Independent Statistical Consulting Guidebook - Section1

The Fundamentals

These are some foundational things to think about to be successful in running a consulting business.

1.1    Reason for Being: The Why

  • What do you mean by consulting?
    • “Consulting” means a lot of different things to different people. Some refer to the type of work regardless of who you work for (e.g., advisory), others refer to the independence from the employer-employee relationship regardless of the nature of the work (e.g., freelancing/staff augmentation/outsourcing). It may be a combination of the two views. Be sure to define clearly what you envision.
  • Why do you want to get into the consulting business on your own? Consulting vs. consulting on your own are not the same.
    • What are you trying to get out of consulting? (professional development, flexibility, etc.)
    • Pros: What are the benefits to you?
      • Being your own boss; control
      • Flexibility
      • You may have other reasons.
    • Cons: What do you lose by going into consulting on your own?
      • “Independent” means you are on your own. You are responsible for things you would not ever do as an employee of an organization.
      • Lack of structure.
      • Stability is not guaranteed. Considerations include the economy.
      • Lack of opportunity to learn from others.
        • You really have to go out of your way to learn from others.
        • The learning curve is only getting steeper. By design, professional growth can be very limited.
      • Do you have the skills to do “independent” consulting?
      • It is much easier to start working in a larger group and then break away, than to start as an independent consultant. It is not impossible and depends on the type of consulting. See more under Finding Clients.

1.2    Business Model: The What

  • What is your value proposition? That is, what specifically makes your services attractive to clients?
    • What are you good at? What are you NOT good at?
    • What makes you different/stand out?
    • See Getting Started with Consulting (Alan Weiss) for guidance on creating your own value proposition specific to consulting.
    • Adapted from HubSpot:
      • Identify all the benefits your service offers.
      • Describe what makes these benefits valuable.
      • Identify your client’s main problem.
      • Connect this value to your client’s problem.
      • Differentiate yourself as the preferred provider of this value.
    • Who is your customer base? Who is NOT in the target customer base?
    • Factors for determining the business model:
      • Full-time vs. side job (see below under Workload).
      • Advisory vs. Labor/Freelance/Staff augmentation.
      • Type of client base.
      • On-site vs remote.
      • Others
    • What is your desired level of professionalization?
      • Tools
      • Operations
      • Do you need to compete with the large established firms and can you do so?

1.3    Risk Management

  • What are your risks?
    • Confidentiality/non-disclosure.
    • Business continuity.
    • Financial
    • Regulatory/Compliance.
    • Reputational
    • Others
  • What is your risk tolerance?
  • How do you handle the ebb and flow of the workload?
    • Should you cushion your workload and by how much?
    • How much cash reserve do you keep for periods of slow business? (See also under Taxes & Accounting)
    • How do you handle extreme spikes in the workload, both professionally and personally? (See below under Workload)

1.4    Workload

  • Full-time vs. Side Job: Be intentional about whether you want it to be full-time or a side job. Do not start consulting as a side gig hoping that it turns into a full-time job. If your objective is to have a full-time business as an independent consultant, you need to be intentional about developing it as a full-time business from the get go. Getting Started in Consulting has some good advice around this topic.
    • Full-time:
      • Line up 1+ clients before you start consulting full-time.
      • At what point do I quit my regular job? How do I get there?
      • Set aside 6 months of savings to start.
    • Side job: if you are employed, check to see if it is allowed. Also check for conflict of interest.
  • If you are coming out of school:
    • Your options are generally:
      • Go all in as an independent consultant from the start: this is probably the least viable, although not impossible and depends on the type of consulting. If you are still in school, START NOW with relationship building and experience. It may still be difficult.
      • Start with a full-time job, find a few clients, then become an independent consultant full time. However, be careful about how you go about doing this: you may have non-solicitation and/or non-compete agreement with your employer. (See under the section Contracts and Other Legal)
      • Work with an experienced independent consultant to build reputation and experience.
    • Build reputation. But for that, you need some experience!
  • Determine an ideal/target number of billable weekly hours.
    • If you are consulting full-time (vs. a side job), do not expect to bill 40 hours every week.
    • The number of “billable hours” will vary by week.
    • A typical utilization target (number of billable hours in a week divided by 40) for a consulting organization is 80% with additional support built in. For solos, expect to be around 70-75% at most.
    • As an independent consultant, you have overhead hours (administrative, business development, professional development, etc.), which is often as high as 33% of your work week, depending on several factors.
    • See also the section on Pricing and Billing.
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