10 Tips for New Consultants
Welcome to the biz. Frankly—and I’d be remiss if I failed to say this—you’ve chosen a rough time to dive in. But how much you make has always been a question of guts, brains and moxie, not the economy. And I’ll remind you that some of the best firms in the world—including Microsoft—began in recessions.
My first year in consulting was tough. I’d never learned the basics, and worse, there was no one there to show me. So I lived by trial and error, making every mistake you can make, most of them twice. The following tips were learned the hard way. They can save you some time and money.
1. Find a Mentor
Like everything else, consulting has a learning curve, and you’ll have to climb it to kick butt as a free agent. But there’s a shortcut. Find someone who’s been there before you and is willing to share the war stories: how to get clients to pay an overdue bill (without offending them), how to fight the competition (without losing) and how to meet a payroll (without fretting), among others.
There’s another reason to find a mentor, and it’s all about money: A good one can throw you some business when you’re in a pinch, and you can do the same for him when you get established. In fact, most of the consultants I know have a “twin” who’s there for them when they need it—and from time to time, we all need some help.
2. Learn the Tax Laws
Trust me. If you do nothing else after reading this piece, buy a good tax book. Tax law is confusing and time-consuming, and if you make a mistake (even an honest one), you’ll be hit with penalties and interest up the wazoo. I speak from experience.
Don’t be afraid to call the IRS and ask them a question. A few years ago—and under intense pressure from Congress—the Service began to get friendly. They redesigned their Web site (www.irs.gov) and set up a consumer hotline at (800) 829-1040. Better yet, they hired an army of experts to help you with all kinds of questions, from the I-9 to the arcana of tax shelters.
There’s also a passel of Web sites with good tax advice, including Intuit (www.intuit.com), MoneyCentral (moneycentral.msn.com/tax/home.asp), Tax Mama (www.taxmama.com) and Business Owner’s Toolkit (www.toolkit.cch.com).
If you’re loath to do your own accounting, find a bookkeeper. A good one can be cheaper than you think.
3. Get Referrals
If you’re any good at what you do—and you read CertMag, so you must be fabulous—most of your business will come through referrals.
You can rev this up by giving your clients a discount (say, 2 percent to 5 percent) on prior fees if they refer you to a new client who gives you business. You can be even more aggressive and ask all your clients for three to six names you can pitch to. Warm calls are better than cold, and you never know—you might hit a gold mine. “Endless Referrals: Network Your Everyday Contacts Into Sales” by Bob Burg is a good intro to sales by referral, and it’s worth the time and money.
4. Know the 80/20 Rule
It’s simple. It’s sacred. And it has a profound impact on your business. Eighty percent of your work will come from 20 percent of your clients. Otherwise put, three, four or five of your accounts will pay your rent. The rest are just gravy.
What’s this mean to you as a consultant? It means you should obsess over their accounts. Make them a priority whenever they call. Bend over backward to make them happy. If one—or even all—is hard to deal with, suck it up—you can’t ditch a core client without a new one to take its place.
One of my first clients for Web design (my bailiwick) had a knack for crashing his machine. Part of this was due to the fact that he’d removed its cover and used the motherboard as an ashtray. I kid you not. But he was also a tinker: He would “tweak” his system until it crashed. Then he would call me for help. I’d never planned to sell tech support, but over time it became a primary revenue stream. The moral of this story is simple: Learn to sell a new service to your old clients—especially those in the 20 percent.
5. Market Like a Maniac
Here’s a simple rule: Spend half your time marketing.
That may seem like a lot, but the pros know it’s the price they pay for steady income. New accounts won’t just come to you, no matter how good you are. You have to get out there and hustle. You’ve got to be seen and get known—in the paper, on TV, at trade shows or just on your block. Far and away the king of books in this field is “Guerilla Marketing” by Jay Conrad Levinson. Get a copy and read it cover to cover. If time permits, have a look at “Selling the Invisible” by Harry Beckwith, another classic in the field.
6. Be Cheap
In the end, business is fairly simple: If you spend less than you make, you’ll do fine. When you’re just starting out, of course, you may not make as much as you’d like—so tighten your belt and learn to be cheap. Don’t get an office if you can work from home. When you do get an office, rent, don’t buy your furniture. And rent the cheapest stuff you can find. You won’t feel like Donald Trump, but you won’t live in fear of your credit card bill, either.
And you’ll be in good company. Most of the best minds in business were tightwads. Sam Walton. Warren Buffet. And Henry Ford. If they did it, so can you.
7. Get the Right Collaterals
Here’s the one place where it pays to be a little extravagant. Truth is, most people skimp when it comes to collaterals—their letterhead, business cards, brochures and Web site. Don’t. It’s a deadly mistake. These represent the first impression you make on new clients, and we all know how important first impressions can be.
If you can afford to, hire a designer. If you can’t, use the Web to fake it. Start with VistaPrint (www.vistaprint.com) for good letterhead and business cards (some of them free), then head over to TemplateMonster (www.templatemonster.com) for a crackerjack template you can drop into Dreamweaver or FrontPage. Voila! You’ve got a Web site.
8. Know the Competition
Let me emend that. Know your competition like the back of your hand. Know what they do and what they don’t, who they are, how they market and who they’re about to hire. Know what they’re good at, then do it better. Know where they’re weak, and bring it up—artfully—when bidding against them. And, most of all, know what they charge.
How? First, you can ask. When bidding against other firms, ask your client for a peek at the bids. He may decline, but you can ask for any info he’s willing to share on their fees. How do you stack up? Higher? Lower? If so, by how much? Get a ballpark figure.
If that fails to work, scope out the competition. Learn who they work for. Mom-and-pop shops? The Fortune 50? The bigger the clients, the more they charge. How long have they been in business—two months or two years? As a rule, fees go up with age. As a newbie, you’ll have to bid low until you develop a stable of clients.
9. Choose the Right Legal Structure
By and large, there are four to choose from, though it varies by state:
- Sole Proprietorship: Legally, this is no more than a person doing business under a fictitious name. It’s the simplest form of business and the cheapest to start.
- Corporation: A corporation is a legal entity that gives you far more protection under the law than a sole proprietorship. But it’s more work to maintain, and it can be expensive to start.
- Partnership: A partnership, like it sounds, involves two or more people legally bound in a business arrangement.
- Limited Liabi