Step 0: Consulting
I’m asked about the "Step 0" - starting to consult. I’ve met remarkable individuals this week asking me questions. Several folks suggested researching "how to overcome the element of fear" to going independent. I’m not prepared to help with that yet. For now, I just want to share what I know about starting to consult independently.
Finding a customer first still applies?from the previous article. Beyond that, I regularly see these three main groups of the "Company of One" consultants:
Mechanical Turk
Most consultants fall into this category. Pass a certificate. Get a recruiter to place oneself. Work on a rate specified by the recruiter. There are specialty jobs in this category as well but these require some marketing. IT Turk’s rates range from about $45/hr - $175/hr and this is the easiest type of work to get started in. It’s a good stepping stone for everyone to experience. However, this should not be a strategic objective as trading time, life’s most precious commodity, on someone else’s rules is defeatist. Nevertheless, with the right customer, a consultant is typically left alone to keep growing personally and professionally because the meager expectations are built into the "job description". I am not including the actual Mechanical Turk sites in this category, such as Upwork. I expect even poorer outcomes there. But I am willing to try it out and close a few jobs just to know for sure what to expect and update this article. If anyone has done that I’d appreciate hearing about your experiences.
Important legal consideration: Mechanical Turk is often not legally different from ordinary employment and in this lies a serious problem. According to the IRS, "if your boss can tell you what to do, and you need to comply to keep your job" - then you are an employee and can sue for benefits! This has all kinds of nasty implications associated with this consulting format!
Mr. Robot
These individuals tend to be deep experts in complex and specialized domains. Security is a good example. Database is another. My friend, John, who I mentioned in my earlier articles, runs a penthouse Chinatown company in this category. Also, I’d written about Lindsay of?The Northern, the Canadian charging $450/hr for GPT-4 integration, is in this category. Typical Time and Materials (T&M) rates on East Coast start at about $300/hr. This is also the easiest category to explore the coveted Fixed Price (FP) projects or even programs route. There’s a good opportunity to upsell here in both tools and workups. A typical expectation is to "make a problem go away." - so, fears rather than passions work best in sales. And there needs to be sales and marketing going on all the time.
Daddy-o
This is the broadest category that a few experts dwell in. Most of our friends operate here. It typically requires breadth and depth of knowledge. The expectations are on the outcomes, and it’s most often passions than fears in sales, with one notable exception: "the fear of missing out" is also on the table. Here are the subcategories:
Hybrid
There are more categories, of course, but this should help you get started on thinking about?your own market. Many seasoned experts will end up in several of the above categories or markets at the same time. Most newcomers tend to start with the Mechanical Turk and then move into the other categories. Just like ourselves, people I mentioned here already run SaaS startups, guide communities, help other founders and operate in literally every category. I don’t think there’s such a thing as a job beneath someone - remember, pride is a sin: one should always pick the best option available to them and continuously work on expanding one’s options.
领英推荐
Market Strategy
Only for the Mechanical Turk one does not need to market or sell much. All others will require working on their business continuously. And for that, we have Market strategies. Here are a few most frequently used:
The most important part of consulting is?finding the?right?customer!?For any type of competence coaching, for example, if the team is not motivated to learn and change their ways, not only is the coach going to be miserable, the customer is not getting what they actually need! They may have asked for transformation and competence coaching, but they actually may just need a pretty report for stakeholders and have no desire to exert themselves, and their actual desire is status quo. A coach will only end up aggravating the group with all the hardcore learning they dish out. This can also damage the reputation of the coach. I have made mistakes of signing such customers and gracefully not continuing after a completed phase.
Where to Learn More
How to Think About It…
Often, one hears that consulting is a less desirable business model because it involves trading time for money, and time is the only truly valuable commodity. While this holds true, consider that everyone working on a W2 "for the man" is already doing so, arguably in the least advantageous way. Let’s contemplate how to transition into the Mechanical Turk category, the least desirable one, but the easiest to crack. All kinds of roads will open up thereafter.
The rule of thumb:?double it.?If a senior developer earning $100K per annum, with a 2000-hour work year, is thus making $50/hr, the benchmark is that one should be able to find a very similar job on a corp-to-corp basis for $100/hr under one’s brand new S-Corp. Most first-timers will have trouble hitting this benchmark, but that is a temporary growing pain because this mapping is the convention. This will produce $200k in the same year. However, one will not have earned double; one will only have grossed double. Then, one’s best medical insurance for the whole family will be up to $30k, one’s best malpractice insurance up to $10k, one’s legal, bookkeeping, accounting, and secretarial fees up to another $10K, and one should be able to keep $150k. From the $150K, one draws a W2 salary, the greater part, and the rest can be distributions which are taxed less. Note that this will not work the same way for everyone, like an ex-FAANG employee, for example. Market is market! And one will not be able to charge $350/hr just for being an ex-Googler. To do that one would need to subcontract for Google and such companies don’t work with contractors in this way.
My recommendation: don’t take all $150k.?The objective is to grow from here, else why start. There will be a lot to learn, and the first year will be… interesting and perhaps overwhelming. What the new consultant can’t do will need to be bought before learning it for one’s self. The hardest part for developers and the only part that matters for any business is finding customers. Clearly, like I explained in my previous article, if one has not found a customer one cannot make the move. But when one is finally consulting, my recommendation is to set aside about $30k. There’s still a bonus expanding $120K into salary and distributions. Spend this $30k working with other small founders that are marketing firms to learn how to create sales funnels, advertise, and discover?your?consulting market fit.
This can be the beginning. And all other options will only be better from here.
Always Be Nice!
Robert Greene on the most important skills in business:
I don’t care how technically brilliant you are in your field; if you don’t understand people, you are going to neutralize all of your powers.
— Robert Greene, The Laws of Human Nature
There are a few books that help every consultant beyond belief!
Godspeed!