Two Truths About Being a Consultant
Feeling that urge to “hang out your own shingle.” To become a consultant. To leave the “security” of your job and be your own boss.
It happens every day in the training business. Sometimes it’s voluntary. You’ve always wanted to be in business for yourself and see the opportunity to sign your current employer as a client so you can set up shop with paying work from Day 1. Sometimes it’s not voluntary. You get downsized, right-sized or outsized, and you consult out of necessity. Or you decide to make unemployment an opportunity rather than a sentence.
Whatever the situation, there are two critically important truths to heed. The first is: Consultants have limited inventory. All you have to sell are your hours, so you have a maximum inventory somewhere between eight and 24 hours a day. Take your inventory times the number of days per year and the amount you can charge for each hour, and that’s your maximum annual consulting revenue. And it’s a ceiling. But, before you get excited that your maximum annual revenue is greater than your current salary, remember it’s the maximum; you won’t reach it because you won’t bill every hour you have available to work. In fact, you’ll be lucky to bill half. And also remember that those are gross dollars. You have to pay taxes and business expenses from them, among other things.
There are a couple of issues lurking in the shadows of this discussion. The first is economic necessity. Can you support yourself and your family? That’s the most important issue. But many people stop there. Even further back in the shadow is an issue that could help solve the first as well as provide a strategy for going well beyond a simple consulting business. That’s the issue of expanding your limited inventory. What if you had an infinite inventory to sell? What if you didn’t have a maximum annual revenue limitation? If you could remove that cap, not only could you increase the likelihood of supporting yourself and your family, you could build a business with inherent value and sustainability rather than a consultancy–which is really just another way to sell your time.
So how do you remove the cap? There are two primary options:
Sell others’ time. Build a stable of contractors, sell their time and take a markup.
Develop and sell products. Create your own training programs. Build them once (but keep them up to date) and sell them over and over.
So you can choose to only sell your time, to sell others’ time, create and sell products, or any combination of those. And you can start with one but intentionally grow into the others. BUT the second critically important truth is present in all three options: You have to be able to sell to succeed. If you’re not comfortable or don’t have the skills to sell yourself, chances are you won’t be comfortable selling other’s time or products. If that’s the case, avoid the “shingle virus.”
Are you a consultant? Share your story. Are you considering going out on your own? Tell us about it.