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Consulting, Contracting and Freelancing
Be Your Own Boss
By Ian Benjamin Allen & Unwin
Copyright © 2007 Ian Benjamin
All rights reserved.
ISBN: 978-1-74176-369-0
CHAPTER 1
WHY BECOME A CONSULTANT?
We have two choices. We can make a living, or we can design a life.
Jim Rohn
In what job can you arrive at the office within a minute of leaving home, park your car only metres away, enjoy immediate access to your boss, determine when you start and finish, pursue your passion — what you are good at — and sometimes earn in one day what you used to take a week to earn? Oh, and by the way, there are minimal office politics.
This book is about more than having a job. It is about lifestyle. Practising as a consultant — by doing independent contracting, freelancing or consulting — can be a gateway to living the life you want, doing the work you want, ideally for the clients you want, and possibly from the place you want.
As a consultant the benefits you stand to gain are very specific. You will be able to:
• Work from home — and this will be pure delight for many. There are times when you will work extremely long days but you will be able to go for a walk just after lunch or at 4 pm. You can return to your desk without travel and for just an hour. You will be on the way to balancing home and work life.
• Work hard and fast and make lots of money; or implement that plan of yours to work not quite so hard and to pursue your hobby, to spend more hours each week and year in your garden, on the golf course, travelling the country and the world, learning a language, flying an aircraft, diving under the sea, helping others and reading books. Get to know your children, do more active parenting. Get to know your own family. You will be further along the road to balance.
• Do the type of work you enjoy and be more focused on the tasks you thrive on, rather than spending much of your time dealing with internal political issues.
• Enjoy variation in your work and in the way your days are spent. Instead of working with one organisation, you will experience the stimulation of working with many, and learning more about people and where they work. You also learn more about the practice of your craft as you see it applied in a variety of situations and industries. Travel is often required, so you learn about places as well.
• Exercise control over your fate. You choose what you want to do. You plan for the risks of self-employment and manage those risks. Downsizing and restructuring will be issues at the margin of your business rather than at the core of your life.
• Use only minimal capital to set up your business. You will need access to funds, however, to get you through the set-up phase, which for most people is from six to nine months.
• Choose where to live. Subject to the needs of those with whom you live, this might be the golden opportunity to leave the capital cities and go somewhere warmer, somewhere more serene and somewhere that costs less to enjoy.
• Keep working. Don't retire — you possess a lot of useful information, and there are many people and organisations that can benefit from what you know. We are a long time dead, and it is generally accepted that we are a long time retired. Stay active and be paid for your contributions.
WHAT ARE CONSULTING, CONTRACTING AND FREELANCING?
Practitioners of these occupations are identified by several common characteristics. They:
• possess specialist skills;
• are extensively experienced in some areas;
• possess specialist knowledge;
• work for a number of clients on an irregular basis;
• are self-employed; and
• maintain an office of their own — often at home.
Queenslanders pack their clothes in a port while the rest of Australia uses a suitcase. Beer drinkers in New South Wales ask for a middy; Victorians order a pot. These examples of different names given to the same object to some extent reflect what happens with the words consulting, contracting and freelancing, although in this case the basis for distinction tends to be industrial rather than geographical.
Each of these three activities involves a person with a particular skill set and knowledge base working on an occasional basis for one or a number of clients. In certain industries, including the engineering, construction and manufacturing industries, the terms 'consulting' and 'contracting' are used extensively. The term 'freelancing' is used more extensively in publishing, broadcasting, the arts, advertising and marketing. Freelancing is also the vernacular expression for someone doing occasional work here and there, while consulting and contracting tend to be used in a more formal context.
Some observers see consultants as adopting a higher profile position than contractors or freelancers. However, it really depends upon the industry. In activities associated with the creative arts, leading performers and practitioners are usually described as freelancers, while those who advise the organisations on issues related to management, technical aspects of production and marketing are called consultants.
In this book I use the words 'consulting' and 'freelancing' interchangeably. A useful distinction can, however, be made between these terms and 'contracting'. In his book Flawless Consulting, Peter Block defines consulting as 'setting the parameters' whereas contracting is working 'within the parameters'. When consultants start a project, they have a problem or a blank sheet of paper before them. When contractors start a project, they have a series of steps before them. The consultant works out what is to be done, then the contractor does it. It is often the case that the one person performs both functions.
Consultants and freelancers tend to differentiate themselves according to the methodology they use, their approach and their reputation, factors that collectively contribute some form of uniqueness. The marketing programs of the consultant and freelancer are directed towards establishing their name as a brand that has unique features. The uniqueness allows them to have greater flexibility in setting the price of their services.
By contrast, contractors market themselves as experts in certain established methodologies and as being able to deliver a uniform quality within a specified time frame. This is all done within a relatively narrow price band. It is often said that contractors are price takers whereas consultants are price makers.
In the first edition of this book, I used the term 'solo service professional' to include consultants, contractors and freelancers. In this edition, I use the term 'consultant' to describe all three. Where special comment is appropriate, I will use the terms contracting and freelancing.
WHAT DO YOU NEED TO BECOME A CONSULTANT?
Whether you are a consultant, freelancer or contractor, the key ingredients in establishing yourself as a consultant are:
• A strong desire to create a lifestyle giving you optimal flexibility, control and variety. For many, this is the major benefit in becoming a consultant. Self-employment can suit you if you have young children to raise, you want balance in your life and you have other interests you wish to pursue. It also gives you greater control over your life. You can plan and act to get the type of work you want and the type of clients that you prefer.
• A range of specialist skills and knowledge, acquired over a number of years, that you can apply for the benefit of clients. If you analyse them, you will be able to package them as groups of skills applicable in a variety of situations. It is better to think of them in terms of the benefits they give to clients than in terms of the technical aspects which interest you and other providers of the services. Freelance photographers, for example, may talk of shutter speeds, aperture openings and placement of lights, but their clients will be more interested in looking good, feeling great and having tangible records of happy events.
• A capacity to communicate with prospective clients about their needs. This involves giving the clients reasons to have confidence in you, demonstrating empathy and understanding of their situation, using their language in their context, and avoiding giving them stock standard solutions to problems they don't have.
• A persistent attitude. Making sufficient approaches to a broad range of prospective clients. It is usually necessary to make many approaches to gain one engagement. This process must be multiplied, because you will need many engagements. When you start making direct approaches the odds of success may seem to resemble the long shots in the Melbourne Cup, but the odds improve with experience and with practice. The reasons for non-engagement will be reasonable in most cases, mostly relating to inappropriate timing, a perceived lack of need or an apparent lack of comfort on the client's part with some aspect of your overall approach. Even when the reason for rejection isn't fair it's all still part of life, and so you learn a little, look for the next opportunity and learn a little more. If you go for too long without success, you should seek advice, take action and try again.
• Being a risk taker. There is an entrepreneurial aspect to becoming a consultant. First, you need to create circumstances where potential clients are aware that you are available for hire and then to be able to negotiate a contract with your hirer. Then you need to deliver on your promise — to provide the appropriate service and result. The rewards for taking and successfully managing this risk are described at the start of this chapter. To some people, this risk is really a series of exciting opportunities to do interesting and rewarding work on a discrete assignment basis for which you are reasonably well rewarded.
BEING A SERVICE PROVIDER IS NOT ENOUGH!
Freelancers, consultants and contractors are all service providers. So too are all the occupations listed in the Yellow Pages. Service providers give clients what they ask for. They take orders and in doing so address the expressed wants of clients.
Contractors are usually given a full description of the outcome desired by the client, and perhaps the steps or methodology necessary to achieve the outcome. It is the client who defines what is to be done and how it will be done. For example, a client may request that the bookkeeper use a particular system, rather than just coming up with the necessary reports.
Consultants, however, may often be dealing with a client who is not aware of the nature and extent of the problem and really has no idea about the solution, very often because they lack knowledge of the particular area: some clients may mistakenly request an inappropriate service delivery, or define key words or processes differently from the service provider's understanding. Either way, it is vital that service providers ask searching questions of their clients to define the real need and to confirm that their engagement will solve the problem.
The primary diagnostic tool that consultants use to uncover a client's real need is the question. Contractors who ask too many questions, on the other hand, may well be viewed as out of line and not suitable for the task because they are behaving inconsistently with the client's expectations.
When you start your business you will have the objective of doing good work so that your good name will spread and the phone will keep ringing with offers of engagement. For this to happen, it is imperative that you have a clear understanding of what is required of you as the service provider.
DEFINE THE SERVICE REQUIRED
A Brisbane-based training consultant delivered a workshop entitled 'Leadership Skills' to a public sector client in Sydney. Four months later the consultant sent out a newsletter to all her clients. It featured information about a new workshop called 'Advanced Leadership Skills'. Subsequently, the PA to the public sector client in Sydney rang to request delivery of the 'Advanced Leadership Skills' workshop to 100 people within the organisation.
Five days prior to the scheduled workshop, the consultant rang the client to confirm the number of attendees. Yes, it was still 100. Further questioning revealed that none of these people had attended her basic 'Leadership Skills' workshop, nor had they had any other leadership skills training.
At this stage it became apparent that the client thought he was ordering the original workshop that the consultant had delivered. He had not registered that there were two levels of workshop, having jumped to a conclusion on seeing the name of the trainer and the words 'Leadership Skills'. Consultant and client quickly sorted out the misunderstanding and the consultant brought the appropriate workshop manuals and materials to Sydney.
There was some initial confusion in the first few minutes of the workshop as the training consultant explained to the attendees that the workshop was properly called 'Leadership Skills' and that it was the appropriate workshop for the situation. The body language of some of the attendees suggested they were unhappy at finding themselves attending a lesser version of the workshop they had expected, but fortunately their antagonism soon dissipated as they moved into the subject and their first activity of the morning.
As shown here, being merely a service provider runs a high risk of inappropriate service delivery. A client's understanding of the service to be delivered may be quite different from the provider's understanding of what is to be delivered. This mismatch is due solely to a lack of appropriate communication. As service providers are the subject experts, it is reasonable that they take responsibility for the outcome.
An analogous situation would be for a patient complaining of a stomach ache to request a surgeon to perform an appendectomy. A doctor who did this with no further diagnosis would be simply taking orders and providing the service — being merely a service provider and no more.
HOW DOES CONSULTING DIFFER FROM BEING AN EMPLOYEE?
A survey conducted by Business Review Weekly reported that the main benefit recognised by the newly self-employed is in the area of independence and freedom — the freedom to pursue their own vision, to do the work they like and in their preferred situation, be it location or industry, and to do so with their preferred clients.
These factors combine to give a high level of job satisfaction which may compensate for the irregularity and sometimes reduced level of income that self-employed consultants experience.
The major concern for the same group was the accompanying lack of financial security. Most consultants start out with one or two clients in mind, but building their client base beyond that point is an unknown factor. However, the completion of these first assignments creates a track record for the fledgling consultant. The transition to the next stage becomes much easier when the consultant can reflect the confidence gained from having successfully completed a few commercial projects, and has independent third-party endorsement from satisfied clients.
There are differing perceptions as to how consultants and employees view their obligations. Most consultants would argue that they are only as good as their last job and that their reputation is on the line all the time. They therefore display a high level of obligation and responsibility to perform the task to the best of their ability. Often their time is recorded and the client is required to pay only for work done. The employee perception is that they sometimes find consultants to be self-interested, that they overcharge and that they are always looking for the next engagement. It is relatively easy to find evidence where these conflicting perceptions both approximate reality.
The same article listed four things that former corporate executives miss as consultants: the thrill of putting deals together; using the skills they had spent a career developing; the social contact of the office; and being in the loop. My comment is that the first two of these aspects can be part of your consultancy career if you want them to be. You become the deal facilitator and you continue to use your deal-making skills.
HOW IS BEING A CONSULTANT DIFFERENT FROM BUYING A BUSINESS?
The main difference here is that the capital requirements for setting up your own consultancy are minimal whereas it requires a considerable sum to purchase a business that will pay a regular income. Most good business opportunities are quite costly, with the purchaser paying a multiple of the earnings as the acquisition price. If the business were to generate an income of say $60 000 and the industry generally accepted a multiple of 3 as the acquisition price (purchase price = 3 × annual earnings), the purchase price would be $180 000. One often hears of multiples of 10 or 15 × earnings, which in the case of $60 000 would see a purchase price of $600 000 or $900 000. Management rights on apartment buildings are often quoted at 8 × earnings. (In theory, this means that the investment pays for itself in eight years.)
Another difference is that the operating costs in consultancies are relatively low, while retail businesses may carry stock and debtors of considerable magnitude.
The major asset of any consultancy business is the skill, knowledge and business contacts of the owner. These are difficult to pass on to others so very few consultant businesses are sold. Sales are more common where there is a group of partners and a newcomer can acquire equity in an existing business. In this case they will also gain a share of the profits and have something to sell when they in turn retire.
(Continues...)
Excerpted from Consulting, Contracting and Freelancing by Ian Benjamin. Copyright © 2007 Ian Benjamin. Excerpted by permission of Allen & Unwin.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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