Do You Want to Try Consulting?

Are you thinking about starting your own consulting practice? Your timing couldn’t be better. The gig economy is in full swing, as many people leave traditional jobs for more flexible roles. Consulting is one of the fastest-growing industries of the decade. According to the US Bureau of Labor Statistics, consulting has a market size of $300 billion. This is good news for you.

First, the shift from the full-time employment model toward contract work makes it easier for those who prefer a self-directed work life. Consulting tops the list of career paths for talent development professionals who have specific expertise (like you).

Second, many companies can’t fill their hiring needs, and they embrace the experience and flexibility that consultants bring. As the workplace changes, the demand for consultants increases because companies can’t do everything. Companies lack the specialized skills and expertise to handle their growing needs, and they often don’t have the staff to complete special projects. In addition, companies appreciate a fresh perspective and outside opinion that consultants bring. Consulting is more respected than ever.

Your consulting colleagues may be excited about their flexibility or how they make more money as a consultant. These comments may make you think becoming a consultant is a slam dunk, but there are several things to consider.

So, what do you need to know?

Consulting has been incredibly rewarding and lucrative for me and can be for you too. Deciding to become a consultant is easy. It’s more difficult to become a SUCCESSFUL consultant! Consider exploring these three questions.

1. How do I determine if becoming a consultant is right for me?

Here are three steps to guide your decision.

• Interview a consultant. Ask questions such as: How did you get started? Why did you decide to become a consultant? What do you do for clients? What’s the greatest challenge for you as a consultant? How can I best prepare myself to become a consultant?

• Assess your own skills. You are skilled and knowledgeable about the area you will consult in. To be a successful consultant, you’ll also need to know the consulting process and become an expert in communication, problem solving, managing meetings, designing surveys and materials, team building, and facilitating. Remember that you oversee a business, so you need to be skilled in business development (sales, marketing, and niche identification) and business management. Among a myriad of other details, you’ll need to determine a business structure, understand office technology, track expenses, project income, understand your financial data, develop contracts, and select a banker, an accountant, and an attorney.

• Talk to your family and your inner circle. Have a frank discussion with your spouse, significant other, or family. Present your idea, your thoughts about the transition, your vision, and any possible concerns. Ask them to think beyond everything going smoothly—what if things go wrong? How supportive will they be if the big deal doesn’t come through and you need to dig into the family savings to stay afloat? How supportive will they be after you skip another family outing because you must work on a Saturday? You need your family’s support—100 percent of it.

2. What should I know before I take the plunge?

The number one question I am asked is, “What should I charge?” Many are disappointed when I say, “It depends,” but that is the best answer. You will need to determine your start-up costs, your financial requirements, your annual expenses, and the income you desire. You also need to recognize your new role as an entrepreneur.

Calculate your daily rate. Determining your salary, taxes, benefits, and business expenses for one year can be time-consuming, but it will give you an accurate picture of what you’ll need to earn to break even. You can also use what I call the “3x rule,” which provides a fast and relatively accurate estimate of what you should be aiming to make in a year. As a startup company working out of your home, you may be able to follow something closer to a “2.5x rule.” However, while it may seem tempting, don’t cut your budget too closely. If it’s too tight, you may experience cash-flow problems.

For example, if you want a salary of $80,000, you will need to bill 2.5 times that amount, or $200,000. Why is it that high? Well, your salary is $80,000 and you’ll need to cover: fringe benefits, such as insurance, FICA, unemployment taxes, workers’ compensation, and vacation time; overhead, including advertising, copying, professional development, telephone, supplies, and clerical support; and downtime, including days when you’re traveling, vacationing, or in training development. You’ll also require time for client preparation. Besides, any good business should be making a profit.

Now determine a daily rate. Of course, it depends on your expertise, your clients, your location, and many other factors. Most consultants have about 100 billable days. So, in our earlier example, your billable rate would be $2,000 per day. First-time consultants rarely set their fees high enough. If I asked five new consultants to put a price on their heads, there is a 90 percent chance that I’d recommend they double it.

Accept that you are an entrepreneur. Many consultants fail because they rely on their area of expertise to be successful. Whether you are an expert in communication, leadership, cybersecurity, or artificial intelligence, you likely know your industry intimately; most consultants do. But your expertise alone will not lead to success—most consultants underestimate what it takes to run a business. You are no longer a trainer; you are a business owner. Your current expertise will not automatically skyrocket your business to success. If you want to be in business a year from now, you need to learn how to become a successful entrepreneur. How do you market your services? What do you say on a sales call? How do you manage cash flow? What taxes do you pay?

3. How can I get started?

What do you need for a smooth start?

• Plan a financial cushion. To continue our previous finance discussion, I recommend having at least six months of living expenses set aside that you can tap into as you start.

• Share your plans by networking with others. Your business plan can be informed by what you learn from your discussions with others. Learn what others think you are good at and what you need to improve. Discover who is consulting or who needs a consultant. Learn more about the trends in your specific industry.

• Consider a side hustle. If you’re not ready to take the plunge, try a small project. You could use your vacation time or weekends to work on small projects. Just review your company’s policy on outside work. For example, if your specialty is team building or facilitating decision-making meetings, you could lead weekend retreats for boards of nonprofit organizations. Part-time work won’t give you the full flavor of what it is like to solely depend on consulting as a career; however, it will give you an idea of whether you like the profession.

• Check your mindset. What kind of self-talk are you practicing? Carol Dweck has given credence to the growth mindset. Her research supports the idea that what we think becomes reality—especially when it comes to our talents and abilities. Your mindset about consulting will permeate everything you do.

This advice on getting started as a consultant is only scratching the surface. ATD’s Handbook for Consultants offers in-depth guidance on what you need to think about and know before making the leap into full-time consulting. The 37 experts in different fields and different stages of their careers that have come together in this handbook provide perspectives to help you get started and answer all your consulting questions.