No doubt about it: The gig economy is here, and it isn’t going away anytime soon. In fact, a study released in 2017 by Randstad US suggests that by 2025 the majority of workers will be employed in an agile capacity (think consultants, contractors, temps, and freelancers). The study predicts that as early as this year, up to 50 per cent of the workforce will be made up of agile workers.1
This is great news for anyone who thinks the freedom and flexibility of self-employment sounds like an appealing way to make a living. (It is, by the way, but it does have its challenges!) The fact is, businesses need consultants more than ever. Our rapidly changing global economy means it’s nearly impossible for a company to do everything by themselves. Here’s why:
Companies lack expertise to address their growing and changing needs. Their staff members don’t have time to complete special projects or research. They’re understaffed and need someone to fill in until demand is met. They need objective outside opinions to solve problems in unbiased ways. Etcetera.
It’s simple enough to hang a shingle and declare yourself a consultant. But of course, that’s just the beginning. While creating a thriving consulting practice is very doable, it takes realistic expectations, a lot of planning, and never-ending hard work. Here are some insights I’ve learned from my own journey and from other consultants I’ve talked to along the way:
First, get a reality check.
You’ve probably heard that consulting is lucrative, offers lots of free time, and rescues you from pesky office politics. Don’t believe these myths. When you’re starting out, you’ll be working at least 60 hours a week, and while you can charge a higher salary, taxes, and benefits will take a bite out of your money. Finally, you’ll have not one boss, but many!
Don’t skip the initial planning.
Before you can start a consulting practice, you must have a roadmap to keep you moving in the right direction. That’s why it’s crucial to develop a sound business plan, a marketing plan, and a financial plan. Once these are in place, you will feel more organized and confident.
Moonlight before going full-time.
Doing part-time consulting work will help you know whether you would like to start a consulting career. With your employer’s approval, take on some small projects to complete during nights, weekends, and vacation periods. Soon, you’ll know whether or not you enjoy the work.
Hire a great accountant.
To succeed, you need a good support team. Finding a talented accountant should be at the top of your list. They will provide expert advice on your business structure, profitability, accounting procedures, and growth plans, and will keep you out of trouble with the IRS. Find an accountant who is willing to educate and advise you as your business evolves.
Use my 3X Rule to determine a fair fee.
It’s much easier to establish an appropriate salary from the beginning than to increase it later on. One quick way to determine a salary that adequately covers your business expenses is what I call “Elaine’s 3X Rule.” If you need to earn a salary of $100,000, that means you’ll need to bill around $300,000 to reach your goal.
Focus on the big fish.
Many consultants make the mistake of focusing on small businesses as their first targets, perhaps because large organizations are more intimidating. But small businesses often have smaller training and consulting budgets. Aim for medium- and large-sized businesses. With their larger budgets, they may feel more comfortable taking a chance with a newer consultant.
Don’t count on your expertise for success.
Your industry knowledge—be it communication, leadership, artificial intelligence, or cybersecurity—won’t help you run your own business efficiently. It’s equally important to master other entrepreneurial skills. For starters, learn what to do on a sales call, figure out your tax situation, practice networking, start brushing up on your marketing know-how.
Become a budget marketer.
There are all kinds of creative, budget-friendly ways to market yourself. Conduct a survey and share the published results with your clients. Serve on the board of a local charity. Start a new blog about industry trends and happenings. Send cards for unusual holidays like Halloween, Independence Day, and Thanksgiving.
Learn to cope with loneliness.
Some people find it hard to work by themselves, so it’s important to combat isolation and loneliness. Be sure to stay in touch with other consultants you know, and schedule regular lunch dates to get you out of the house.
Plan for a rainy day (but keep a sunny outlook).
First, a piece of practical advice: Don’t spend your money until it’s in your hands. Even though you must plan for the worst-case scenario, it’s wise to harness the power of positive thinking. Believe in your success and make sure your clients believe in you as well. Never mention your problems to your clients. You want their confidence, not sympathy.
Strive to earn repeat business.
Remember, it takes 7 to 10 times the investment to sell to new clients. This is why you should always aim to bill 50 to 75 percent of your annual revenue from the previous year’s clients. It’s important to balance enough repeat business so you don’t have to constantly seek new business.
Know that it’s unethical to lower your rate to accommodate a client’s budget.
This is one way consultants get a bad reputation. If you said you could do a project for $15,500 and the client has only $10,500 in their budget, never agree to do it for the lower amount. If you can do it for less, why did you ask for $15,500? Did you have $5,000 worth of fat in the proposal? Don’t make your client question your ethics—and the ethics of all consultants.
Help your client become independent.
By the time your project draws to a close, your client should fully own the solutions. You’re not there to make clients depend on you. You are there to help them receive the maximum return on investment—and that occurs only when the client is able to uphold the changes you have helped them make. By focusing on the client’s independence, you ensure the organization continues to be successful.
Keep a “praise” file.
Save any and all raves you receive from your clients in a testimonial file. If you receive verbal praise, ask them to put it in writing. These testimonials will come in handy for proposals, brochure copy, and prospecting letters.
Put quality and your clients first—even ahead of profitability.
Any poor-quality service mistakes you make will follow you for life. This is why you should guarantee that your services will be the highest quality your clients have ever experienced—even if it costs you your profitability in the short-term. A project that goes in the red is a small price to pay for your lifetime reputation. Keep in mind that the project will end, but your relationship will not.
If consulting is your dream job, it’s time to take advantage of the gig economy and seize the moment. Yes, it will be a challenge, but your hard work will be worth it once you are doing what you love.