So You Want to Be a Consultant?

So you want to be a consultant?.....

Since I've been consulting for most of my career and the owner of a small services company for the last dozen years, I'm asked for advice from those looking to move from being a full time employee to a highly paid consultant. I thought I'd summarize the information I share on this topic.

I don't recommend a series of books about how to be a good consultant or how be an expert. When friends of mine are considering making the move to consulting, I point them to books about the business of consulting first. Why? because it's a different business than the employer/employee business. Entering the consulting business with no small business knowledge will probably cost the new contractor about $50k-100k a year in lost revenue, extra costs, and poor decisions. Yes, maybe six figures a year, left on the table.

How can you avoid these costs? By learning how the broker/agency/contractor business works. One of the best ways to learn about the tricks and scams in the agency business is to read everything you can by Janet Ruhl. Ruhl is the author of many consulting business books, namely The Computer Consultant's Guide: Real-Life Strategies for Building a Successful Consulting Career or Janet Ruhl's Answers for Computer Contractors: How to Get the Highest Rates and the Fairest Deals from Consulting Firms, Agencies, and Clients. These books show you how the agency and consulting firm business works and how disreputable agencies will try to scam you out of tens or hundreds of thousands of dollars, then offer you another contract to do the same thing again.

For instance, did you know that it is common for bad agencies to keep your last paycheck? They know you won't sue them for a small amount, so they just won't pay you your last month of billables and travel. For another example, do you know how to handle a situation where a broker calls you in the middle of your contract and says that your client is asking for a $4.32 reduction in your hourly rate? It's not your client looking for that pocket change -- it's your agent. Four dollars doesn't sound like much, but if he is able to negotiate that much from a hundred contractors, he's making a significant addition to his bottom line.

Do you know what to say when an agency asks for your list of references? Do you know how to handle a broken contract?

While most of the content of these books are focused on US law and US business practices, I've found that most of the content is directly applicable in all contract situations.

Janet also runs a website focused on rates and contract issues at www.realrates.com . The rate information you see there needs to be taken in context: some agencies intentionally enter low-ball rates in order to lower the average rate shown.

Not all agencies are bad -- I know quite a few whom I trust and refer people to on a regular basis. It's just a sad fact that when there is money to be made, some business owners choose to skim off your wallet instead of wanting to place you on repeat contracts. You need to know the warning signs and the solutions to the scenarios you may face.

Another great book I recommend to nearly everyone is Jerry Weinberg's Secrets of Consulting: A Guide to Giving and Getting Advice Successfully . This book is about consulting, but it is also about dealing with tough situations a consultant will face. I especially like the fact that this book is told in parables, short stories that make a point. So Rudy's Rutabaga Rule reminds me that when I get rid of my number one problem, my second problem gets a promotion. And the White Bread Warning reminds me that if you use the same recipe, you get the same bread. I re-read this book at least once a year, it's that good.

So you have there a handful of book recommendations which I believe you must read before your first interview, discussion, or negotiation. If you wait to read them later, you'll leave a pile of money on the table, I will guarantee it.

Stories

I recommend that new consultants talk to as many active consultants as they can. You may get different opnions, but you are guaranteed to hear some horror stories. For instance, I've had all these happen to me:

Asked to provide references of former clients during an interview for a new project contract. These clients were then contacted by the agency in an attempt to sell them on their great contracting services. Guess what? There was no original contract -- the agency was collecting references in order to make sales calls to my references. You should never provide references to an agency -- only the end client.
Sent to a client for an interview which lasted several hours. At the end I was asked what salary I wanted. I told them my hourly rate. They said they wanted to hire a full time employee. When I told them that I was a business owner and not looking for a full time job, the client blew a gasket because he'd been told by the agency that I was current a contractor but hoping to go back to full time work. So both the client and I had wasted our time. Agent chalked it up to a "communication error".
Asked for a resume in a specific format for a proposal. No client actually existed -- the new agency was building a resume database to submit on future proposals, even though I'd never work through them.
Received my own resume in response to a request for proposal we had sent out. The agency had done a terrible job of physically taping someone else's name over the top of my own. I could see the tape marks in the copy. Agent got my resume via public records access for the primary RFP, then submitted mine and others from our team with new names. Agent claimed it was not fraud, just reuse.
Asked to lower my rate. Agency calls to say that they have somehow "taken over" my direct contract with a client and are now the party I am to negotiate with. Immediately demands a 20% reduction in my rate. When I tell him he can't "take over" a contract with a third party, he insists he has "bought out" my contract with the client. Client manager and CIO have not heard of him. He was trying to get consultants to lower their rates, then go to the CIO to show how good he was at negotiating.

Top 10 Employee to Consultant Myths

Consulting makes you rich, automatically.
Being a consultant means you are your own boss.
Consultants are free to take time off whenever they want.
Being a consultant means you are an expert.
Rates don't matter when you are the best candidate for the project.
Having a lot of clients is more important that longer engagements.
If it worked on one project, it will work on another.
It doesn't matter what's the contract because your client likes you.
You only need to set your rate a bit higher than your salary to come out ahead.
You need to bill at least 40 hours a week to be working full time.