What do I need to know before I start consulting?

[twunde]

I'm currently strongly considering moving to consulting. I've got some work lined up (20 hrs/wk) but not enough to be stable 1) What do you do about health insurance? 2) How do you figure out your rate as a consultant? 3) How much work do you aim for? And then how do you get it? 4) How do you get the social interaction that you would get at a fulltime job? 5) What else should I be thinking about?

[eswat]

2) I assume you’re charging by time. In that case do some research on what your local competitors charge and find a balance between that average amount and what you’re comfortable with based on your experience. Don’t be afraid of increasing prices. Once you get some experience under your belt, look at value-based income[1].

3) I do a guesstimate on how much I can actually work in a week - a bit more than the 20 hours you have, but not 40 - and allocate clients to that time. Most of my current clients are people I have worked with in some capacity, but going to meetups and talking to people about your business helps get new clients as well. Always be selling, even to friends.

4) Ironically I get more social interaction now than when I had a full-time job, mostly due to compressing my work schedule which offers more flexibility for meeting with people (having lunch with others in my industry, going to meetups earlier and staying later to network, etc.).

I suggest just working your damn hardest during the day so you save enough time to get some proper social interaction after work. Co-working spaces are another avenue, but if anything I found people less talkative in these setups than an actual office (in Ottawa at least).

5) Think about getting an accountant, even if you think you don’t need one. Sooner or later you’ll need their help for some trivial thing you didn’t account for, such as signing a new apartment lease and being able to prove your income.

And be open to collaborations if possible. Working with other consultants on a project that they can’t quite get off the ground will help both of you than working individually.

[1] http://breakingthetimebarrier.freshbooks.com/

[twunde → eswat]

Is there a reason why you don't do 40 hours a week? Also I really like your idea about working with other consultants. That may be what I try to do first (especially since I'm not a front-end dev)

[canterburry]

Charge enough so that you can afford downtime and choosing your gigs rather than having to take whatever comes your way. Being short on money forces you to take whatever low paying work you happen upon. Low paying gigs make you short on money. It's a vicious cycle.

My consulting gigs where usually long term 9 months+ full time with 3 - 4 months of downtime during the year. You need to charge enough to easily last 6 months without a gig and still afford to be choosy, pay yourself retirement, healthcare, vacation, savings etc.

[brudgers]

Number one, above everything else:

Work is never lined up for a consultant. Either you have a signed contract and a cashed retainer, or you have a job you are chasing. There's no in between because lined up work doesn't pay the bills. People cancel projects. Consultants get underbid. Start dates get moved back. There's no paycheck on Friday.

As a corollary, clients are people with whom you have a contract. Paying clients have already written you checks. Great clients have written you lots of checks and done so quickly and without hassle. Everyone else is a potential client or a deadbeat. Don't work with deadbeats. Don't pursue potential clients that give you clues they will be deadbeats.

Insist on a retainer applied against final invoice. The arguments a potential client gives against a retainer will be based on their concept of business. If that model is that everyone tries to scam everyone else, take it as a tell about their future behavior.

Lastly, discount all future payments to zero. Don't plan around getting paid on a particular day. Don't plan on getting paid at all by any particular client until you really know their business model inside out and have done enough repeat work with the client that you can describe where your money comes from in their process. Even then you should discount to zero because outliers happen, but nobody can.

Good luck.

[poulsbohemian]

Realize that you are going into business for yourself. Bread will only arrive on your table and the mortgage will only get paid through your blood, sweat, and tears (not speaking figuratively at all here). You have to hunt down that prospect, turn them into a customer. You do the work, you do the billing, you nag them until they pay the invoice, and gee wiz, you may have accounts payable before you have accounts receivable.

1) Health insurance: assuming you are in the US, you buy it - try ehealthinsurance.com, your state's health exchange, etc. 2) You figure out what your customers can afford relative to what your competitors are charging 3) As much as you can get, from any source you can find. Build a sales pipeline, you are in business for yourself now. 4) There's no time for social interaction, you are self-employed. Any time you aren't doing the work, you need to be doing sales, bookkeeping, marketing, updating your website, writing new work proposals, and half-a-dozen other things. Your only social interaction will be with customer and prospective customers. I'm only partially kidding.

I'm assuming the 20 hours/week that you are doing now is in addition to a full time gig. If that's the case, keep your day job. Keep doing these moonlighting gigs (and saving the money from them!) and use them as a test to help you figure out things like a) what to charge b) what it takes to win new business c) how much work you can handle. When you have enough work built up that it is overtaking your day job, then you'll know it is time to quit and go full time on consulting.

Good luck!

[wikwocket]

Regarding insurance, shop around. Look to the government healthcare exchange, but also check with your credit union, home insurance provider, local agents, etc. Ask agents about the pros and cons of low/high deductible, coinsurance, maximums, etc.

Regarding pricing, price based on value, not cost. Don't come up with a rate by saying, well I used to make the equivalent of $30 an hour at my day job, so I'll change $40! Instead work on finding projects where you can build something that makes or saves a customer many thousands of dollars, and charge based on that value. As you gain business/industry knowledge, develop a pitch that communicates this. As you become more experienced with scoping and delivering projects, switch to weekly pricing or project pricing, in the $X0,000 range.

The other reason not to come up with a rate based on your day job is that you now need to cover insurance, time off, dry spells, non-paying customers, etc out of your own pocket. Make sure whatever rate you do settle on accounts for all of this.

Finally, talk to an accountant and a lawyer. You're going to want to know what's coming before tax season, and you're going to want to have signed agreements (preferably with cash down) with customers.

[JSeymourATL]

In terms of time management- a solid idea to consider from David Maister, split the day into 3 categories:

1)Income Time (serving clients)

2)Investment Time (creating ones future)

3)Individual Time (everything else)

The essence of this approach is to start treating your investment time as serious as income time. This will significantly affect your future success-- and lifestyle.

Look up Alan Weiss on consulting > http://www.amazon.com/Million-Dollar-Launch-Kick-start-Succe...

[robbiea]

A lot of great advice in this thread. My input is to get involved in organizations that are the most likely to help you find clients.

If you're a digital marketer, get involved in digital marketing meetups. If your clients are most likely lawyers, go to lawyer meetups. When I say get involved, I mean really get involved. Get a position on the board. Immerse yourself in the community where your clients are.

[Im_Talking]

You know you have hit the perfect pricing point when the client says to you: "You do great work but fuck are you expensive". This means they can't do without you but cringe paying the bill.

My other advise is don't be a consultant. No leverage, no building value, no holidays (trust me on this), no security (you're always first to go). My advise: find a pain point and build a product.

[philbarr]

I've been thinking about consulting myself, and have slowly been working out solutions to those problems. Remember this is from someone who doesn't actually consult yet though. But since I seem to be the first one to comment here goes nothing:

1 - I'm in the UK so not a problem. But if I was in the US and didn't have a regular income, no immediate life-threatening diseases and was just starting out I'd be tempted to let that slide for a few months. Put it on the priority list for when you get stable.

2 - Think of yourself as your customer that's looking for a consultant. Find consultants in your local area-ish and ask them what their rate is. Make it a bit cheaper than that to start with and be honest with your customers that you are just starting out, "so you're getting an experienced dev for cheap but I would like to use you as a reference."

3 - As much work as you can get to start with! Never stop looking for business. Even if you're jammed with work right now (and you're not) you should expect to spend some of your time each week "feeding the pipeline". Also remember to sell support contracts to your customers as much as you can, this is where you're going to get your regular income. You charge more for "instant response" and on-the-day fixes. Free tech support is "I'll answer an email when I get a chance". It also makes sure that your customers know that just because you did some work for them that doesn't mean they now get 24/7 support for free for life.

4 - I've worked from home for 3 years and I like it. Some don't. Either way make sure to get some social interaction. I have a dog I walk to the pub :). Another good way to meet people is to join a gym but then do the sports clubs there - I've joined the squash club and we meet every Thursday and Sunday. It's good because you meet different people and it kind of forces you to get out. Also remember to put in a bit of effort to see friends and family. It takes a little more effort because it means you have to get off your arse and out of the house - but it's not that much more.

5 - Sales, sales, sales. Who are your contacts? What business meetups are there in your local area? Is your website setup with your own domain and clean and professional? Do you have business cards? You're not just a dev now, you're a businessman/dev.

Hope this helps...

[cafard]

Might I recommend Gerald Weinberg's The Secrets of Consulting (http://www.dorsethouse.com/books/soc.html)? Much of it is written in a light and amusing manner, but he hits a lot of the points people have mentioned here.

[nuff]

I started consulting about 2 years back. The most important thing I have learned is Cash Flow management. Always keep in mind the 'earned money' is going to be in your bank account for a while. Sometimes for over a month. Make sure you stay afloat.

[twunde]

I just want to thank everyone who replied. There is a lot of great information in this thread. Who knows, maybe in a while I'll have a blog post about going solo

[chris_wot]

Watch the company you keep.