So You Want to be a Consultant? Part 1
(first published on StoutSystems.com)
Most people focus on the work that they would do when considering whether they should pursue consulting as a career. Am I a good enough engineer or project manager or designer to command an attractive wage and to stay busy?
While that is definitely the single most important question to ask and answer, it cannot be made in a vacuum.
If you are considering hanging out your shingle as a consultant, the mindset to take is that of a business owner or entrepreneur who is establishing a new company.
That is, in fact, exactly what you are doing. And you have to be prepared and willing to take on all of the functions of a business.
If you think about a typical corporate organization chart, that can be helpful in providing the framework or skeleton that presents everything you’ll need to do as a consultant.
In this article, you’ll find an overview of the administrative hats you’ll wear as a consultant.
In So You Wanna Be a Consultant: Part 2, you’ll find an overview of the marketing, promotion and sales hats you’ll wear as a consultant.
Executive
Whether you call yourself the president of the company or not, you have to adopt the viewpoint that that’s exactly what you are.
As an executive, you are responsible for ensuring the solvency of the company. Its long term growth and viability. Its reputation and good will in the community and industry.
These all fall under the heading of strategy.
While you may be very comfortable as a [LANGUAGE] programmer, is that language or technology stack time-limited? If it is, in what direction should you drive your consultancy?
Are you setting your rates properly? It is necessary to pass along a rate increase, even to the best customers, from time to time. At a minimum, you need to keep up with inflation. Otherwise you are actually losing ground financially.
Taking time on a regular basis to step out of the daily grind and assess your consultancy from a strategic standpoint important. If it is not reaping the rewards you anticipated, what can be done to fix that?
Legal
I’m not a lawyer, but I can point out a few things that most consultants do to establish and maintain their business from a legal perspective.
First, they incorporate a business entity. There are different types of corporations, and most consultants establish Limited Liability Corporations (LLCs).
I have noticed recently more and more consultants using LegalZoom to establish their companies. Because LegalZoom’s pricing structure is typically fixed cost, they may offer a cost effective alternative to working on an hourly basis with a local attorney.
I’m not suggesting that you don’t need a relationship with a local attorney. You do. You will be asked to sign non-disclosure agreements and contracts, and an attorney can give them a quick review and alert you to anything concerning.
Once the corporate business entity is established, it needs to be registered with the state. And for most companies that registration needs to be renewed annually.
Maintaining some amount of business insurance coverage, such as professional liability insurance, is a prudent way to protect yourself. It also can raise a prospective client’s comfort about doing business with you. Most general purpose insurance agencies are able to talk about types of coverages and provide quotes.
Facilities
Most consultants will spend a considerable amount of time working from home.
In order to do so productively, you need adequate facilities. So another hat you will wear is that of a Facilities Engineer.
Having a room that is dedicated to your work is important.
You need a space that will be distraction free. People walking in while you are working, talking on the phone or video conferencing interrupts your concentration—not to mention your professional image. The same is true for pets. It also needs to be relatively noise-proof if you have kids or barky dogs.
Next, a good desk and an ergonomic chair. You can skimp on the desk, but skimping on the chair will cost you in the long run.
Reliable high-speed Internet, a phone with good reception (if mobile) and, of course, a suitable computer.
Accounts
Consultants invoice for their services. That is how they get paid.
In order to do this well, you need a very accurate tracking system that allows you to capture how you spent your time, typically in quarter hour increments. Employees get paid for every hour they are in the office. As a consultant, you need to abandon this mindset. You are being paid for your work.
When you task shift away from your customer’s work, you are no longer on the clock. That’s why you need an accurate tracking system to capture what you work on, for how long, and when.
Some consultants use apps to help them track. Some use pen and paper.
The bottom line is that you need to track every time you task shift, whether it’s for your customer or not, and then derive your invoice from your log.
Let’s take a minute to talk about why: as a consultant, you need to present a value proposition.
Consultants typically command a higher hourly rate than employees. If consultants provide maximum value for every hour, then they are a value proposition. You need to be in a position where you can account for every minute you spent—what you were working on, how long it took you, what day it was—so that your customer can map your time to your task work and decide for him- or herself whether or not things are taking the expected amount of time.
If you don’t have this mindset, then you are not cut out to be a consultant.
It becomes obvious very quickly who does and doesn’t.
Consultants who cannot produce an artifact that shows their detailed time tracking are caught out immediately. Ditto for consultants who always estimate and/or report their task time in round numbers like 4 hours or 8 hours.
Establishing a reputation for fair and accurate invoicing is very important.
Along with producing invoices, from time to time you will need to function as the Collections department. When your invoices are not paid on time, you need to investigate. A simple thing like an invoice being lost by your client is easily rectified. But—rarely—you will need to take legal action to get paid.
Staying on top of collections is important.
Another function that falls into the Accounts territory is record keeping. Along with tracking invoices and payments, you will also need to record your expenses. You need to pay yourself and keep a record of that!
An accountant will be an asset when it comes to filing annual tax returns for your company. If your corporation is profitable, you’ll also need to file quarterly estimated tax payments—something an accountant can also help with.
Great record keeping allows your accountant to generate your tax return and other filings quickly, which will save you a lot of money.
Quality
Along with producing whatever it is that you do, you need to establish a separate mechanism to ensure your product is of the highest quality. This breaks down into two categories.
First, you need to continually learn new things.
Those new things might be new tools and technologies. Those new things might be best practices, which are constantly evolving.
Learning can sometimes be done on the job, but relying on that limits you. So you need to give yourself specific goals and then work out how you will achieve them.
Are there books you should read? Should you take a training course? Should you pursue a certification? Should you teach yourself a new tool or technology by building an application that uses it? Should you attend a conference?
Part of keeping your quality high is ensuring that you are keeping yourself current.
But there is another aspect to quality, which is this: what do you do when you goof up?
Every consultant is going to come face to face with a situation that exceeds his or her knowledge or capabilities. How do you handle it?
I have seen all sorts of bad handlings:
- Consultants who let the situation drag on and on, covering up that they didn’t know how to accomplish what was needed.
- Consultants who abruptly quit.
- Consultants who blamed requirements or said something was impossible.
As a consultant, you need your own policy about what you should do if you ever get into such a situation. In general, a consultant should be willing to work unbilled while he or she researches and learns something that was an obvious requirement for accepting the assignment. And a consultant should also consider not billing for hours spent trying to do something but not succeeding. And finally, a consultant should learn to be transparent about status so that a client has a chance to step in quickly and prevent time from being lost.
Interested in reading about more hats a consultant wears? Check out So you Want to be A Consultant: Part 2. Covers a consultants marketing, promotion and sales hats.
Stout Systems is the software consulting and staffing company Fueled by the Most Powerful Technology Available: Human Intelligence?. Stout was founded in 1993 and is based in Ann Arbor, Michigan. Stout has clients across the U.S. in domains including engineering, scientific, manufacturing, education, marketing, entertainment, small business and, yes, robotics. Stout provides expert level software, Web and embedded systems development consulting and staffing services along with direct-hire technical recruiting and placements. If you're looking for a job in the tech industry, visit our job board to see if you qualify for some of our positions. Best of luck to you! If you're looking to hire technical talent for your company, please contact us. This is a career advice article catered to developers, technical project managers, and other technical staff looking to improve their skills.