Jake Carroll was a program manager at a growth-stage fintech company for more than five years, learning the ins and outs of the business and the industry. Ultimately, Carroll found he was more interested in the what and why of product development than in the when and how. He took the skills he had acquired and launched a tech consulting company, Create Kaizen, to focus on product development, coaching collaboration, and managing culture change in tech companies.
“The biggest thing that I've learned is to not take the administrative burden that your company takes on for granted,” said Carroll. For a business to thrive, you not only need to provide a quality product or service, but you also need to manage the administration of the business.
Perhaps you, too, have a passion project that could grow into a full-time career. If you’ve been thinking of going the tech consultancy route, here are the things you need to know to get started.
11 Skills You Need to Support Yourself & Your Business
Gavin Halse is a business strategist coaching tech specialists who want to become better leaders. He says that the best tech consultants have these 11 attributes:
- Deep industry knowledge and experience
- Ability to see the big picture quickly
- Ability to break down complex concepts and problems into simple frameworks
- Good listening and facilitating skills
- Proven processes, systems, and methods
- Objectivity to look at your work from various points of view
- Good interpersonal skills
- Good communication skills
- Ability to impart influence without formal authority
- A well-developed sense of political acumen
- Business basics
How Much Money Do You Need to Start a Consultancy Business?
You know that you have to bring in enough money to pay the bills and keep the lights on to start, and then have a strategy to grow your business and make it profitable. But what does that really mean?
Drew Gerber is something of a serial entrepreneur and has started several successful ventures including a public relations (PR) company, a financial planning company, and a tech company. He says that a good rule of thumb is to have six months’ worth of your fixed expenses on hand at startup. This can help you survive during the startup stage or any client dry spells.
"Identify your customers before you open the door, so you can have a way to start covering those expenses,” Gerber says. A good place to start is to ask your existing consulting projects if they need more work.
You’ll have upfront expenses and regular monthly expenses. These may include:
- Computer hardware
- Business software for contracts and accounting
- Legal costs
- Professional liability insurance
- Tax accountant
- Rent and utilities
Getting a handle on your monthly expenses is essential to building a sustainable business. You may want to check out the expense calculator at the Small Business Administration (SBA). The SBA also has a worksheet you can use to help itemize and estimate your monthly expenses.
5 Goals to Meet Before You Launch Your Consulting Business
When you are preparing to launch your tech consulting career, there are some steps you can take to help get ready. If you’ve been working side jobs, hopefully you’ve developed some initial clients that can help you get started. Your business plan and estimate of expenses will help you determine how many clients you need to meet your financial goals. Once you make it a full-time career, you have to plan for the ebb and flow of business. You’ll need to figure out how many clients you need and the length of time you need to work with them to meet your goal. Here are Carroll’s five tips for turning your side gig into a full-time gig.
1. Test the market.
No doubt you’ve heard this piece of wisdom before: “Look before you leap.” It applies in business as well as in life. You need to consider the possible consequences of moving into tech consulting full time.
“Even if it's joining a Facebook group that relates to your niche and asking questions, gathering information will help inform your next step and may lead you to pivot your business before starting, saving you a lot of time and money.”
It’s not just about evaluating whether you can make a living as a tech consultant; it’s also about whether you’ll enjoy the work. “Don't be afraid to try things out of your comfort zone; it's the quickest way you'll learn if you enjoy that particular type of work or not,” said Carroll.
2. Prepare your brand.
Line up testimonials from past clients, create the digital components (like a website and LinkedIn page), and develop all the collateral you need, including:
- Name and logo
- Business cards
- Professional email account
- Descriptions of your services
- Rate cards
- Case studies (before and after examples of your work)
3. Ask for referrals.
Scott Edinger, the founder of Edinger Consulting, says that there is no better source of leads and revenue than referrals. “Make referral business a central part of your go-to-market strategy,” Edinger says. Asking for referrals from satisfied clients creates an implied endorsement and can give you a foot in the door with prospects.
4. Build a financial safety net.
A study by JPMorgan Chase reports that half of all small businesses maintain a cash buffer that will last them more than a month. These businesses could last just 27 days if cash flow stops. The median cash buffer for companies providing high-tech services fared just slightly better, at 33 days. Don’t forget Drew Gerber’s advice for keeping enough cash ready to cover at least six months of business and personal expenses.
5. Seek advice.
Besides counsel from a lawyer, an accountant, and insurance reps, it helps to find mentors that can help you navigate the journey. “When you go out on your own, you really understand the gravity of what it takes to start and build out a business,” so leaning on others who have been down this road will be important, says Carroll.
Developing a Client Base
One of the biggest things you need to worry about when leaping into a full-time career as a tech consultant is having enough clients and business to support you, but also not accepting too many jobs that pigeonhole you in a niche you’re not happy with.
The real focus, Carroll said, is to constantly assess how much “runway” you have, meaning how many months your business can keep operating before it’s out of money. This helps you make decisions about the amount of business you need, how quickly you spend cash, and whether you need to adjust your business plan or raise capital.
It helps to have a clear set of goals and regularly scheduled reviews to assess performance. Carroll says that he developed a set of key indicators to assess his runway. “Some trigger points inform me that I need to shift to more consistent work that I can acquire a bit easier (low interest/low challenge work), and some inform me that this is unsustainable and that I'll need to get additional sources of income,” he said. There are also metrics that let him know he’s on the right track, which helps with setting priorities.
Does Your Tech Startup Need a Lawyer?
Depending on how you set up your company, you may need to register for a business license, file papers for incorporation or as a limited liability company (LLC), and register with your state’s taxing authority. You may also need to develop articles of incorporation, partnership agreements, and a host of other legal paperwork.
A tech startup will need legal support. Even if you are operating as a sole proprietor or an independent contractor, you will still want to develop legal agreements to cover the scope of work you are performing for your clients and the terms that will define your relationships, deliverables, fees, and payment schedules.
Another consideration will be who owns the rights to your work product. During your consulting work, you may create intellectual property (IP) for your clients that may be entitled to copyright protection. If you haven’t clearly defined the IP in an agreement, your work may be considered “work for hire,” and you will lose the rights to your work product in the future. This is why creating contracts will be important for your firm.
Do Tech Consultants Need Insurance?
As a tech consultant, you’ll also need protection from actions or lawsuits brought against you by clients or other companies. The cost of defending even a frivolous lawsuit can easily drive you out of business. Insurance options available for small businesses include the following:
- Errors & Omissions (E&O) Insurance: If you provide professional services, such as tech consulting, E&O insurance can protect you against claims of negligence or delivering inadequate work products. Also called “professional liability insurance,” an E&O policy can provide coverage for the cost of client claims for economic damages based on your advice or services.
- Commercial General Liability Insurance: General liability insurance can protect you from a variety of legal claims, such as slander, libel, or copyright violations. It also covers things like a customer suffering an injury while visiting your place of business.
- Business Owner’s Policy (BOP): Some small business owners choose to purchase a business owner’s policy, which often includes commercial general liability, property, and business interruption insurance.
Running your own business — especially if it’s doing something you love — can be a rewarding and lucrative way to earn a living. “Define what it takes to start and operate your business, identify what level of seed funding (or income) you will need to get everything off the ground, and set key trigger points for your first year,” says Jake Carroll. This can help inform you if you're on the right track, wrong track, or no track at all.
Image courtesy of iStock.com/RossHelen