Career Focus: How to Get Started as a Consultant

I’ll never forget the first time my company hired a consultant. Our division needed to fill in certain gaps in our operations but we had a lot of anxiety about what would happen when he arrived. We spoke of him in whispers for days before the dreaded day. When he finally came to our offices, we noticed the graying hair at his temples, the wisdom in his eyes and the calm smile on his lips. “Let’s make things better,” he said.

And things did, indeed, get better.

Consultants fill a unique role in the business landscape. They come in when they are needed, put their unique skills to use solving problems for a day or a week or a year, and then disappear back into the night (or the local airport). Sometimes we never see them again. Other times they return a few months or a couple of years later when the situation calls for the use of their unique skills.

But where do these consultants come from? Can anyone become one? Is it easy to work as a consultant? Why do some people fail as consultants? To get these answers, we turned to the experts themselves.

When Is the Right Time to Start?

Consultants are made, not born. The ability to become a consultant, especially in high-tech fields, comes with experience, something that you can only gain with time. This experience not only establishes people as experts, it also gives them ability to charge a premium for their services, says Larry G. Nelson Sr. of Nelson Research, a founding member of the IEEE Consultants Network. “Getting the little bit of gray hair and a little bit of age tends to bolster the impression that you’re an expert,” he says.

There’s no exact formula that suggests a person might have the exact amount of experience necessary to become a consultant, but Wayde Gilchrist, host of Tech Start Radio, says the situation sometimes reveals itself. “I knew that I was ready,” he says, “when I ran across a company that had a problem I know I could help solve.”

For other people, timing or other life changes becomes the catalyst. “For me, it happened when I got laid off,” reveals IEEE Senior Member Bob Gauger who consults in the reliability, availability, and maintainability field. He had already been moonlighting, so rather than find another full-time job he made the transition to full-time consulting.

That doesn’t mean that everyone who gets laid off should hang out their shingle. Michael Bryant, who helps run the IEEE San Diego Consultants Network and operates a consulting practice called Software Synergistics, says “that’s absolutely the wrong decision.” He says if a person is direly in need of money, then “getting a consulting job is going to be financially ruinous. You need to be out looking for a job, because it takes a lot longer to make money as a consultant then people realize.”

Money Matters

The biggest mistake most beginning consultants make, experts say, is not understanding how much they should charge. “I wish I had a better feeling for rates when I first started,” concedes Gauger. “I started off my first consulting job with too-low rates. It ended up being lower per hour than I was getting as a direct employee.”

Nelson says he feels too many new consultants set their rates based on their old full-time salary, which they find out too late is a mistake. “Then they realize that they used to have vacation time, health insurance, life insurance, training and all of those other things.” Add in marketing expenses and the fact that many consultants don’t find themselves working 40 hours a week and people who price themselves too low can find themselves in a bit of a financial pickle.

Gauger suggests that people turn to the annual IEEE-USA Consultants Fee Survey Report to gauge their rates, which may be two- to three-times higher than their corporate hourly rate. “That’s the best way to get a feel of what’s being done in the industry,” he says. “You need to know what the market will bear and what your fellow consultants are getting.”

Networking, Networking, Networking

After money, the question consultants ask most is where to find clients and work. The first place, most consultants suggest, is with your existing contacts. When Bryant first set out on his own he struck a deal with one of his previous employers. That first consulting job, which gave him something to do for a few hours a week, gave him some guaranteed income while he went out looking for additional clients.

“The first five or six customers are super-easy to pick up,” suggests Bryant. “It’s after that when you start having problems because you’re not marketing enough to keep your business going. A lot of people last six, 12 or 18 months and then they’re suddenly out of work because they have exhausted all of their contacts.” In fact, the experts I spoke with say they saw many other consultants fail because they did not work hard enough to find new assignments.

Nelson suggests that people join professional organizations such as IEEE and attend networking events and conferences. “I also volunteer in trade organizations,” he says, which helps get his face in front of potential clients and to establish him as an expert.

“A lot of my contacts are people that I know through the IEEE,” Gauger says. But it isn’t enough to just belong: you need to be active. “You participate, attend meetings, network, meet people, listen to speakers,” he says. “It’s a good way to establish a network of people that can help you when you need it.” Meanwhile, it helps to put you in a lot of peoples’ networks so they can hopefully call you.

Several of the consultants I spoke with recommended taking speaking engagements whenever possible. “That really helps get your name out there,” Nelson says. In fact, seminars have become a second revenue stream for him. “It’s another whole wing of my business,” he says.

The more you get out there, the more people know you, and the more people who can either hire you directly or refer you to someone else. “Consulting is definitely a referral business,” Bryant says. But sometimes you need to prove yourself in order to get that referral. “People have to trust you in order to hire you. If you’re not trustworthy, you’re not going to get around. Your reputation means everything.”

A Team of One

Many high-end engineers come from environments where they have large support staffs. It may surprise them, then, when they start consulting and find out that they have to do everything from completing their high-tech assignments to changing the toilet paper roll in their office.

“Consultants have to do everything,” Bryant says. “You don’t have to love it, but you have to be able to do it.” Tasks consultants might not realize at first that they have to handle include marketing, doing the books, collecting overdue money from clients, and much more. Some of this work can be outsourced, but they are expensive and consultants may not have the money to pay to get these tasks done. “If you can’t do everything,” Bryant says, “then you’re out of businesses because you can’t afford to pay someone to do everything.”

Some Uncertainty

Although consulting can be a great way to make a living, recent years have been tough on some consultants. Kip Haggerty of H&A Systems Engineering says his practice’s gross income dropped from the mid-six figures in 2010 (their most successful year) to literally zero in 2012. “We still had expenses, so we lost money,” he says.

Haggerty blames the decline on new rules the IRS established a few years ago to help determine who, exactly, is an independent contractor. The rules (seen in IRS form SS-8) are designed to protect workers from being classified as consultants when they are really full-time employees. One of the things the rules do is say that companies shouldn’t hire consultants in primary areas of their own business. “They criminalized my business plan,” Haggerty says.

Of course when you’re working for yourself, the only certain thing is uncertainty. That’s why many consultants have multiple revenue streams. Nelson, for example, has his consulting business as well as work as an expert witness and giving seminars. “You’ve got all of these little islands happening,” he says. “Typically, none of them all come in at the same time. But when one part of the business is slow or goes down, the other areas can prop things up.”

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