Becoming a Consultant: The Two Truths
It's 2020, and maybe the year you finally plan to “hang out your own shingle”; that is, to become a consultant, leaving the “security” of your job and being 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 out-sized, and you consult out of necessity. Or you decide to make unemployment an opportunity rather than a sentence.
Hours for sale
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 that inventory x the number of days per year x 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 new maximum annual revenue will be greater than your current salary, remember that 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 shadows 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.
Can you sell?
So you can choose to sell only your time, to sell others’ time, to 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 people's time or products. If that’s the case, avoid the “shingle virus,” and don't become a consultant.
Are you a consultant? Share your story. Are you considering going out on your own? Tell us about it.