Whether you are building an architecture, accounting or law firm, financial services, or business consulting practice, going it alone as a Freelance consultant is fraught with challenges for all but the most well-connected. Let’s take a look at a few of the biggest obstacles that trip up those of us who’ve founded our own consulting shop.
Obstacle #1: You don’t own a business, you own your job
Eight out of ten consulting businesses never expand beyond the core services provided by the founder/principal. There may be administrative support staff, there may be occasional contract project-specific helpers, but these businesses are limited to the personal sales and production capacity of the founder/principal only. Typically, the founder is convinced that s/he cannot or should not bring in other talent to join in delivering the personally designed, boutique services to clients, a process that would make the operation scalable and capable of generating additional revenue.
Instead, if the founder/principal isn’t working, there are no billable hours, no accounts receivable and no revenue generated. Vacations are difficult to take, because they are financially risky. The founder pays twice: once for the vacation itself and a second time through lost revenue. When the founder wants to retire, there will be no more money derived from the business. There’ll be no residual income harvested from decades of work done to research the market, decide the most marketable services to offer, identify the most logical clients to pursue, launch the venture, build a client list and develop a good reputation and brand. The doors will close and that is all.
Obstacle #2: Managing cash flow
Let’s be brutally honest: many Freelance consultants do not have a truly dependable cash-cow revenue generator, regardless of the services provided. More often than any of us want to admit, we can drop a stitch when it comes to invoicing clients and that depresses our cash-flow. Too many accounts receivable may become past due and some will be difficult to collect. As a result, accounts payable may be late and interest charges may be incurred. Building up a capital reserve fund that can be used to help the business grow is therefore difficult.
Obstacle #3: Finding and keeping clients
Most Freelance consultants become founding principals of their own venture because we are respected experts of our core services, but many dislike sales and marketing. Others are too overwhelmed to keep up with the marketing plans they’ve designed.
As noted in Obstacle #1, if the founder/principal isn’t generating business and that means not only working on the in-house projects, but also networking to search for new business; identifying, if not creating, additional revenue streams; working in said revenue streams whenever possible; and trying to maintain good relationships with current clients, then none of it gets done. When new business is not created, slowdowns are likely to occur, along with gaps in income and cash-flow problems.
So what is the solution? Really, searching for a business partner who will join you would be most desirable, but that’s easier said than done. Partnerships are tricky to sustain. Hiring someone outright means that you have to make payroll every week. Is your consultancy generating that kind of reliable revenue?
There is no one answer because every consultancy is different. Founding principals of architecture, accounting, financial services and law firms may have an easier time than some other service providers — interior design or business consulting — because the former services are more “standardized” and less boutique- personal.
The latter typically guard clients jealously, because there are usually fewer of them. Sill, some cautious experimentation may be possible. The next time I hear about a project that is too big for me alone, I will think about who can help me and if I win the contract, evaluate that person for a partnership. Maybe the stars will align?
Thanks for reading,