Smart Answers

Why Self-Employed Consultants Fail


Many former executives who have been downsized or have taken early retirement in recent years are consulting today. Rather than making a healthy profit, most scrape by or fall on their faces, says Alan Weiss, president of Summit Consulting Group in East Greenwich, R.I.Weiss recently wrote The Consulting Bible, a how-to on establishing a lucrative practice. Weiss, whose 1992 book, Million Dollar Consulting, is in its fourth edition, spoke recently with Smart Answers columnist Karen E. Klein about what it takes to make a solo consultancy thrive.

Karen E. Klein: How many people in the U.S. work as consultants?

Alan Weiss: There are about 400,000 people in the U.S. calling themselves consultants. My estimate is that only half of them are actually working as consultants. Most enter the profession as a second career or after they're retired.

What is the most important thing to know about the consulting business?

It's really a marketing business. Even if you go into it with a great approach or methodology, that's not nearly sufficient.

What big mistakes do consultants make?

They charge by the hour. As a solo consultant, you should only bill on value and you should only deal with an economic buyer—somebody who can write a check for you. Don't deal with a middleman.

I used to think that most consultants were undercapitalized and that was their big problem. What I know now is that the main problem is self-esteem. It doesn't matter what their age, gender, or culture is, most consultants do not see themselves as their clients' peers, but as subordinates. They're obsequious and they come to the job hat in hand. If you want to make six figures, you can't have that mindset.

How can consultants begin to view themselves as peers, rather than subordinates?

You have to create intellectual property and become a thought leader. You have to own a niche. When you do, people will come to you. You can go out there with a kind of pizzazz or you can have the image of a vendor.

Why is lack of self-esteem such a problem for the self-employed?

Becoming self-employed as a consultant exacerbates the problem most people have. When you work in a company, someone else can be the front man and you can hide and just poke your head out when you have something you feel strong about.

When you're out on your own, the poor self-esteem issues rise to the surface. And one-third of people don't have good support systems among their spouses and friends. Instead of encouraging them, these people are saying, "Go back to work. You're never going to make it on your own!"

What do you mean by "bill on value"?

Get an agreement with the buyer on objectives and metrics. Then ask them, "If we meet your objectives, what's the impact on your organization?" If you're going to help save a company a million dollars or improve their market position by $2.5 million, you can get a 10-1 or better return. So you can make $100,000 or $250,000 for those jobs.

When you're talking to the right buyers, they don't blink at those figures. That's what they're paying to have someone spray the plants in their offices every year. And that gets back to the right buyer: Don't deal with a trainer or an HR person; deal with the person who is authorized to spend that money.

How does billing on value change the way a consultant performs?

Your fee is not based on how often you show up or how long you take. Unlike when you're billing by the hour, the faster you solve someone's problem, the more valuable you are. If you charge by the hour, you're in an ethical conflict because you're tempted to drag out the process.

If you can fix something in a day, you're happy and the client's happy.

How does a consultant get past gatekeepers and pitch the economic buyer you mentioned?

You get them to come to you. When you do that, you don't have any problem with credibility and fees are an academic matter. The platinum standard is a peer-to-peer reference. The gold standard is a commercially published book. It doesn't matter how many you sell. I made $2.5 million from my first book because decision-makers saw my name, HarperCollins, and the word "strategy."

A corporate buyer will be attracted to people who are posting articles, writing columns, online as well as in hard copy. The more you do that, the more you speak at major conferences. Speaking, networking, publishing, going to conferences are all great ways to get buyers to come to you. Trade associations are great: Many times you're being paid to address 200 buyers in the audience.

What recommendations do you have for the consulting process?

Don't arbitrarily use a methodology. Come in and find out what has to be improved. Use observed evidence and create something for that situation.

So many consultants have solutions searching for problems. They go in with their methodology and try to find a place to use it. Everybody's fond of telling you what they want: a two-day leadership conference, a person coached for a month. Your value-added is to ask what they want, and discover what they need. That's where you get higher fees.

You have companies coming to you. How do you choose which ones to work with?

I don't pursue companies that need remedial help. Pursue companies that have money and are already leading the pack. In most cases, these firms don't have competitors nipping at their heels, so they don't have high standards. You can help them improve their productivity, become more global and more customer-oriented.

I turn down some business that's not in my sweet spot; I give them a referral. Lousy prospects make terrible clients. If you have a meeting with a potential client who shows up late, cuts off your sentences, runs people in his organization down, and spends the time complaining, you don't want to work with him. Get out of there. If you're carrying around all these lousy clients, you won't have time to reach out for the good ones.

What advice do you have for someone just starting out in consulting?

No. 1, get together a marketing approach; have an Internet presence; have hard copy materials that include your company name, logo, and branding.

Then call everyone you know: all your contacts in civic organizations, your family, social, and college networks, your last employer. Tell them, "Here's what I'm doing these days. If you have a need for this, I'd love to talk to you; if you know someone who needs this, I'd love it if you'd put us together." You can't be shy, you can't be bashful or feel like you're imposing. If you include your dentist and your doctor on the list, you'll probably contact about 200 people and you will get leads and business.

Then you give yourself six months or eight months to make that first sale, and in 12 or 15 months you should be able to support yourself and your family. If that's not happening, this may not work for you and you should go back into the workforce—or go raise rabbits someplace.

Karen_klein
Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.

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