I started consulting part time (moonlighting) in 2006. My first client was a former employer that I had left in 2004. I used one of their available SolidWorks licenses to do the work. Building and maintaining excellent relationships with colleagues, employers, vendors, clients, and other contacts that you make during your career will be critical to your success and longevity as a consultant.
I have very specialized and deep expertise (in precision machine design and optomechanical engineering) that I apply to a variety of industries (horizontal specialization). Specialization will be key to your success and longevity as a consultant.
In 2008, I formed an LLC and purchased my own license of SolidWorks Premium (still my biggest single investment). The amount I consulted varied wildly in the following few years (by my choice).
I started consulting full time in 2011 and couldn’t be happier with the life it has enabled me to lead, despite typical ups and downs.
Even though my first job as a consultant paid better than any salaried job I held then or since, I was undercharging. My rate increased steadily through that period. It’s more than 2X what I started at. I suspect it would be higher than if I didn’t still succumb to the classic dilemma of neglecting marketing/business development to do fulfillment, but I’m getting better. I am also experimenting with value-priced services that have a much higher effective rate while still providing tremendous ROI for clients. Understanding the value you provide and charging accordingly will be critical to your success and longevity as a consultant.
Consulting is incredibly cash-flow positive and profitable. And you will get yourself into trouble if you do not manage that cash flow; set money aside for the eventual big tax bill; set aside money for large, necessary future purchases (e.g., software renewals); avoid unnecessary large purchases that you tell yourself are necessary or will really help you grow your business but aren’t or won’t; and avoid unnecessary small purchases that can really add up. Doing so will be critical to your success and longevity as a consultant.
To help implement that last point, I recommend Profit First by Mike Michalowicz. While many of the examples in the book relate to businesses who charge too little and spend too much, as noted above, that likely isn’t the problem you’ll face as a consultant. But the book is helpful in getting you to think like a business should think and to distinguish between:
- Profit (the reward for the risk you take as a business owner) and the purposes it is meant for
- Compensation (the money you get for doing the work in your business
- Money set aside for taxes and other big, irregular needs
- Expenses - The money you allow for yourself to use to operate your business
In 2012, my largest client at the time declared bankruptcy on very short notice, not long after they had asked me for even more of my time, which I obliged to do, while falling behind on my invoicing. So many painful lessons in that one experience. Once the bankruptcy court was through, they actually asked me to pay them a substantial amount, never mind what they owed me for work done and expenses accrued in their name. You obviously want to avoid being in that situation, and you want to have a contingency fund.
I rambled on a lot more than I planned to. I hope it’s coherent.
- Rob Campbell, PE
Learn precision engineering at practicalprecision.com