(Don’t) Start A Consulting Company!

Michael Fruhling posted the below snippet as part of a response to my recent blog post: You’re Fired? Start a Company! It Could Be a Win-Win!

“Perhaps the most difficult decision for those who have been displaced, is whether or not to pursue an entrepreneurial endeavor. Interestingly, many folks after firing, don’t just leap into an entrepreneurial pursuit. Many hedge their bets and do some freelance consulting while they explore corporate job opportunities.

This time period can potentially be lengthy, depending upon severance provisions, one’s financial requirements and circumstances, and one’s area of professional interest and expertise.”

I meet so many people who run their own pseudo consultancy company besides their day-job or plan to do so as a back-up plan if they are fired. This can in many ways be a good thing, but I also think we need to bring a reality-check into this equation:

First, as Michael also noted in his comments, it usually takes several years to get a consultancy company up and running to the extent where it can provide solid food on the table. It might sound simple and attractive to start a consulting company, but regardless of your chosen area of expertise, you can expect cut-throat competition and it is even harder making a living in turbulent times like this. Too many are too positive on the earnings potential and they tend to downplay the time it takes to get established.

Second, you need to learn new skills and you need to change your mindset. You might be very strong on the core offering (your expertise), but this does not matter if you don’t know how to position yourself for making a sale. Are you willing – and able – to become a good sales person? This includes personal brand building, networking and relationship building (including social media) and being able to close a sale (relate your offerings to the pain of someone willing to pay for your help).

Third, start a “real” company instead. Many people consider starting a real company – not just a consultancy – but then they first want to the dip their toes in the water being a consultant. But maybe it is better to focus outright on a product, service or technology and then see where this can take you? Of course, this is can be much more capital-intensive and more demanding than “just” starting a one-person consulting company.

One issue here is that too many people wait for the perfect idea. You know what? It will never come. You need to start with a minimum viable product and build your business from there. Why do you think almost every startup have their original idea turned up-side down within a year? They meet the real world and they have to adapt.

Do or don’t – that is the big question. I can’t provide a clear answer, but if you are prepared to work hard, make same personal changes and even risk your marriage (if you have one), then you can also be handsomely rewarded if things work out. And no, this is not just about money although this has to be there as well. The freedom and flexibility you can achieve and the delight of doing work that you like to do is the biggest pay-off you will get.