
Growing One's Consulting Business (2012) - ColinWright
https://training.kalzumeus.com/newsletters/archive/consulting_1?HN_repost
======
fchollet
One should remark that the price of your services does not depend solely on
how much value you're providing. That value is just the upper bound of what
you can charge. The other factor is what somebody else would charge to do the
same service (it doesn't even to be a service of the same value, just a
service _perceived_ to have the same value --and people are notoriously bad at
estimating that value in software). That's why in practice consultants find it
impossible to increase their rates above market average unless they have a
very strong brand.

I would certainly be curious to know how much patio11 is really making from
his consulting business. It sounds like he would be making at least $300,000
(a lowball estimate of $x0,000 would be $15,000, and a lowball estimate of how
many weeks he works in a year would be 20). And possible up to $1.2M (40 weeks
at $30k).

~~~
tomjen3
You are right, assuming the market is liquid. The market in these types of
consultants isn't liquid, it is very possible that, if they don't hire
patio11, they will have to search extensively for somebody else, whom _they
perceive as qualified to do the job_. Given that they still make a lot of
money of of the deal, that isn't going to be too smart.

Note that if I am right, this suggest an arbitrage opportunity, uber for small
business consultants. It's most important issue is vetting the people who are
doing the job and making sure clients know that they can count on them.

~~~
reagency
Your uber idea is exactly how the decades -old traditional consulting shop
works (Accenture/Anderson, McKinsey, etc).

The "partners" are well-reputed deal-makig salespeople, and they farm out work
to associates .

------
sown
So how do you start a consulting business, if you're technically a programmer
with a degree n' all but not much experience spread over 7-8 years. All I do
is fix bugs; that's all _they_ trust me with.

For example, I didn't know that Design Patterns were a thing. I'm learning
about it now. I don't know what I don't know, yada yada.

Not sure what to do. I really do aspire to make new code, but it seems like if
I never give up and I never win, then I'm wasting my precious remaining years.

Recently I've been writing a ruby grape-based api server and I thought I had a
handle on it. Then I had the privilege of seeing a similar project for real
and I wasn't even close. Theirs was so much better. Maybe I can get to that
level but these guys are young, half my age, and they know 4x what I do.

I don't want to get negative but it feels like my career has just stalled and
is at risk of never starting up again. I'm at a loss as to what to do exactly.

What would you do?

~~~
toxicFork
I'm not a super expert on consulting, and my advice is going to be
specifically about doing things other than "bug fixing":

I would recommend contributing to open source projects, find some that may
interest you and are at an early stage.

If none exist, you can also just use a couple hours every day, and some at the
weekends, to create something from scratch on your own. You will run into
problems and you will have questions, use the internet (e.g. stackoverflow)!
Also - it will help me too - could someone recommend some books please?

~~~
amorphid
This may sound too simple, but if you wanna make the big bucks as a well paid
consultant, learn how to be a consultant. The simplest option might be joining
a successful consulting company, and learn to play the game they play. You can
also get your own clients and work your way up.

Just push yourself to figure out what you don't know, and then go after it.
Finding one or more mentors can be pretty strong, too.

Source: I taught myself to be a recruiting consultant, and then taught myself
to be a software developer. Neither was easy. Now I'm growing as a software
developer, and that's going pretty well.

~~~
toxicFork
You may need to reply to the above message and not this one so that it can
reach the intended recipient easier :)

------
akassover
There's another type of hybridized consultancy/product business to consider:
have a product and provide value-added consulting around the product. This
tends to work best with B2B products that require implementation legwork,
customization, or just general thought on the customer side to get maximum
value.

For example, at Guidearama.com, our platform lets businesses turn marketing
assets (videos, white papers, case studies, etc.) into a resource center on
their website with lead generating landing pages. We've often ended up
managing the entire program our clients are implementing around our platform.
This can be packaged at a fixed cost and is much easier to price based on
value than normal time & materials work. To our clients, we look like heroes
because we can produce results very quickly using guidearama.com that in their
minds should take 10x longer to complete.

There are a few benefits to this hybrid approach:

* The consulting work becomes decommoditized. You gain an unfair advantage because you developed the product the client is interfacing with.

* Your product builds your pipeline for you so you spend less time on sales and marketing.

* Your consulting work becomes more efficient because you can automate many tasks in your product that would otherwise take time if you were doing straight consulting work

In patio11's case, I don't think there wasn't an opportunity to do this
because his consulting work and Bingo Card Creator didn't overlap - the case
might be different with Appointment Reminder.

------
apatters
When I read this I don't know whether to be inspired or to put a bullet
through my head. I've been freelancing/running a micro-PHP/WordPress
consultancy for a few years now and the experience has been very, very
different. (We have a fair splash of node and javascript competency on the
team too, but haven't turned it into projects yet.)

Our margins are thin. Billing on a weekly or monthly basis is a fantasy for
us. Clients are never interested in this arrangement, they want to do hourly
only because they think it'll save them money. When I try to pitch things as a
business solution instead of just renting a coder, they invariably push back
and say it's only fair to tell them what it'll cost to build, and they'll pay
that.

I don't have a huge personal network so we've relied on platforms like Elance
to make many of our contacts. The nickel-and-diming, even outright scamming on
these platforms defies the imagination. We had a client last year who was very
lucrative in the beginning, but he ran out of cash. After a lot of sob stories
and assurances that it was a temporary situation, we ultimately did five
figures worth of work for him on credit. Of course now it's been six months,
we haven't seen a dime of what he owes us, and he continues to demand more
work. If I say no he attacks me with some of the most vile personal abuse and
insults I've ever seen. I want to get rid of this guy so badly, and I finally
drew the line with him and said no more work yesterday after he insulted me
and called me names in front of other people in my industry. But the reality
is he owes us tons of money (well, by the standards of what I make) so I'm
very afraid to burn that bridge for the same reason I took him on in the first
place: I need the cash.

Recently we did a small job for a payday loans affiliate website. (I know, I
know, I know, but again, we needed the cash.) The guy who owned the website
congratulated us on a job well done, and then of course proceeded to "not
notice" that there was $200 still owed and not reply to my messages. After a
week I reverted the changes we made to his site and he was super responsive
after that. He chewed me out for how unprofessional it was, of course, but he
paid up.

Look it's not all bad. We've had some good clients and we're very proud of the
work we do -- I'm in love with the craft of software development, not in the
"chase the latest framework like a puppy on adderall" sort of way, but in the
"this is an amazing and never ending intellectual challenge" sort of way. My
employees are like this too. We work in an EXTREMELY difficult environment and
if we weren't very good at what we do, we would have been replaced by $8/hr
programmers in India a long time ago. We get some good business from referrals
because we do (IMHO) great work, but when half of your clients are broke
and/or scammers, how good are their referrals really going to be?

I started my career at one of the tech giants where the compensation was good,
the coworkers were amazing, and I learned a ton. But not about running a
business, where I clearly have a lot more to learn. Sometimes I look at where
I am now, squabbling with a freakin' loan shark over 200 bucks, and ask, "Holy
crap, how could I have screwed up this badly?"

Building a product with the proceeds of our consulting business? What
proceeds? I can only dream.

~~~
mtbcoder
Two suggestions I would have:

1) Expand your services offerings beyond "Wordpress consulting", even if it
means putting your company on the back-burner for a bit to acquire more
lucrative skill sets. "Wordpress consultants" are a dime-a-dozen and there's
simply too much noise in this arena for it to be sustainable.

2) I'm not sure what city you are located in, but try to tap into the local
market first before aiming for national or international clients. Small/medium
sized businesses generally like to have people that they can interact with
face to face. Also, participate in and join your local chamber of commerce.
From my past experiences, they love to do business with other members.

~~~
apatters
Do you think that node consulting would be a better play, in terms of having
fewer nickel-and-dime clients? We already have a bit of node experience on the
team.

------
bdcravens
This was posted almost three years ago at
[https://news.ycombinator.com/item?id=4805091](https://news.ycombinator.com/item?id=4805091).

I see you appended "HN_repost" to make it unique.

~~~
tptacek
As is the idiom on HN. You're explicitly allowed to repost older things, but
doing it for recent stories in order to get them multiple cracks at the front
page is an abuse.

The title could use a _(date)_ on it, though. I no longer work at Matasano;
instead, me, Patrick, and Erin now run a company together.

~~~
larrys
An interesting discussion could revolve around what happens if you (Patrick)
give up your lucrative consulting practice to start a company? If the company
doesn't work out for some reason and if that process takes many years then how
easy is it to get back into consulting and to build a book of business and
referrals again?

~~~
MichaelGG
Going off Patrick's blog, I'm guessing it'd be pretty straightforward for him
to resume very successful consulting work.

------
j2kun
Reading this post inspired me to give consulting a shot.

~~~
patio11
Awesome! Drop me a line in a year if you want to share how it goes.

~~~
sarciszewski
This general attitude of being friendly and encouraging people is probably a
large contributor to your success. :P

------
paulhauggis
It sounds like Patrick is doing what most developer/business owners do (me
included), which is consult until your product or service based business
succeeds.

I tried it twice and twice I nearly burnt out. Luckily, after the second time,
my business was making me a good living already, so I never looked back.

The problem is that consulting will take a lot more time out of your life than
even a regular job. His clients sound professional and fairly large, but the
majority of your clients will be small and mid-sized companies. They will try
to nickle-and-dime you for everything because they want to save money.

You only have so much mental energy and I found that I didn't have much left
over to work on the business. On top of this, you then needed to worry about
chasing down customers for payment, which adds to the stress.

I also worked for a consulting company (they grew like what is described
here). It was very difficult for them to find reliable consultants. We went
through so many different people, I was the only one that was still there
after a year, when I finally left.

It's a brutally difficult business and will sidetrack you to the point where
your other business may not ever succeed.

~~~
gk1
> ...but the majority of your clients will be small and mid-sized companies.
> They will try to nickle-and-dime you for everything because they want to
> save money.

In case anyone reading this is considering going into consulting: There _are_
good clients out there. You don't hear about them because people don't
complain about good clients, they only complain about the bad ones.

I've been consulting for two years and never had these problems. It helps to
be on a monthly rate (vs hourly) and choose your clients wisely.

~~~
crdb
I agree with this. If you set expectations and make sure you work with decent
people (and that last part is just a function of life experience,
unfortunately), you will have a much smoother ride. I've had both, learning
the hard way. Also agree with monthly rate.

------
blumkvist
>but after you've figured out scaling for a product business (highly non-
trivial), they often scale so well that continuing with the consulting would
be economically irrational.

I have this hybrid model going on. I do consulting, I do products and I do
training too. Products make 2-3x Consulting revenue. If I pushed it, it would
go much higher than that.

However, I just like my job. I like consulting. I like solving problems for
businesses. I like it much more than building a full scale business for
myself, actually.

What I want to say is this: If you're a consultant and want to scale, you
won't be doing what you're doing now. You will be running a business. If you
do software deelopment, you won't be doing any of that any more. You will be
figuring how to hire people, how to train them, how to retain them, how to get
them work, deal with accounting and a million other things.

Another thing to think about is competition. When you're a solo operation,
competition is not a problem. When you grow a company, however, it becomes a
big problem. Not only direct competition. Indirect one too. Take for example
PPC (pay-per-click) agencies. Firms offering search engine optimization
started offering PPC, so the ones specializing in PPC had to start offering
SEO too. Then SEO became all about web development and now those firms had to
compete with web dev shops. Hire, train, retain people for that? Then
traditional ad agencies started getting into digital too and they have a lot
of other expertise to offer.

Growing a business is like taking a life-long trip without knowing the
destination and you might be very unpleasantly surprised at the end.

~~~
lifeisstillgood
I am not so sure. I was CIO for a small/mid company and ran it well, but
slowly got fed up with the politics. So I went back to contracting, and loved
it for a while, just me and the keyboard.

But I still have to do the same "CIO" stuff - negotiating the trade off
between "right" and "right now", project and risk management etc etc. but this
time it's for me alone, with far less positional authority, far less face time
with decision makers and generally less support.

It's called being a professional I suppose. But I simply do not trust that
contracting or consulting without working on a client funnel and focusing on a
niche and so on is going to provide the richness of work I want.

So despite having thought I was going to be happy, it turns out I need to work
on the business in some fashion so I can later on work in the business -
without worrying so much about the future.

Tl;Dr - if you are a consultant and want to keep on being one without constant
fear of empty schedules or just being a cog in a giant machine you have no
control over, you need to work on your business. Automate as much as you can,
but if you are not marketing yourself and building some funnel then you are
accepting whatever comes along - if anything.

Edit: Oh, and when you are just a solo operation, competition is definitely
something to worry about - you are almost a commodity, pitched about by shiny
suited agents or vaguely remembered contacts in past contracts.

Edit2: hmmm, and this is me after two weeks holiday. Might need a long look at
things Monday Morning.

