By vertical or industry (oil and gas)
2. By problem or technical domain (user interfaces, data pipelines, etc.)
3. By platform (Salesforce, React, etc)
2 and 3 could be conflated, but I like to separate them. Your specialization can cut across dimensions and at a small scale it's likely the best (eg: "we build custom Salesforces apps for sales processes in oil and gas")
> You can make more money doing the first but your job will eventually be 100% account management and sales.
There is not two ways about this, but emphasis on eventually... I think up to a certain scale you will be able to combine technical and management - although arguably the scale is much smaller than we'd like to think.
> A good first step is pick a specific problem and/or a specific industry
To add, I prefer thinking of three levels of specialization:
1. By vertical or industry (oil and gas)
2. By problem or technical domain (user interfaces, data pipelines, etc.)
3. By platform (Salesforce, React, etc)
2 and 3 could be conflated, but I like to separate them. Your specialization can cut across dimensions and at a small scale it's likely the best (eg: "we build custom Salesforces apps for sales processes in oil and gas")
> You can make more money doing the first but your job will eventually be 100% account management and sales.
There is not two ways about this, but emphasis on eventually... I think up to a certain scale you will be able to combine technical and management - although arguably the scale is much smaller than we'd like to think.
I agree specification is better, but the issue is that I am afraid that would limit my clients especially that the first client is the hardest to find. I am working though on trying to be a "general" consulting company with a short term focus on one niche.
Wands choose the wizards. And to some degree, your niche chooses you. The tech stack I built for video games: gcloud, chromeos, android vulkan, admob. Is essentially a "native mobile ads" platform.
It was only when clients requested I serve ads that I realized what I had built!
Now it unlocks free cash flow potential. And I'm working on my own private buyers list, inventory management, real time bidding exchange & auction tech ;)
It was only when clients requested I serve ads that I realized what I had built!
Now it unlocks free cash flow potential. And I'm working on my own private buyers list, inventory management, real time bidding exchange & auction tech ;)
Your comment on utilization is spot-on, there are no two ways about it, and everyone should pay very close attention to this.
Even if you're truly solo, you will need ~20% for sales, account management, accounting, and residual business management tasks. If you're at 100% utilization either you are neglecting these areas and hurting yourself in a much shorter term than you'd think, or you're working 6 days a week, which means you're not really at 100% utilization.
Regarding paying customers, I agree with the sentiment, but probably not with the detail. I've worked with a few Fortune 500 companies and their payment terms are 30-90 days. On the other hand advances are very commonly accepted and I've never had any pushback. I go for 50% and could possibly push higher. It still doesn't create entirely positive cash cycles but it's decent.
Even if you're truly solo, you will need ~20% for sales, account management, accounting, and residual business management tasks. If you're at 100% utilization either you are neglecting these areas and hurting yourself in a much shorter term than you'd think, or you're working 6 days a week, which means you're not really at 100% utilization.
Regarding paying customers, I agree with the sentiment, but probably not with the detail. I've worked with a few Fortune 500 companies and their payment terms are 30-90 days. On the other hand advances are very commonly accepted and I've never had any pushback. I go for 50% and could possibly push higher. It still doesn't create entirely positive cash cycles but it's decent.
> Try to focus on the kinds of customers you won't ask for down-payments and up-fronts --- the kinds of customers who will routinely delay a full quarter or two on payables, and you'll put up with it, because they're paying for several people's salaries,
Must be nice to have so much money in the bank that not only can you pay 6 months of several people's salaries, but you can also tolerate the risk of the client not repaying you that amount.
Must be nice to have so much money in the bank that not only can you pay 6 months of several people's salaries, but you can also tolerate the risk of the client not repaying you that amount.
Yeah managing cashflows is a huge part of running a business.
You really have to plan to deal with things like this because it will happen.
This is exactly what revolving/lines of credit are for. Talk to your bank.
Source: have seen a business growing who had to deal with this. There is no way - no way in hell - you can scale a real consultancy business using escrows and ditching clients as soon as they don't pay. It's just not how most of the world works.
You really have to plan to deal with things like this because it will happen.
This is exactly what revolving/lines of credit are for. Talk to your bank.
Source: have seen a business growing who had to deal with this. There is no way - no way in hell - you can scale a real consultancy business using escrows and ditching clients as soon as they don't pay. It's just not how most of the world works.
I think it's mostly an issue of trust.
- Customer says they can only pay in 6-months time? Ok, you will route around it.
- Customer says they will pay next month and then ghosts you for several months? That's not cool. Particularly when it's peanuts for them, in the grand scheme of things.
I was personally burnt by the latter scenario. It was only resolved when they reappeared almost a year later, after I had stopped consulting altogether, asking me to find some other guy to carry on; I replied that I couldn't honestly recommend my peers a customer that doesn't pay, and lo and behold, two weeks later the money came in.
- Customer says they can only pay in 6-months time? Ok, you will route around it.
- Customer says they will pay next month and then ghosts you for several months? That's not cool. Particularly when it's peanuts for them, in the grand scheme of things.
I was personally burnt by the latter scenario. It was only resolved when they reappeared almost a year later, after I had stopped consulting altogether, asking me to find some other guy to carry on; I replied that I couldn't honestly recommend my peers a customer that doesn't pay, and lo and behold, two weeks later the money came in.
> It's just not how most of the world works.
By this, do you mean clients tend to insist on long payment terms in the contract? Or do you mean they'll sign a contract agreeing to pay in 30 days then they only actually pay after 90 days?
By this, do you mean clients tend to insist on long payment terms in the contract? Or do you mean they'll sign a contract agreeing to pay in 30 days then they only actually pay after 90 days?
Most contracts are standard 30-90 days with large enterprises. And they do take a while to process given their large structure. Sometimes there are breaches of contract terms but as a smaller consultancy serving a large organization, you really don't have much leverage to force them to pay faster.
That being said, project continuity is huge with large organizations and if you're opportunistic, there's always something to be fixed. They also pay well and are more likely to pay. That's the tradeoff for slower payments.
That being said, project continuity is huge with large organizations and if you're opportunistic, there's always something to be fixed. They also pay well and are more likely to pay. That's the tradeoff for slower payments.
Same for gov contracts. You might only get paid right at the end of the project + whatever their payment period is, but with an order number in your hand you know they will pay. Good luck getting a downpayment from big corp accounting depts if you're small fry.
I got downpayment from a company with about $100M revenue. Not sure if it qualifies for big corp. I normally do custom product development from scratch and it takes about a year of work in average. There is no way I would sit for a year without getting paid. Normally we would write a contract that among the other things specs stages and what is delivered for each stage. Each stage is paid upfront so first one qualifies as a downpayment. Obviously if by the time I am to start stage N it is not prepaid I would simply inform client and will not start working and the whole contract timeline shifts. But it is all in the contract and frankly had never happened. I've always got paid on time and had / have good relations with my clients.
But I normally develop software for companies whose main business is not software per se but they need software to conduct their business.
But I normally develop software for companies whose main business is not software per se but they need software to conduct their business.
His advice is spot on though in terms of what OP will encounter. My peer comment said the same.
If you go after big companies they will be cash rich and they won’t rip you off, but they will be slow to pay.
If you go after big companies they will be cash rich and they won’t rip you off, but they will be slow to pay.
Agreed, if scaling with full-time employees (which I am avoiding to do in and working on subcontracting) no advance would be hassle.
That's the benefit of working with high-paying customers!
> Try to focus on the kinds of customers you won't ask for down-payments and up-fronts --- the kinds of customers who will routinely delay a full quarter or two on payables, and you'll put up with it, because they're paying for several people's salaries, and the people you work with there don't control the accounts payable people to begin with.
Can't you just volunteer for these companies instead? If the need free work so they can get their employees to do something useful and pay for it, and you want them paying their employees instead of you as a contractor, you can be straight up about giving away your labour, instead of pretending that they're going to pay you as your customer
If you're giving stuff for free on purpose, just give it away for free
Can't you just volunteer for these companies instead? If the need free work so they can get their employees to do something useful and pay for it, and you want them paying their employees instead of you as a contractor, you can be straight up about giving away your labour, instead of pretending that they're going to pay you as your customer
If you're giving stuff for free on purpose, just give it away for free
You don’t get it. Some companies (bigger ones) have their accounting department operating independently from their development/IT department. This is not the case for small businesses which the OP is softly suggesting not to work with.
Clients with such departments will pay if your invoice is approved. The payment process is disconnected from the team you’ll be working with. It also happens that the team you work with will not care with the costs since it’s not coming out of pocket directly. The finance team, which will pay you, has no idea what you are doing exactly except that you are authorized for the payment.
The process is slow, so bear with it and price for the delay of the funds. But if you are a regular, it’s a constant flow.
Small businesses where the decisions making, IT and payment (ie: director of tech is also the CEO, is also paying out of pocket) will scrutinize much more on payments, and also miss a payment if they can (a surprising amount of people will try to do this).
Clients with such departments will pay if your invoice is approved. The payment process is disconnected from the team you’ll be working with. It also happens that the team you work with will not care with the costs since it’s not coming out of pocket directly. The finance team, which will pay you, has no idea what you are doing exactly except that you are authorized for the payment.
The process is slow, so bear with it and price for the delay of the funds. But if you are a regular, it’s a constant flow.
Small businesses where the decisions making, IT and payment (ie: director of tech is also the CEO, is also paying out of pocket) will scrutinize much more on payments, and also miss a payment if they can (a surprising amount of people will try to do this).
> The process is slow, so bear with it and price for the delay of the funds.
Every large company actually has two parallel ways of paying.
There's a main procedure which is extremely slow, because getting a 6 month interest-free loan from your suppliers is free capital, and maybe the supplier will forget and you won't need to pay at all which is free cash, and to access these benefits all you need is a smaller accounts payable department. They will be overjoyed to not pay you because you didn't submit form AB-1234 confirming that you have a policy on modern slavery. And they absolutely will not chase you for that form.
Then there's a parallel procedure, where your contact asks their boss's boss's boss's boss and the bill gets paid by credit card within the hour.
Having a reasonable amount of flexibility is fine - but at any time that friendly, helpful, trustworthy contact you're working with could change jobs, the project could be cancelled, or the project could end successfully and all your contacts get reassigned.
You don't need to extend so much credit that you'd be put in a difficult financial situation were they not to pay - if the client has reached their credit limit, and they are late on payments they're contractually obligated to make, you just need to get your contact to trigger the fast procedure instead of the slow one.
Every large company actually has two parallel ways of paying.
There's a main procedure which is extremely slow, because getting a 6 month interest-free loan from your suppliers is free capital, and maybe the supplier will forget and you won't need to pay at all which is free cash, and to access these benefits all you need is a smaller accounts payable department. They will be overjoyed to not pay you because you didn't submit form AB-1234 confirming that you have a policy on modern slavery. And they absolutely will not chase you for that form.
Then there's a parallel procedure, where your contact asks their boss's boss's boss's boss and the bill gets paid by credit card within the hour.
Having a reasonable amount of flexibility is fine - but at any time that friendly, helpful, trustworthy contact you're working with could change jobs, the project could be cancelled, or the project could end successfully and all your contacts get reassigned.
You don't need to extend so much credit that you'd be put in a difficult financial situation were they not to pay - if the client has reached their credit limit, and they are late on payments they're contractually obligated to make, you just need to get your contact to trigger the fast procedure instead of the slow one.
I'd say landing such a company already require an internal or initial contact there. In case that contact does not exist, I'll tread careful like I am working with a black box. You'd have to navigate their bureaucracy somehow and a big company will have a reputation for such things (either good or bad).
The contact, depending on your friendly terms with him, can shed light on how these processes work and what to expect. It's up to you to determine if it's worth your time/effort to pursue working with them. Everyone has a different sweet spot.
The contact, depending on your friendly terms with him, can shed light on how these processes work and what to expect. It's up to you to determine if it's worth your time/effort to pursue working with them. Everyone has a different sweet spot.
I don't follow. The companies I'm describing are likely to be your most lucrative clients.
Looking in from geophysics, 3/4 lucrative customers for the 1 non-paying is not sustainable.
If you're looking for customers that don't intend to pay, is it 1/5 that end up paying well? 1/100? 9/10?
If you're looking for customers that don't intend to pay, is it 1/5 that end up paying well? 1/100? 9/10?
He's saying large companies that have money will pay you even if it's late. If you're doing work for Johnson and Johnson they are going to pay you. If you're doing work for John the attorney they might.
So look for work for Johnson and Johnson.
So look for work for Johnson and Johnson.
I don't know who the "non-paying" customers are. Don't do business with companies that might not pay.
When you say "delay on payables", do you mean not paying you for agreed-upon already-completed work, or do you mean not giving you new work right now?
To give you an extreme example, I have worked as part of a team of consultants for various state owned companies in the past four years. They take up to six months to clear your payment but I have never ever seen them not pay and once you are in both the bureaucracy and the environment are so complex that given onboarding costs you get a steady amount of work for years.
I mean that some of your most lucrative clients will take forever to pay out invoices.
This is often deliberate. Postponing payment of invoices means you have at any given time a larger warchest to invest and gain an edge, or conversely have to pay more interest. CFOs often set a target and push back on swift payments. Some companies even risk lawsuits to be able to not pay the bill just yet, though it obviously depends on context what you can get away with and what harms your reputation too much.
This is just how large enterprises work. Nothing deliberate. They operate in longer cycles.
100% agree with the utilized part. 100% utilized means you can't focus on growing your business and everything else which is not consulting work.
I totally agree with some of this, starting with the "your name is your bond." People hire you because they can trust you. Your reputation is your most important asset, more than your knowledge. If you're a reliable, honest, easy-to-worth with person, then clients will forgive your lack of knowledge. But if you're a brilliant jerk, then no one will hire you.
And yes, stop work if a client fails to pay. It's so tempting to say, "Well, they're nice, and if I just do xyz for them, they'll pay." No, you've found a deadbeat client. Join the club.
But there are other parts of this with which I'll disagree.
Chief among them: Contracts are important, but I see them as a formality more than anything else. If I have to sue a client, then it's all over anyway; the time and legal fees won't be worth chasing. I work with people with whom I get along and (generally) have mutual trust.
Also: I've consistently charged at the top of the market for the last few years. Some clients don't want to pay top dollar for Python training, but others do -- and the ones who do are the easiest to work with, who understand that they're spending a lot, but also getting a huge ROI.
And yes, stop work if a client fails to pay. It's so tempting to say, "Well, they're nice, and if I just do xyz for them, they'll pay." No, you've found a deadbeat client. Join the club.
But there are other parts of this with which I'll disagree.
Chief among them: Contracts are important, but I see them as a formality more than anything else. If I have to sue a client, then it's all over anyway; the time and legal fees won't be worth chasing. I work with people with whom I get along and (generally) have mutual trust.
Also: I've consistently charged at the top of the market for the last few years. Some clients don't want to pay top dollar for Python training, but others do -- and the ones who do are the easiest to work with, who understand that they're spending a lot, but also getting a huge ROI.
> - Never price at the top of the market. It's better to be 100% busy at 80% of the fee structure, than it is to be 50% busy, at 125% of the base rate.
I tend to favor this line of thinking most of the time. But sometimes I'd rather be 50% busy, and pricing is one way to influence that. It is worth understanding the power and purpose of pricing.
My favorite discussion of pricing for consulting is a chapter in 'Secrets of Consulting: A Guide to Giving and Getting Advice Successfully', Gerald Weinberg.
The whole book is a goldmine of useful perspective once you're past the initial round of setting up shop and making sure you are getting paid.
I tend to favor this line of thinking most of the time. But sometimes I'd rather be 50% busy, and pricing is one way to influence that. It is worth understanding the power and purpose of pricing.
My favorite discussion of pricing for consulting is a chapter in 'Secrets of Consulting: A Guide to Giving and Getting Advice Successfully', Gerald Weinberg.
The whole book is a goldmine of useful perspective once you're past the initial round of setting up shop and making sure you are getting paid.
Yes on all points, with an exception that solves two problems at once.
Set a sliding scale of rates, based on how much they either commit to pay up front or pay timely over the past 6 months. In my shop it was a Service Plan, each one priced just under a common budget threshold. So a $9900 plan got a 5% rate discount, $24K 10%, $49K 15%, etc... (discounts not exact, make your own). If they pay that much up front, they immediately start on the discounted rate, if they just work up to it, they earn the step-down in rates as they pay bills on time passing each tier within 6 months. (Nothing wrong with using escrow too, but we never had it arise).
the cool thing about this is that it provides an immediate answer to the inevitable questions about getting discounts — instead of client trying to beat you up on price, it becomes "of course, here's our discount plans, what works best for you?". I probably should have expected that, but it really surprised me at how thoroughly it banished those uncomfortable conversations.
I was given a tip about this type of billing by a random guy in a hall conversation at a conference decades ago, and I wish i knew who it was to say "thank you", because that billing structure really paid off.
Also, emphasize "Your name is your bond.". Absolutely key to be reliable. The world is way smaller than it seems, and being a trusted provider goes a long way, in ways you can never predict. It is far more important than any kind of being flashy.
Set a sliding scale of rates, based on how much they either commit to pay up front or pay timely over the past 6 months. In my shop it was a Service Plan, each one priced just under a common budget threshold. So a $9900 plan got a 5% rate discount, $24K 10%, $49K 15%, etc... (discounts not exact, make your own). If they pay that much up front, they immediately start on the discounted rate, if they just work up to it, they earn the step-down in rates as they pay bills on time passing each tier within 6 months. (Nothing wrong with using escrow too, but we never had it arise).
the cool thing about this is that it provides an immediate answer to the inevitable questions about getting discounts — instead of client trying to beat you up on price, it becomes "of course, here's our discount plans, what works best for you?". I probably should have expected that, but it really surprised me at how thoroughly it banished those uncomfortable conversations.
I was given a tip about this type of billing by a random guy in a hall conversation at a conference decades ago, and I wish i knew who it was to say "thank you", because that billing structure really paid off.
Also, emphasize "Your name is your bond.". Absolutely key to be reliable. The world is way smaller than it seems, and being a trusted provider goes a long way, in ways you can never predict. It is far more important than any kind of being flashy.
Your points on not getting paid sound overly pessimistic. I’ve had hundreds of large clients. They are usually absolutely glacial to pay and totally ignore payment terms, but I’ve never had a debt go totally bad. Invoices have always been paid in the end.
That said, regarding payments, my tip to the OP would be around negotiating down payment terms and chasing finance teams with the anger of 1000 suns if you need the cashflow!
That said, regarding payments, my tip to the OP would be around negotiating down payment terms and chasing finance teams with the anger of 1000 suns if you need the cashflow!
> Your points on not getting paid sound overly pessimistic.
I agree. Late payment is much more common that no payment. Also, clients, unjustifiably or not, usually take umbrage at being asked to cough up what's owed. I give everyone a healthy grace period and send gently-worded reminders, but I won't stop working unless there is a material breach of contract or unless my reminder isn't at least responded to with a "Sorry we're late with your payment, we're working in it."
I agree. Late payment is much more common that no payment. Also, clients, unjustifiably or not, usually take umbrage at being asked to cough up what's owed. I give everyone a healthy grace period and send gently-worded reminders, but I won't stop working unless there is a material breach of contract or unless my reminder isn't at least responded to with a "Sorry we're late with your payment, we're working in it."
> Never price at the top of the market. It's better to be 100% busy at 80% of the fee structure, than it is to be 50% busy, at 125% of the base rate.
No way. I'd rather be 50% busy at 125% of the base rate.
No way. I'd rather be 50% busy at 125% of the base rate.
Good points, all except I went a different way on the last one.
I charge more, specifically to keep 50% busy. One needs downtime. When you can deliver on time reliably and wrap it up nicely (documenting internals, design decisions, etc), you get repeat business.
I charge more, specifically to keep 50% busy. One needs downtime. When you can deliver on time reliably and wrap it up nicely (documenting internals, design decisions, etc), you get repeat business.
> - Never price at the top of the market. It's better to be 100% busy at 80% of the fee structure, than it is to be 50% busy, at 125% of the base rate.
Wait, what?
I'm an FTE, never been a consultant. But personally, I would be ecstatic to give up 50% of my income in exchange for 6 months off per year.
Your numbers imply giving up only 21.875% of potential income, unless I'm mistaken. That seems like the mother of all no-brainers.
Wait, what?
I'm an FTE, never been a consultant. But personally, I would be ecstatic to give up 50% of my income in exchange for 6 months off per year.
Your numbers imply giving up only 21.875% of potential income, unless I'm mistaken. That seems like the mother of all no-brainers.
To be honest i think that at first 80% is better in order to grow a portfolio and credibility in the industry, then the 50% is great. I don't think anyone would take the highest base rate at the beginning anyway.
unless you have an own project you want to work on or open source project, in which case 70% busy at 100% market rate is optimal, you just work on your own project until the next customer comes along.
one other point i would add here is that it is often good to have 2 parallel clients, you will have more freedom to say no to mistreatment from one and also less stress to have zero income when a project ends.
one other point i would add here is that it is often good to have 2 parallel clients, you will have more freedom to say no to mistreatment from one and also less stress to have zero income when a project ends.
Where does one go to find an Escrow provider? This would be really helpful for me to know the money is at least there with projects.
Random bullets.
* You need to be making 150-200% of your FTE rate to come out ahead in a year
* Bill daily, not hourly (you can bill weekly, or quarterly, too.)
* Raise your rates.
* Count on signing your clients master agreement, not yours
* You can win by getting every contract reviewed, or by just signing them blindly
* Specialize
* Incorporate; it's easy and cheap
* Keep your SOWs vague
* Don’t waste time on your website design (but do write)
* Do go nuts with your proposal design; pay someone to help you
* Target 80% utilization; past that, hire or jack your rates up
* Don’t work with clients you’d want a down payment from
* Don’t hire a salesperson
* Your availability on a calendar is worth money; so is your implied consent to be terminated on no notice; make sure you’re charging for it
* Get an accountant ASAP
* Do favors; karma works better than ads
* Don’t do conferences/conventions
* You can subcontract at first — most new consultants do — but get out of that quickly.
These are just things I think I learned over 15 years of doing this work; only some of them --- like never billing hourly --- are things I'd go to the mattresses over, but I think they're all generally correct.
* You need to be making 150-200% of your FTE rate to come out ahead in a year
* Bill daily, not hourly (you can bill weekly, or quarterly, too.)
* Raise your rates.
* Count on signing your clients master agreement, not yours
* You can win by getting every contract reviewed, or by just signing them blindly
* Specialize
* Incorporate; it's easy and cheap
* Keep your SOWs vague
* Don’t waste time on your website design (but do write)
* Do go nuts with your proposal design; pay someone to help you
* Target 80% utilization; past that, hire or jack your rates up
* Don’t work with clients you’d want a down payment from
* Don’t hire a salesperson
* Your availability on a calendar is worth money; so is your implied consent to be terminated on no notice; make sure you’re charging for it
* Get an accountant ASAP
* Do favors; karma works better than ads
* Don’t do conferences/conventions
* You can subcontract at first — most new consultants do — but get out of that quickly.
These are just things I think I learned over 15 years of doing this work; only some of them --- like never billing hourly --- are things I'd go to the mattresses over, but I think they're all generally correct.
Some contrasting perspectives, three years in:
> Specialize
Or die.
> Bill daily, not hourly (you can bill weekly, or quarterly, too.)
Largely agreed, the hour is a bad unit which poses the potential for customers treating you as someone they can throw random time-wasting tasks at. I'd add, consider fixed/value pricing on certain projects. Particularly if/when you specialize, and as you take on tasks that are more close-ended (consulting, analysis, design, ie, anything that's not implementation) you may be able to shatter your rate ceiling this way. I've had projects where I've effectively 5x-10x'd my rate with fixed prices.
> Your availability on a calendar is worth money; so is your implied consent to be terminated on no notice; make sure you’re charging for it
Worth reminding your customers in a casual chat explicitly (and tactfully, of course) if they raise an eye brow at your rates. I've done it and have brought potential customers back into the fold very quickly.
> Don’t hire a salesperson
Your mileage might vary on this one. I'm currently testing a playbook / sales process that I might be able to delegate in a few months... This can be further made easier if you've specialized properly. I've heard of some people having success with some degree of sales delegation, but I'll admit I have no experience with it. At any rate, I'd agree that you are always going to be Chief Sales Officer, unless maybe you form a partnership (ie, a proper company) with someone who takes on that role - and even then you'll still need to devote some degree of time to sales (going to critical meetings, etc.)
> Don’t waste time on your website design
Unless you're doing design-ey things, maybe. But regardless, don't make it utter crap either, there are so many consulting firms with off-putting websites that reek of lack of professionalism that offering a clean design might be a differentiation factor.
> Specialize
Or die.
> Bill daily, not hourly (you can bill weekly, or quarterly, too.)
Largely agreed, the hour is a bad unit which poses the potential for customers treating you as someone they can throw random time-wasting tasks at. I'd add, consider fixed/value pricing on certain projects. Particularly if/when you specialize, and as you take on tasks that are more close-ended (consulting, analysis, design, ie, anything that's not implementation) you may be able to shatter your rate ceiling this way. I've had projects where I've effectively 5x-10x'd my rate with fixed prices.
> Your availability on a calendar is worth money; so is your implied consent to be terminated on no notice; make sure you’re charging for it
Worth reminding your customers in a casual chat explicitly (and tactfully, of course) if they raise an eye brow at your rates. I've done it and have brought potential customers back into the fold very quickly.
> Don’t hire a salesperson
Your mileage might vary on this one. I'm currently testing a playbook / sales process that I might be able to delegate in a few months... This can be further made easier if you've specialized properly. I've heard of some people having success with some degree of sales delegation, but I'll admit I have no experience with it. At any rate, I'd agree that you are always going to be Chief Sales Officer, unless maybe you form a partnership (ie, a proper company) with someone who takes on that role - and even then you'll still need to devote some degree of time to sales (going to critical meetings, etc.)
> Don’t waste time on your website design
Unless you're doing design-ey things, maybe. But regardless, don't make it utter crap either, there are so many consulting firms with off-putting websites that reek of lack of professionalism that offering a clean design might be a differentiation factor.
How would you suggest someone new to consulting handles sales? I've talked to consultants that get all of their leads from old conference talks they did, but you advise against it.
In my book, there is a finite number of options:
1. Go through your network - lots of writing / talking in case someone knows someone who's looking right now.
2. Become famous - conferences, blogging etc.
3. Cold call potential clients.
4. Work with recruiters and dedicated boards for this.
For an established consultant, I can imagine they get a lot of business through referrals, but for someone just starting out, I don't think so. What worked for you in the early days? Did I miss a strategy that works?
In my book, there is a finite number of options:
1. Go through your network - lots of writing / talking in case someone knows someone who's looking right now.
2. Become famous - conferences, blogging etc.
3. Cold call potential clients.
4. Work with recruiters and dedicated boards for this.
For an established consultant, I can imagine they get a lot of business through referrals, but for someone just starting out, I don't think so. What worked for you in the early days? Did I miss a strategy that works?
I think that's this bullet:
* Don’t waste time on your website design (but do write)
Specifically, "do write". Your writings will be way more accessible than conference talks.
He also may mean "don't sponsor or have booths at conferences or conventions". I personally find them valuable for connections but you don't need to attend them to make sales.
* Don’t waste time on your website design (but do write)
Specifically, "do write". Your writings will be way more accessible than conference talks.
He also may mean "don't sponsor or have booths at conferences or conventions". I personally find them valuable for connections but you don't need to attend them to make sales.
Good list but curious why you advise against doing conferences and conventions. The obvious benefit in my mind is advertising, potential clients, and most importantly, advertisable "credibility" on your website in the form of "Speaker at X conf".
I'm not in the consulting business, however, and the list of benefits is speculative.
I'm not in the consulting business, however, and the list of benefits is speculative.
I’ve been contracting for four years and added a former colleague as a subcontractor to my contract for the past year: is that the sort of thing you are advising to “get out of” quickly or being a subcontractor yourself?
couple of questions to that:
> * You can win by getting every contract reviewed, or by just signing them blindly
could you elaborate on that? not sure i understand
> * Keep your SOWs vague
that can help you or hurt you, right? i'm working at a big consulting firm and our motto is to write the SOWs as explicitly as possible to prevent scope creep.
> * Don’t do conferences/conventions
why? isn't that a perfect way to stay up to date and network?
> * You can win by getting every contract reviewed, or by just signing them blindly
could you elaborate on that? not sure i understand
> * Keep your SOWs vague
that can help you or hurt you, right? i'm working at a big consulting firm and our motto is to write the SOWs as explicitly as possible to prevent scope creep.
> * Don’t do conferences/conventions
why? isn't that a perfect way to stay up to date and network?
For SOWs, I find that it helps to keep them very explicit about the larger goals and the "why" of the project, but vague on details, and then enter into an agreement where the customer pays you to keep scope at a level where the larger goal and "why" can be accomplished within budget, not into an agreement where the customer controls the scope and you just balloon the budget if they increase it.
I tend to keep my SOWs vague so allow for reprioritization of work and protect myself. I also never write SOWs on basis of outcomes, but as an activity. Ie here is what I will do, but if you decide to not take my advise, don’t blame me if the desired outcomes aren’t delivered. This makes a big difference when chasing up invoices.
I read that Alan Weiss preferred to keep SOW detailed so that the client cannot give you extra work during the scope that was not the initial focus due to the vagueness.
>> You can win by getting every contract reviewed, or by just signing them blindly
> could you elaborate on that? not sure i understand
Not the OP, but what I think they mean is that the time or money spent to review contracts just about pays for itself: if you spend a lot of time reviewing contracts or a lot of money having them reviewed by professionals, you may save some money some of the time, but if you just sign contracts after a cursory glance you will probably come out even just the same, on average.
> could you elaborate on that? not sure i understand
Not the OP, but what I think they mean is that the time or money spent to review contracts just about pays for itself: if you spend a lot of time reviewing contracts or a lot of money having them reviewed by professionals, you may save some money some of the time, but if you just sign contracts after a cursory glance you will probably come out even just the same, on average.
We reviewed everything, but large competitors of ours did almost the opposite, and they were fine. If it was me, I'd get everything reviewed, but apparently it's just a school of thought.
20+ years since I started my firm, we are very successful and I love our team and our work.
Few points…
Word of mouth is best advertising.
Prove yourself trustworthy and honorable, there are still assholes who will try to take advantage of you but on balance, this will pay off over time.
Don’t work for free. If companies want you to work because it will look good for referrals or something- run.
Don’t work for equity or revenue shares without some cash as part of the deal. Cash is skin in the game, it makes everyone act differently.
Treat your team better than you wish you were treated - they are your most important relationships.
Be willing to fire clients.
Fancy contracts are a waste of time, if you ever get to the point after work has begun that you are talking about wording in a contract - you already lost.
Lastly…learn to delegate, I spent way too much time doing too much of the work myself- sharing the load is a superpower.
OP or anyone else thinking of doing this, feel free to reach out for a longer chat on the topic.
Few points…
Word of mouth is best advertising.
Prove yourself trustworthy and honorable, there are still assholes who will try to take advantage of you but on balance, this will pay off over time.
Don’t work for free. If companies want you to work because it will look good for referrals or something- run.
Don’t work for equity or revenue shares without some cash as part of the deal. Cash is skin in the game, it makes everyone act differently.
Treat your team better than you wish you were treated - they are your most important relationships.
Be willing to fire clients.
Fancy contracts are a waste of time, if you ever get to the point after work has begun that you are talking about wording in a contract - you already lost.
Lastly…learn to delegate, I spent way too much time doing too much of the work myself- sharing the load is a superpower.
OP or anyone else thinking of doing this, feel free to reach out for a longer chat on the topic.
> Don’t work for free. If companies want you to work because it will look good for referrals or something- run.
Obligatory The Oatmeal: https://theoatmeal.com/comics/exposure
Obligatory The Oatmeal: https://theoatmeal.com/comics/exposure
I proposed to companies to work one week for free with my team (we do not have paid clients yet) for testimonials that I can add later on to my website.
Niches = riches.
You want a super-tight thing that you do (e.g. "I fix performance issues for large NodeJS code bases", or better still "I write tooling to measure performance hotspots in NodeJS code bases".)
Despite this sounding like cutting off potential customers, it doesn't work that way. Customers will reach out to you with some generic work that they want done "because I know you know NodeJS" even when you say you specialise in something.
A good first book to read: "Book yourself Solid" by Michael Port.
You want a super-tight thing that you do (e.g. "I fix performance issues for large NodeJS code bases", or better still "I write tooling to measure performance hotspots in NodeJS code bases".)
Despite this sounding like cutting off potential customers, it doesn't work that way. Customers will reach out to you with some generic work that they want done "because I know you know NodeJS" even when you say you specialise in something.
A good first book to read: "Book yourself Solid" by Michael Port.
I agree with the niche aspect but I also can't imagine clients using Node would be the types to worry about performance.
Lots of companies don't worry about performance until they have to, and when they do they usually have the money to spend on improving it.
Not really a Node guy but I thought one of its selling points is being much more performant than other scripting languages, e.g. Python?
Have a read of this classic post by patio11:
https://training.kalzumeus.com/newsletters/archive/consultin...
I can testify as to the troubles that flow from doing work for discounts or gratis; I'm currently four years into a client relationship where I started out by helping them out of a desperate situation with a cut-price block of work, then they've continued to build their business on the basis that I (or other consultants) can keep providing ongoing work at comparable cut-price rates. Any time we try and explain that they need to increase their budgets if they want to keep funding further enhancements work, they protest that they're a non-profit with very limited budgets - they just can't accept that it costs big dollars to do this kind of work on an ongoing basis. It's just super-hard to adjust the expectation once the client has locked in an idea of what the work is "worth".
https://training.kalzumeus.com/newsletters/archive/consultin...
I can testify as to the troubles that flow from doing work for discounts or gratis; I'm currently four years into a client relationship where I started out by helping them out of a desperate situation with a cut-price block of work, then they've continued to build their business on the basis that I (or other consultants) can keep providing ongoing work at comparable cut-price rates. Any time we try and explain that they need to increase their budgets if they want to keep funding further enhancements work, they protest that they're a non-profit with very limited budgets - they just can't accept that it costs big dollars to do this kind of work on an ongoing basis. It's just super-hard to adjust the expectation once the client has locked in an idea of what the work is "worth".
Just a further comment on this -
As tptacek pointed out above, favours/karma can go a long way, so it’s not necessarily the case that you should never do anything for a discount or pro bono.
It’s a matter of setting the right expectation. If you’re doing a favour, make it clear that that’s what it is and what the limits are, and avoid letting that become the expected ongoing deal.
As tptacek pointed out above, favours/karma can go a long way, so it’s not necessarily the case that you should never do anything for a discount or pro bono.
It’s a matter of setting the right expectation. If you’re doing a favour, make it clear that that’s what it is and what the limits are, and avoid letting that become the expected ongoing deal.
I ran a consultancy for 15 years before selling it. Was at times fun, and certainly educational, but would I do it again? Unlikely.
Anyway, couple of things that worked for us:
* Try to get retainer contracts: we would offer one when we had delivered a project. This is great for you as it makes income more predictable. And it is great for the client as they know they have certain capacity from you, and don't have to go to their boss with a new budget request for every small thing they want changed
* Don't let a client grow too large: we had a big client that wanted to buy all capacity we had to offer, and wanted us to hire more for them. We never let them become more than 50% of revenue, so we were able to survive when they went away one day (the "burning platform memo"). Keeping them at 30% would've been even better, but it is hard to say no to money
* Don't try to be fancy: you're not one of the big consultancies, so don't emulate then. If clients wanted that stuff, they'd deal with those companies, not you. Our sales conversion rates improved radically when we switched from tailored suits to jeans and conference t-shirts
Anyway, couple of things that worked for us:
* Try to get retainer contracts: we would offer one when we had delivered a project. This is great for you as it makes income more predictable. And it is great for the client as they know they have certain capacity from you, and don't have to go to their boss with a new budget request for every small thing they want changed
* Don't let a client grow too large: we had a big client that wanted to buy all capacity we had to offer, and wanted us to hire more for them. We never let them become more than 50% of revenue, so we were able to survive when they went away one day (the "burning platform memo"). Keeping them at 30% would've been even better, but it is hard to say no to money
* Don't try to be fancy: you're not one of the big consultancies, so don't emulate then. If clients wanted that stuff, they'd deal with those companies, not you. Our sales conversion rates improved radically when we switched from tailored suits to jeans and conference t-shirts
Thanks for those points. Really insightful. Wanted to ask 2 questions:
1. Would you mind saying what was your multiplier for the valuation when you sold the business?
2. How can I limit a retainer so that a client does not abuse it.
I run a consulting firm.
Get one client. Do an amazing job. Use that to tell other clients what you do.
Be specific. Most people outside tech have no idea how it works. Tell them what they will get.
Increased sales, reduced costs, better productivity. Whatever it is you do, forget about the tech and talk about the benefits.
Get your elevator pitch right. Mine is "I help businesses fix their procedures". People then say "You know, I could introduce you to my friend...."
Business first, tech last.
Get one client. Do an amazing job. Use that to tell other clients what you do.
Be specific. Most people outside tech have no idea how it works. Tell them what they will get.
Increased sales, reduced costs, better productivity. Whatever it is you do, forget about the tech and talk about the benefits.
Get your elevator pitch right. Mine is "I help businesses fix their procedures". People then say "You know, I could introduce you to my friend...."
Business first, tech last.
"Whatever it is you do, forget about the tech and talk about the benefits."
That's a very good point. People who want to get stuff done, don't want to hear about all the tech buzzwords, they want to hear if you can make their life easier or not. And if you throw around tech jargon to impress them, you likely loose them as they don't understand you.
That's a very good point. People who want to get stuff done, don't want to hear about all the tech buzzwords, they want to hear if you can make their life easier or not. And if you throw around tech jargon to impress them, you likely loose them as they don't understand you.
What would be a good way to get the very first client if I’m a nobody outside of my tiny friend and colleagues circles?
First, you are somebody.
You have more skills in your area of expertise than anyone else you will meet.
My first clients came from volunteering at the local football club. As others have said, connections matter.
Do what doesn't scale. But don't do it for free.
My first clients came from volunteering at the local football club. As others have said, connections matter.
Do what doesn't scale. But don't do it for free.
Do not do free work for "testimonials" rather do it for a discount. I do not give sh-t who it is, I am not devoting my time for free to anyone. Your sidekick should be ChatGPT or any AI assistance you can get your hands on (if you are starting solo) It will help you tremendously. Do not be scared to reach out to organization. Buy some add space on google and target regions. You are going to kill it. I believe in you (random internet stranger). Good luck.
> Your sidekick should be ChatGPT or any AI assistance you can get your hands on (if you are starting solo) It will help you tremendously.
Copilot has been found to spit out copies of code it was trained on. You don't want to violate your contract with client, nor expose client to IP theft or GPL taint.
Copilot has been found to spit out copies of code it was trained on. You don't want to violate your contract with client, nor expose client to IP theft or GPL taint.
There is no problem with your client having GPL code if the code is not going to be published. As far as I know, GPL and GPL2 should be totally ok. The rights to the codebase can also be transferred but the GPL parts would retain the same license. So the new owner would have to publish it under GPL if he publishes the code and so on.
But proprietary code is the problem in the equation. They are not GPL and any code that gets bits of such proprietary code would be in violation of the copyright...
But proprietary code is the problem in the equation. They are not GPL and any code that gets bits of such proprietary code would be in violation of the copyright...
Ignoring technicalities, legalities, ethicalities etc. How would anyone ever find out, assuming their product is closed source?
Not only will I not do pro-bono work, but getting paid in full and on time is a challenge. Even good clients can suddenly ghost you and forget to pay up.
Don't forget the larger companies who'll try to negotiate Net 90, one month in arrears, in which they'd still probably feel they had another 2 weeks of wiggle room. Companies try that. With me it ends up Net 30 as usual when we edit the service agreement, but lordy do they TRY that.
Which is why you need airtight service agreements, and then the willingness to follow up on them. Obligatory video, "Fuck You, Pay Me": [https://www.youtube.com/watch?v=jVkLVRt6c1U]
I only ever had two customers (out of > 200) not pay in about 15 years. One got a lawyer letter and paid up. The other (new customer, and one I was warned to be wary of) I actually dragged to district court to receive a judgement. They then still wouldn't pay. I figured there was no one there I'd ever see again in my career... so I sent the sheriff. They wired payment within hours.
Which is why you need airtight service agreements, and then the willingness to follow up on them. Obligatory video, "Fuck You, Pay Me": [https://www.youtube.com/watch?v=jVkLVRt6c1U]
I only ever had two customers (out of > 200) not pay in about 15 years. One got a lawyer letter and paid up. The other (new customer, and one I was warned to be wary of) I actually dragged to district court to receive a judgement. They then still wouldn't pay. I figured there was no one there I'd ever see again in my career... so I sent the sheriff. They wired payment within hours.
This is brilliant!! Thank you for sharing.
I had no idea who this guy is, and the talk series. How much field-relevant brilliant content am I missing?
I had no idea who this guy is, and the talk series. How much field-relevant brilliant content am I missing?
This is legendary. Will have to watch the video tonight. Thank you.
Haha that's really nice thanks for the advice.
Deciding how to structure your contracts is important. Time and materials is nice, but if you're making the same thing over and over, a fixed bid with accommodations for additional changes is okay. Networking is important, so keeping clients happy is important, but also telling bad clients to go pound sand is a critical skill, as they'll ruin you if you let them.
My company made most of its money by referrals from one client to another, and it was important to have someone who is good at maintaining relationships with not only current clients, but old clients, and prospective clients. If that's not you, find someone who will do it for you. They should be good at it, and ought to be second nature to them: it's not a one-time thing, it's an ongoing part of that business model. I meanm you might get lucky and have one client for years and years, but you should plan on having to constantly be hustling for new clients, since that's the most common scenario.
I did consulting for 13 years. The upside is you get to work on a lot of different stuff, and become really good at a variety of technologies, as well as the general skill of becoming good at picking up new skills. You also get to look at a stupid product or application and think to yourself, "it's your money, pal," because you don't have to pretend you're saving the world at some dumb startup, you're a mercenary who parachutes in and then escapes on a hang glider just as the startup is about to explode. On the other hand, you don't get to focus on one thing and get really good at it, or focus on one market and learn every angle of it, or focus on one product and iterate on it until it's good.
My company made most of its money by referrals from one client to another, and it was important to have someone who is good at maintaining relationships with not only current clients, but old clients, and prospective clients. If that's not you, find someone who will do it for you. They should be good at it, and ought to be second nature to them: it's not a one-time thing, it's an ongoing part of that business model. I meanm you might get lucky and have one client for years and years, but you should plan on having to constantly be hustling for new clients, since that's the most common scenario.
I did consulting for 13 years. The upside is you get to work on a lot of different stuff, and become really good at a variety of technologies, as well as the general skill of becoming good at picking up new skills. You also get to look at a stupid product or application and think to yourself, "it's your money, pal," because you don't have to pretend you're saving the world at some dumb startup, you're a mercenary who parachutes in and then escapes on a hang glider just as the startup is about to explode. On the other hand, you don't get to focus on one thing and get really good at it, or focus on one market and learn every angle of it, or focus on one product and iterate on it until it's good.
I've been consulting since 1995. I started with a lot of different things (Web projects, Unix system administration, tech consulting), and now do 100% Python training.
I am incredibly happy with my work. I get to do what I want, earn a good living, have almost zero meetings, and am constantly learning new things.
But I made many, many mistakes along the way, leading to years of so-so income, limited sleep, and limited time with family.
My biggest mistake was trying to do too many different things. By focusing on one type of problem, you'll gain expertise (useful when helping clients). But you'll also gain a reputation for solving those sorts of problems, and clients will start to find you.
You still need to learn how to market yourself. You need to learn how to ask for money (which I found hard). You need to get a sense for who will stiff you (and some clients will!).
Indeed, a big problem with many consultants is that they forget they're running a business. When you're an employee, you can ignore all of the business stuff; you get a paycheck, and someone takes care of all of the little and big things, from invoicing to taxes to contracts to angry clients. When it's just you, you get to do all of that.
You can take a look at the podcast I do, the Business of Freelancing: https://businessoffreelancing.com/ (We'll hopefully start to record a third season in the coming weeks.)
Beyond that, I strongly recommend Philip Morgan's "Positioning Manual," which can help you figure out just what niche you want to enter.
Best of luck! And remember: If consulting doesn't work out, you're not a failure. It's not the best match for some personalities, markets, places, and times. But if you can make it work, then power to you, and I wish you the satisfaction and success that I've had.
I am incredibly happy with my work. I get to do what I want, earn a good living, have almost zero meetings, and am constantly learning new things.
But I made many, many mistakes along the way, leading to years of so-so income, limited sleep, and limited time with family.
My biggest mistake was trying to do too many different things. By focusing on one type of problem, you'll gain expertise (useful when helping clients). But you'll also gain a reputation for solving those sorts of problems, and clients will start to find you.
You still need to learn how to market yourself. You need to learn how to ask for money (which I found hard). You need to get a sense for who will stiff you (and some clients will!).
Indeed, a big problem with many consultants is that they forget they're running a business. When you're an employee, you can ignore all of the business stuff; you get a paycheck, and someone takes care of all of the little and big things, from invoicing to taxes to contracts to angry clients. When it's just you, you get to do all of that.
You can take a look at the podcast I do, the Business of Freelancing: https://businessoffreelancing.com/ (We'll hopefully start to record a third season in the coming weeks.)
Beyond that, I strongly recommend Philip Morgan's "Positioning Manual," which can help you figure out just what niche you want to enter.
Best of luck! And remember: If consulting doesn't work out, you're not a failure. It's not the best match for some personalities, markets, places, and times. But if you can make it work, then power to you, and I wish you the satisfaction and success that I've had.
What does Python training involve? Workshops to large groups of people? Just an overview of the language or deeper dive? How long are the sessions? I've never even considered training or education as an option but I really do enjoy it.
Moving into training was the best decision I ever made for my consulting career. Better pay, better scheduling, and no bug reports!
About 3/4 of my work is going onsite to companies, and teaching 10-20 people Python. I currently offer a bunch of courses, from "Python for non-programmers" to advanced Python workshops. These range in length from 90 minutes (what I call "microcourses") to 4-day sessions.
The other 1/4 (which I'm working to grow) is an array of online courses, with much overlapping content from my corporate training.
About 3/4 of my work is going onsite to companies, and teaching 10-20 people Python. I currently offer a bunch of courses, from "Python for non-programmers" to advanced Python workshops. These range in length from 90 minutes (what I call "microcourses") to 4-day sessions.
The other 1/4 (which I'm working to grow) is an array of online courses, with much overlapping content from my corporate training.
Awesome, thanks for the reply!
Do you think that blockchain is a niche by itself? Really facing issues into understanding what niche I should go to and having anxiety of letting go of clients on the way.
One way to decide if a niche is big enough to support a consulting career is to ask: Are there enough people interested in this topic to support conferences?
In the case of blockchain, the answer is almost certainly "yes."
But then, what do you do with that topic? I can, off the top of my head, think of a few things:
- Teach general "intro to blockchain" courses - Teach developers how to use the blockchain - Help companies develop blockchain-related apps - Help companies optimize blockchain-related apps - Help companies secure blockchain-related apps
Note that I know almost nothing about the blockchain, and I was able to come up with a few niche-related services you could offer. I'm sure that someone with more knowledge could come up with better, more appropriate ones.
Or, better yet: Ask friends/colleagues working at companies using the blockchain what their problems/bottlenecks are. What problems would they pay money to get rid of? Whatever they answer is your opportunity -- and if multiple people give the same answer, then you should grab it.
In the case of blockchain, the answer is almost certainly "yes."
But then, what do you do with that topic? I can, off the top of my head, think of a few things:
- Teach general "intro to blockchain" courses - Teach developers how to use the blockchain - Help companies develop blockchain-related apps - Help companies optimize blockchain-related apps - Help companies secure blockchain-related apps
Note that I know almost nothing about the blockchain, and I was able to come up with a few niche-related services you could offer. I'm sure that someone with more knowledge could come up with better, more appropriate ones.
Or, better yet: Ask friends/colleagues working at companies using the blockchain what their problems/bottlenecks are. What problems would they pay money to get rid of? Whatever they answer is your opportunity -- and if multiple people give the same answer, then you should grab it.
It was very hit and miss for me. I think you really need to have a primary gig or hobby or side project which exposes you to constant opportunities.
My job now drives a lot of secondary value encounters which allows me to “spin off” different ideas with other people.
I did consulting with a client or two but usually it’s not sustainable on a monthly basis.
I view Consulting as a really incredible way to learn simple business skills, how to ask for money and structure engagements.
My personal feeling is that exposure to consulting is ultra valuable even on a hobby basis and it is very valuable skills to have, though may not be sustainable.
My feeling after trying to make it work for a couple years is you are making a bet with your time. You are better off spotting a high potential project that is just getting started; inserting yourself by just being helpful and then growing it and ultimately turning it into ROI.
A really great high value paid position might take 3-6 months to develop. I think I’m better at spotting and developing these.
The idea that you will just walk in getting top dollar is unlikely. You have to spot the right place to be, position yourself into it by being helpful and likable and then enlarge the opportunity by growing it.
For me Consulting still requires a very entrepreneurial sense of timing and also the ability to get into position and develop something new with a high potential client.
My job now drives a lot of secondary value encounters which allows me to “spin off” different ideas with other people.
I did consulting with a client or two but usually it’s not sustainable on a monthly basis.
I view Consulting as a really incredible way to learn simple business skills, how to ask for money and structure engagements.
My personal feeling is that exposure to consulting is ultra valuable even on a hobby basis and it is very valuable skills to have, though may not be sustainable.
My feeling after trying to make it work for a couple years is you are making a bet with your time. You are better off spotting a high potential project that is just getting started; inserting yourself by just being helpful and then growing it and ultimately turning it into ROI.
A really great high value paid position might take 3-6 months to develop. I think I’m better at spotting and developing these.
The idea that you will just walk in getting top dollar is unlikely. You have to spot the right place to be, position yourself into it by being helpful and likable and then enlarge the opportunity by growing it.
For me Consulting still requires a very entrepreneurial sense of timing and also the ability to get into position and develop something new with a high potential client.
Loved the travel and accumulating flightand hotel points and randomly getting bumped to first class when flying out to see family, etc.
Compensation was generally good.
Work was challenging and engaging. If nothing else it got me exposed to a lot of enterprise environments and business owners.
Don't miss the feast-or-famine workflow, constant shifting of priorities and needs, the artificial "give a shit" about the flavor of the month clients, and the constant up-or-out hustle environment.
Compensation was generally good.
Work was challenging and engaging. If nothing else it got me exposed to a lot of enterprise environments and business owners.
Don't miss the feast-or-famine workflow, constant shifting of priorities and needs, the artificial "give a shit" about the flavor of the month clients, and the constant up-or-out hustle environment.
I'd give contrarian advice here. Some people suggest to "charge more" but this hardly works if you are just starting.
What worked for me is to keep jumping from client to client until you find a good one that makes up for the "bad" ones; with the bad ones not necessarily bad (as don't pay, sky-high expectations, bad communication, etc.. never take those) but rather clients that will have 2-4 months of work only.
The reality is, your consulting business will go two ways: Either you'll grow to x/xx employees; or it'll be just you. The difference is huge, and your responsibilities as well as your day to day job will be different. For the former, you are a manager and a seller. For the former, you are a software developer that need to have a small sales pipeline and keep in touch with an accountant.
I'd not advice on the former, but for the latter, just reach random people here or elsewhere. Somewhere along the people you reach, you'll find work for short periods, or small gigs. One of them will turn into a year long arrangement. It might seem risky that you are relying on a single client, so price accordingly for the down time. But address this with the mentality that your next gig will come from somewhere else. For me, when I was looking, it was a maximum of 1-2 months that I'd land the next gig. Usually shorter. Been at this since 2010, so maybe adjust for the current "down" market.
For the big fish clients (aka: Corporate Gigs) that some people here suggest hooking with, I'd suggest not to put much effort into that. The reason for that is simple: It's more about navigating politics, hierarchy, organizational complexity and bureaucracy. It can be lucrative but it can also drain you in the short time, these are also gigs that gets established with politics rather than skill. They can be draining until you get paid, and if you are short in cash (or need a fast money pipeline) this can turn stressful. I'd advice to push this for a later date.
It's also important to say that the first type of clients will rarely convert to the second type of clients. My experience is that the two categories don't overlap. So if you are about 2, (especially if you are looking to grow) and want clients that will be happy to pay for your airtravel+hotel+wine&dine meal, by all measures start looking for 2.
What worked for me is to keep jumping from client to client until you find a good one that makes up for the "bad" ones; with the bad ones not necessarily bad (as don't pay, sky-high expectations, bad communication, etc.. never take those) but rather clients that will have 2-4 months of work only.
The reality is, your consulting business will go two ways: Either you'll grow to x/xx employees; or it'll be just you. The difference is huge, and your responsibilities as well as your day to day job will be different. For the former, you are a manager and a seller. For the former, you are a software developer that need to have a small sales pipeline and keep in touch with an accountant.
I'd not advice on the former, but for the latter, just reach random people here or elsewhere. Somewhere along the people you reach, you'll find work for short periods, or small gigs. One of them will turn into a year long arrangement. It might seem risky that you are relying on a single client, so price accordingly for the down time. But address this with the mentality that your next gig will come from somewhere else. For me, when I was looking, it was a maximum of 1-2 months that I'd land the next gig. Usually shorter. Been at this since 2010, so maybe adjust for the current "down" market.
For the big fish clients (aka: Corporate Gigs) that some people here suggest hooking with, I'd suggest not to put much effort into that. The reason for that is simple: It's more about navigating politics, hierarchy, organizational complexity and bureaucracy. It can be lucrative but it can also drain you in the short time, these are also gigs that gets established with politics rather than skill. They can be draining until you get paid, and if you are short in cash (or need a fast money pipeline) this can turn stressful. I'd advice to push this for a later date.
It's also important to say that the first type of clients will rarely convert to the second type of clients. My experience is that the two categories don't overlap. So if you are about 2, (especially if you are looking to grow) and want clients that will be happy to pay for your airtravel+hotel+wine&dine meal, by all measures start looking for 2.
It’s been several years since I began but it’s been an amazing experience given I’ve always wanted to do something entrepreneurial. I feel a lot happier knowing that I can help clients advise them on technology and bring solutions to their problems. Happy to have a chat anytime.
Thank you, that means a lot. Please email me at [email protected] and we can move on from there.
been running my company for 23 years now and have friends that also have.
1) staying general works, but niching down works even better. My most successful friends found an up and coming technology partner and rode that wave.
2) most of my business year to year is grown in existing customers. Very little comes from new customers (90/10).
3) marketing/selling becomes much easier if you have a technology partner that is exploding like a rocket (e.g. chat gpt consulting?). Otherwise marketing/selling is mainly about producing content that drives leads. Presenting at conferences is probably one of the best ways we have driven business. But no one method drove enough business.
4) there is an inflection point around 4-7 people and at 30-40 people. at 4-7 you need to manage but the people arent quite generating enough money for you to not work on projects. It can be very hard to get past this point. At 30-40 you now need a layer of management and you have to develop them.
I really like the following sources that apply to consulting 1) so you want to be a consultant (whitepaper) 2) naked consulting 3) managing a professional services firm
Also really like 5 dysfunctions of a team. It isnt specifically geared towards consulting, but it is important as you get employees.
1) staying general works, but niching down works even better. My most successful friends found an up and coming technology partner and rode that wave.
2) most of my business year to year is grown in existing customers. Very little comes from new customers (90/10).
3) marketing/selling becomes much easier if you have a technology partner that is exploding like a rocket (e.g. chat gpt consulting?). Otherwise marketing/selling is mainly about producing content that drives leads. Presenting at conferences is probably one of the best ways we have driven business. But no one method drove enough business.
4) there is an inflection point around 4-7 people and at 30-40 people. at 4-7 you need to manage but the people arent quite generating enough money for you to not work on projects. It can be very hard to get past this point. At 30-40 you now need a layer of management and you have to develop them.
I really like the following sources that apply to consulting 1) so you want to be a consultant (whitepaper) 2) naked consulting 3) managing a professional services firm
Also really like 5 dysfunctions of a team. It isnt specifically geared towards consulting, but it is important as you get employees.
Thank you for the advice and the reads. Will definitely go through them.
I am honestly not sure if I am consulting in the sense many describe here. But I work in my own business, and have since 10 years worked in big corporations as contractor. This type of assignment is impossible to get without going through the middle men that the big corp wants to source their non-employees through. So my experience is different from those that find their customers directly and negotiate directly with them. But at least around here, I think it is very hard to impossible to get a contractor assignment to a bigger company or organization without going this path. They prefer to source their consultants through "framework agreements" (not sure if it is the right English word), which no single-person-business can be a party of themselves as they are too small.
Still, I have been pretty happy working this way. I may have been lucky in that the customer have appreciated the work I have done and I have had responsibilities outside of pure tech, such as acting as team manager for a technical team for example.
Still, I have been pretty happy working this way. I may have been lucky in that the customer have appreciated the work I have done and I have had responsibilities outside of pure tech, such as acting as team manager for a technical team for example.
Once upon a time I gave a talk to a room full of dev freelancers on how to get started as a freelancers. I wrote a short summary here https://www.fullstackoptimization.com/a/positioning-for-free... maybe you find it useful.
Thanks. Will definitely go through this.
I don't have a 'successful' experience - but hoping my experience can resonate with some and I can get some hints on how to achieve 'success'.
I have tried more than a few times and different kinds (if we can say it that) - helping with hiring, training for interviews as well as being a dev (technical architecture, design and implementation). Nothing stuck. I ultimately had to take up a full-time gig to pay the bills - but I still don't want to give up on this dream of mine - being my own boss (sort of - since I know customer is always the boss!).
I would like to know how you got your start and how you got your first customer, then the next and so on. I am not necessarily looking to build a tech empire, hire dozens of others, but rather eek out a decent living by doing what I do best - design and build large-scale systems.
I have tried more than a few times and different kinds (if we can say it that) - helping with hiring, training for interviews as well as being a dev (technical architecture, design and implementation). Nothing stuck. I ultimately had to take up a full-time gig to pay the bills - but I still don't want to give up on this dream of mine - being my own boss (sort of - since I know customer is always the boss!).
I would like to know how you got your start and how you got your first customer, then the next and so on. I am not necessarily looking to build a tech empire, hire dozens of others, but rather eek out a decent living by doing what I do best - design and build large-scale systems.
May I ask what is meant by "tech consulting"? This is different to IT contract work I assume? Is consulting more about offering knowledge and guidance? What are the skills consultants need?
Say a company wants to increase their organic search traffic, I'm guessing that's where a consultant can come in, do some research, provide recommendations, then build out a solution?
And I guess to follow up on this, I've worked as an IT contractor for several years now, but I'm not clear how someone would get into consulting. I'm not even sure I've seen individual consultants before at companies. I've worked with Accenture consultants who have worked on projects with me, but I've never seen an individual do similar work. How would one get into this - is it purely networking, or do recruiters place consultants?
Sorry if these are stupid questions. I guess I've never really understood what people meant by consulting and it seems people can use the term to mean quite a range of things.
Say a company wants to increase their organic search traffic, I'm guessing that's where a consultant can come in, do some research, provide recommendations, then build out a solution?
And I guess to follow up on this, I've worked as an IT contractor for several years now, but I'm not clear how someone would get into consulting. I'm not even sure I've seen individual consultants before at companies. I've worked with Accenture consultants who have worked on projects with me, but I've never seen an individual do similar work. How would one get into this - is it purely networking, or do recruiters place consultants?
Sorry if these are stupid questions. I guess I've never really understood what people meant by consulting and it seems people can use the term to mean quite a range of things.
We build out solutions for their ideas and projects, also focusing on enhancing their brand and even development some times. Well this is what I aim to do.
I have long considered this, but of course, the big question is "How do you land your first testimonial-worthy client?".
I'm not particularly inclined to do pro bono work in exchange for raising my profile (unless that work is of such a high profile that it would drive large numbers of CEOs to my door! This is very unlikely for the gigs I have seen).
I'm not particularly inclined to do pro bono work in exchange for raising my profile (unless that work is of such a high profile that it would drive large numbers of CEOs to my door! This is very unlikely for the gigs I have seen).
Thank you. Yeah I think after finishing our initial pro-bono clients (two), will start only looking for paid ones.
Hey I'm in a similar situation as you. I transitioned out of a dev job recently and I'm putting more energy into my business. I have experience in podcasts, at least from a technical point of view. Reach out if you want to connect [email protected]
Dont grow past 1 person, unless you love sales, the end game is your just in sales.
What type of tech consulting? Strategy/ Architecture? Delivery management? Implementation? Each of these have their own profiles/approaches.
For the former, I'd bill fixed price, fixed outcome - half up front, half on delivery. This is the highest margin work buts it's bitty.
For the rest, a flavour of t&m depending on duration of the engagement.
Testimonials are great, but get some case studies together also and make sure your pitch deck is tight.
There is a lot more I could say, ask in the comments if you wanna talk - happy to oblige.
Source: I did tech consulting and advisory for investment banks and hedge funds for 20 years.
For the former, I'd bill fixed price, fixed outcome - half up front, half on delivery. This is the highest margin work buts it's bitty.
For the rest, a flavour of t&m depending on duration of the engagement.
Testimonials are great, but get some case studies together also and make sure your pitch deck is tight.
There is a lot more I could say, ask in the comments if you wanna talk - happy to oblige.
Source: I did tech consulting and advisory for investment banks and hedge funds for 20 years.
To be honest I am not sure what to do yet so we offer as doing all of these. Have had calls with 3 potential clients, all looking into our proposals one was in marketing and the others in development, looking to go into a better niche after reading these amazing comments. Should case studies be on previous work or can I do some for companies of choice?
I recently took a position at a small, very young tech consultancy. Our compensation and billing practices are reasonable, but somewhat ad hoc.
Can anyone offer advice or resources: 1. Common compensation structures (salary/bonus/profit sharing/etc splits) 2. Appropriate time billing practices, i.e. billing to the minute vs billing blocks of time
Can anyone offer advice or resources: 1. Common compensation structures (salary/bonus/profit sharing/etc splits) 2. Appropriate time billing practices, i.e. billing to the minute vs billing blocks of time
One minor comment: different markets/regions are _different_.
For example, whether or not customers pay on time can depend a lot on the region (and decade!). Not to mention that there's also a big difference between small and large companies, as well as different industries (manufacturing vs restaurants vs banks, etc.)
For example, whether or not customers pay on time can depend a lot on the region (and decade!). Not to mention that there's also a big difference between small and large companies, as well as different industries (manufacturing vs restaurants vs banks, etc.)
Selling your time doesn't scale
> Selling your time doesn't scale
Sure, but it continuously opens to you new opportunities to unearth something that does scale, but isn't available yet...
In any normal employment you don't get that.
Sure, but it continuously opens to you new opportunities to unearth something that does scale, but isn't available yet...
In any normal employment you don't get that.
> Selling your time doesn't scale
a) It doesn't need to be your time exclusively
b) Time-based pricing is only one pricing model for consulting businesses.
I'd add that, funnily, I sometimes hear this from FTEs (who sell their time) or product entrepreneurs who eat ramen for five years and then have little to show other than the time they've spent on the product. Meanwhile, some consultancy owners make real bank... It's fine if your risk profile allows you to do product, but if it isn't obvious, a service business can be totally legit.
a) It doesn't need to be your time exclusively
b) Time-based pricing is only one pricing model for consulting businesses.
I'd add that, funnily, I sometimes hear this from FTEs (who sell their time) or product entrepreneurs who eat ramen for five years and then have little to show other than the time they've spent on the product. Meanwhile, some consultancy owners make real bank... It's fine if your risk profile allows you to do product, but if it isn't obvious, a service business can be totally legit.
No, but eventually you can start also selling other people's time.
It doesn't have to scale if the rates are high enough.
You can make a very profitable decent business that doesn't "scale" in the technology product sense of the term.
You are not necessarily selling time