Been out of the office a bit lately, getting a new left knee.  (See it above, side and front views — doesn’t it look bionic?)  Normally this would just be one of those things in life that you have to take care of, but when you are in business for yourself, taking time off for things like this takes on new meaning.  There is no “sick time” when you work for yourself, no vacation time you can tap.  There is just a hole in your calendar where you could be billing if you weren’t in so much pain! 

Thus, one of the biggest lessons in  running your own consulting business — saving money well, and having a backup plan!  I have been anticipating this knee replacement since last summer when I decided to do it.  I carefully orchestrated my surgery with my clients so that I was finishing up with several key projects before I went under the knife (or in reality, the saw!)   I also squirreled away money for several months of living in case business was slow when I returned.  

When my daughter was young  and my parents were ill, I had agreements with several other trusted consultants that I could call them at the last minute to sub for me.  Several times I even paid them to sit around and wait for my call if I was expecting something to happen but did now know exactly when.  I always informed my clients about the possibilities in those instances and got their agreement in advance.  Only once did I actually have to execute my back-up plans — and because we were all so well prepared,  it went very smoothly.  The client was still happy, my colleague got some extra work, and I was able to breathe easy knowing they were well-served. 

So my question for all of you is — who are your “go-to” people if an emergency would strike?  If you can’t answer that question quickly, start thinking about your own back-up plan.  After all, life doesn’t intrude — its just life! 

Fizz! How to Succeed as an Independent Consultant author Cathy Perme also wrote Confucius in My Cubicle: Practical Wisdom for the Leader in All of Us, released by Wisdom Editions in 2017.

One of the biggest taboos between consultants is sharing what we charge, so let’s break it open and talk pricing strategy. Later I’ll post a survey to gather data (anonymously) about how consultants price so we can all learn from it.

Pricing yourself is one of the biggest challenges, because do you base it on what you want to earn? How you want to position yourself? What the market will bear? The value of your service? What others charge by comparison? I suggest this is a combination of all the above factors – and each needs to be considered to come up with a pricing strategy that works for you.

I would suggest the first step is figuring out how much you would like to earn, and then adjust based on the other factors. A long time ago I learned a great little formula for calculating that, and here is how it goes.

Let’s assume, for purposes of this example, that you want to make $100,000 per year, that you work in the US, and that you can office out of your home or other low-cost location.

• PLANNED GROSS SALARY: $100,000

• ADD TAXES and BENEFITS: Let’s say 25%. $100,000 + 25% = $125,000
  These might include the employer portion of FICA taxes, a SEP/IRA contribution, health and disability insurance premiums, etc.

• ADD BUSINESS OVERHEAD: Let’s say 20%. $125,000/80% = $156,250
  This is your cost of being in business, which includes office space, supplies, technology, phone and internet services, books and professional training, marketing expenses, etc. My experience in tracking this for myself is that it runs about 17% to 22% of my gross depending on my investments in technology and training that year. The result is the amount you would need as gross profit to get the salary you want to make. 
   
• UNADJUSTED HOURLY RATE: $156,250 / 2000 hours = $78.13
  This would be the rate if you could bill every single hour of your day, which is nearly impossible as an external consultant. Let’s assume 2000 hours. (2080 weekday hours in a year less 80 hours for a two week vacation.) 
   
• ADJUSTED HOURLY RATE: $78.13/.33 = $237 per hour /about $1900 per day
  This is based on a realistic assessment of how many hours you could actually bill. If you are an independent consultant who sells their own services, marketing takes time that is not billable. You also have administrative time in running your business, unbillable class time for your own personal development, etc. To be conservative, let’s assume that you can bill about 1/3 of your time, or about 8 days per month.

Thus in this example, your starting rate for further tweaking would be $237 per hour. In my next blog, we’ll talk about ways to adjust that based on how you want to position yourself and what the market will bear, so stay tuned!

Fizz! How to Succeed as an Independent Consultant author Cathy Perme also wrote Confucius in My Cubicle: Practical Wisdom for the Leader in All of Us, released by Wisdom Editions in 2017.

I’ve talked to a number of leaders recently who are retiring and thinking about becoming a consultant.  Having coached and mentored others who have made the same transition, I have one major piece of advice: Remember that you are no longer in charge!

New consultants who have been former leaders often run up against their own “Make it so!” approach.  That might work when you are hired to lead an organization, but not so much when you are hired to consult with it. That’s because a consultant’s role is to assist the leader’s efforts, not take over for them. A good consultant recognizes this boundary and honors it.

I saw this first hand a while ago while mentoring a former police chief into becoming a law enforcement consultant.  As a chief, he was listened to, respected, and obeyed. As a consultant, he was frustrated with clients’ resistance to his ideas and the slow speed of change. Learning to be a consultant meant realizing that he was no longer “the law” – and accepting that clients were making the best decisions possible for situations in which they lived every day.

A consultant is in danger of overstepping their bounds when they:

• Do not listen well to the client’s unique situation, making assumptions instead
• Try to impose their will on a client (for solutions, decisions, or action items)
• Dismiss objections as “resistance to change” versus digging in to understand and work with them
• Act hurt, defensive, or angry if the client chooses not to take a recommended course of action

As a good consultant, you will use understanding, knowledge/information and encouragement to influence clients. You will accept their leadership and not take it personally if a client decides against what you suggest. That said, if in the end you don’t think you can support the client’s direction, you don’t need to take the next contract with them. It is, after all, their organization, not yours!

Fizz! How to Succeed as an Independent Consultant author Cathy Perme also wrote Confucius in My Cubicle: Practical Wisdom for the Leader in All of Us, released by Wisdom Editions in 2017.

Starting your own consulting business is a huge leap of faith – in yourself! Assuming that this is how you plan to make your living (not just a retirement pursuit) here are 3 practical tips to create a safety net for yourself. So before you quit your “day job” make sure you do the following:

Make sure you have 18 months of living expenses planned out.

• New consultants usually give themselves a year to make it before they decide to bail out, and that is way too soon! You need to give it at least 18 months in order for marketing to kick in and generate the kinds of referrals that become the staple of any consulting business.
• My own business turned the corner in my 15th month. I was thrilled when it happened and relieved that I was able to support yourself during that start-up phase.

Arrange for a signature line of credit.

• I’d suggest at least $50,000 US, more if you can get it.   That’s because there may be unanticipated expenses for you or your business, and you want to be able to absorb them.
• However, you need to get this line of credit BEFORE you start your business, while you are still employed and getting a salary! That’s because once you quit, you may not be credit worthy for a while — finance companies will want to see two years of business tax returns.
• In my own business I realized this too late. When I needed to invest in a new computer system and marketing collateral, I had difficulty getting a loan and often had to rely on credit cards with a much higher interest rate.

Get disability insurance before you quit.

• The fact is, you are more likely to become disabled than die, so life insurance although nice will not help you if you get into a situation in which you cannot work for an extended period of time.
• I learned the hard way that applying for this AFTER you start your business means lower benefits for a higher rate. Why? Insurance companies need to prove you are working before agreeing to sign you.   They like to look at a pay stub or tax returns and be able to see you come and go.
• If you are in the start-up phase, you may not be able to provide the financial evidence needed for the amount you want to insure, and if you work out of a home office, you won’t be “coming and going” on a regular 9-5 basis. As one insurance agent said to me, “How do I know you are not just watching daytime TV?”

So while you are planning your own consulting business, put in the effort to soften any hard falls. It will still be a scary leap, but you will sleep better knowing that you have a safety net!

Fizz! How to Succeed as an Independent Consultant author Cathy Perme also wrote Confucius in My Cubicle: Practical Wisdom for the Leader in All of Us, released by Wisdom Editions in 2017.

Rejection is a lot harder to handle as a consultant. After all, you are marketing yourself and not just a “thing-a-ma-jig” with no emotional attachment. But you are not going to win every contract and that is reality. So how do you handle it?

First of all, don’t take it personally. This is not an indictment of your self-worth. There may be lots of reasons why you did not get the business, such as:

• Your proposal did not meet the perceived need
• It is not what the client had in mind
• It is more than they wanted to pay
• They wanted certain people assigned (or not)
• They lack confidence in your ability to deliver
• It may not be politically expedient
• They may have already decided to buy from someone else but not told you.

It is always fair? No, but that is life, and that is business.   So how do you deal with it productively?

1. Check your own sales process.
   • Did you really listen to what the client said the issue was and what they wanted to see happen? Or did you try to impose your own objectives for the work?
   • Did you check to see what their experience with consultants was in the past? And what process those folks used?
   • Were you clear on what they wanted from you as a consultant?
   • Did you ferret out their objections and handle them well?
2. Ask for feedback to improve your product or service.
   • It is important to ask, although they may not want to tell you for fear of lawsuits.
   • Sometimes I have phrased this by asking, “What did you like about the other consultant’s proposal that was not in mine?”
3. Don’t close the door on the relationship.
   • Tell them you are sorry it did not work out this time.
   • Ask if you can check back in X amount of time to see how they are doing, and if there is anything else with which you can assist them. Most of the time, people will say yes.

I have gotten business after an initial rejection and it was even sweeter because of it.  So the next time someone says no – and that is their final answer – respect that it was not a good fit, be graceful, learn well, and try again later!

Fizz! How to Succeed as an Independent Consultant author Cathy Perme also wrote Confucius in My Cubicle: Practical Wisdom for the Leader in All of Us, released by Wisdom Editions in 2017.