I recently shared this advice with a friend who is considering becoming an independent consultant:
0) There's a great book about consulting by Tom Lambert called High-Income Consulting. I highly recommend it. I love Chapter 6. I just bought a used copy from Amazon for $4.20.
1) Don't take anyone's advice seriously - unless you know for a fact they have a fully licensed version of CrystalBall 3.2 software installed and running, and you've conducted the tests yourself to validate it works as advertised. I do not have a fully licensed version of CrystalBall 3.2 installed.
2) I'm a huge believer in going for it. Any comments I make are going to slant that way. But - and this is a big butt (double-entendre intended) - be aware of as many risks going in as you can possibly identify. When you go for it, identified risks provide metrics for measuring your progress.
For instance, if you are not independently wealthy, money makes a good metric. As I mention in The Clean Break : I remember looking at the checking account one day during my first few months of entrepreneurship and seeing $80 in there. I thought "I must've done something stupid." I was right, and this was the beginning of my understanding of business development.
3) There's a lot of hubbub out there about identifying your weaknesses and trying to "not do anything stupid." Hogwash. Quitting Harvard in your junior year to start an industry is stupid, but it worked out ok for Bill Gates.
4) Odds are you're not going to make as much money as Bill Gates. That's ok, you can live very well on substantially less.
5) I subscribe heartily to the Discover Your Strengths philosophy. It basically states "you're good at what you're good at - go do that." Weaknesses will remain weaknesses but they do not have to stop your momentum with your strengths.
For instance, you are passionate about great coding. I built my first (and now my second) business on passion. I kid you not. The fact that I was good at what I did helped, but the passion sold.
It's like the scrawny kid who gives 110% every football practice. The coach is going to call that kid's number before long - and that kid will likely impact the game. Be that kid.
6) Speaking of sales, it will be good at some point to figure out how you're going to get new work. The inherent weakness in any consulting model (and this is a weakness for me too) is: you (and I) do not scale well. If all our business is generated by us, then performed by us, then invoiced and accounted for and business-developed by us - we are going to be very busy doing a lot of stuff which a) we may be no good at; and b) we may not like in the least.
This is business development. I've always managed this with channels. You probably know this already, but a channel is a company or individual that will tell others about you and your work - either for free or for some direct or indirect gain (money).
That aside, you will be amazed at the work that finds you once you go into business for yourself.
7) How much do you know about contracts? I didn't know beans about them until I got handed my [sic]hat once. It only cost me $6,500 to learn about contracts - which, I hear, is pretty cheap.
There's lots of approaches to contracts. Verbal contracts usually prove at some point to be as valid as the paper on which they're printed. I like work orders that specify deliverables and percentages expected for bid-by-job work. I like billing cycles (1st of each month, 15th and 30th, or my personal favorite: every Friday) for bid-by-time work. No matter what, you want to have terms (net 30, net 10, etc.) in writing up front.
The customer is not always right. In our field, a lot of customers are completely ignorant of what they're asking you to do for them. You need to keep this in mind when negotiating the contract. And protect yourself.
There is such a thing as bad business. Bad business will hurt you way more than no business. Bad business ends up causing you to work for free. And there are a substantial number of business people out there who believe they're doing you a service by teaching you this valuable lesson while consuming your single, non-scaling resource: you. They're on par with people who want to teach you how to play poker or pool... just bring money. ;)
Pop quiz: The nicest, most sincere people with whom you are negotiating are:
a) Truly the salt of the earth, genuine, will-do-anything-to-help-everyone-succeed people.
b) Sick bastards who are playing a game with your life and future by which they gain points the more you suffer.
c) You have no idea - until payday.
The answer, sadly, is c.
8) How much do you know about managing cashflow? You can actually lose money - for years in fact - and remain in business if you can maintain a positive cashflow. In my opinion, this is the key to the business side of things.
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