Concise Guide to Becoming an Independent Consultant

Overview

One of the biggest names in the consulting business shows you everything you need to get started—and succeed!

Packed with expert advice, helpful tips, and industry secrets to successful self-marketing, this guide—an abridged version of the bestselling How to Succeed as an Independent Consultant—gives you the crucial tools and techniques you need to both survive and thrive in this highly competitive field. From founding your business to writing proposals to negotiating fees, The ...

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Overview

One of the biggest names in the consulting business shows you everything you need to get started—and succeed!

Packed with expert advice, helpful tips, and industry secrets to successful self-marketing, this guide—an abridged version of the bestselling How to Succeed as an Independent Consultant—gives you the crucial tools and techniques you need to both survive and thrive in this highly competitive field. From founding your business to writing proposals to negotiating fees, The Concise Guide to Becoming an Independent Consultant has complete, up-to-date details on:
* Determining the right fields and services for consulting.
* The most common mistakes made by new consultants and the ten laws of survival.
* Finances, taxes, and potential legal issues for consultants.
* Marketing to the public sector, including federal, state, and local government.
* Proposal formats and rationales.
* Alternatives to formal contract documents and letters of agreement.
* Vital consulting skills necessary for draft writing and presentations.
* How to be a cyberspace consultant.

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Product Details

  • ISBN-13: 9780471315735
  • Publisher: Wiley
  • Publication date: 3/28/1999
  • Edition number: 1
  • Pages: 320
  • Product dimensions: 6.02 (w) x 9.11 (h) x 0.85 (d)

Meet the Author

HERMAN HOLTZ is one of America's leading experts on business and consulting. Holtz has been a consultant to such companies as IBM, GE, Dun and Bradstreet, Chrysler, as well as to the EPA, OSHA, and Georgetown University, and is the author of more than twenty bestselling books on consulting, marketing, and sales. Some of his most recent books include How to Succeed as an Independent Consultant, Third Edition; The Consultant's Guide to Proposal Writing, Third Edition; The Independent Consultant's Brochure and Letter Handbook; and The Business Plan Guide for Independent Consultants, all published by Wiley.

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Table of Contents

What Does (Should) a Consultant Do?

Seizing Opportunity: Capitalizing on Beginnings.

Consulting as a Second Career.

Why Do So Many Consultants Fail?: How to Succeed.

A Few Keys to Success.

Founding the Consulting Practice.

Finances, Taxes, and Related Prioblems.

Marketing and Sales: Finding Leads and Closing Them.

Releases, Brochures, and Other Materials.

The New Marketing.

Marketing to the Public Sector: Federal, State, and Local Government.

Proposal Writing: A Vital Art.

The Initial Meeting.

Negotiations, Fees, and Contracts.

Consulting Processes and Procedures.

Final Reports, Presentations, and Other Products.

Fees and Collections.

Consultant Skills You Need: Making Presentations.

Skills You Need: Writing.

Technological Assets for the Independent Consultant.

Index.

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First Chapter

The Concise Guide to Becoming an Independent Consultant
Herman Holtz
0-471-31573-7

What Does (Should) a Consultant Do?

Better be proficient in one art than a smatterer in a hundred. -Japanese proverb

There is nothing about the services provided by typical consultants that distinguishes them from other contracted-for services, such as those provided by an interior decorator, image counselor, or financial advisor. The differences between these specialists and consultants who provide similar services are principally in the titles and connotation of the word consultant. In this chapter we'll briefly review the titles and have a look at some of the most active fields for consulting and at several aspects of the consulting industry, especially as it pertains to independent consultants. (Counseling and advisory services are often fields where practitioners do not use the word consulting.)
Independent consultants are often independent contractors, but many consultants are specialists who work as temporary employees of service firms who assign them to work on a client's premises to augment the client's staff. High-tech consultants predominate among those employed in this way. Colloquially, they are referred to as "job shoppers," but are more formally referred to as "contract professionals." That kind of employment blossomed in staffing government contracts with skilled people during the Cold War and the high-tech arms race. Probably the most numerous class of contract professionals were and are the computer specialists.

COMPUTERS AND DATA PROCESSING
The desktop computer is now as common as the electric typewriter. Main-frame computers spawned many consultants and consulting specialties. Their number swelled rapidly, many independent, others building consulting companies. There were programmers, systems analysts, designers, engineers, technicians, writers, computer operators, and others identified by various degrees of experience and qualifications. Specialization was forced on consultants by the rapid growth of diverse new technologies.
The accelerating use of the personal/desktop computer and other applications were made possible by the development of new computer chips. Despite a decline in defense contracts and in the manufacture, sale, and use of main-frame computers, the growth in numbers of computer consultants continued, as did the use of contract professionals in general.

THE RISE OF THE PERMANENT TEMPORARY
The term temporary originally referred to office workers who were a convenience for employers with temporary needs for extra help. Temporary agencies were a boon to women who didn't want or couldn't find full-time jobs. They soon began to place engineers, writers, illustrators, and others who sought temporary jobs. "Temp" jobs normally pay a higher hourly rate than does "captive" employment, since fringe benefits are minimal or non-existent. A population of workers arose who preferred to work on higher pay temporary assignments and provide their own benefits. Contract professionals are virtually a subculture. Although many are independent contractors to clients, the majority work for one of the "job shops," a colloquial term for suppliers of the markets.
The situation can be more complex, and a third arrangement is possible: Instead of contracting with the client on whose premises the specialist will work, he or she may work on client's premises as a subcontractor to a broker who is a prime contractor to the client. Unlike a job shop, who actually employs the temporary and assigns him or her to a client's premises for work, the broker subcontracts with each individual for work on the client's premises, so the individual is an independent contractor.
Originally consultants were hired as temporary employees because it was the only way to staff a project rapidly enough with qualified specialists. Today many companies hire contract professionals because it makes better economic and business sense. It is far less expensive to staff up with temporaries than to hire and train new employees. Contracting imposes virtually no obligations on the client beyond paying the contractor for providing the contract labor. Temporaries can be hired quickly, with little paperwork and little legal obligation, since they are employees of a contractor, not of the client, and they can be terminated easily when the need ends. If a temporary employee proves unsatisfactory, there are no complications in having that individual's services ended, in contrast to the legal problems in discharging a permanent employee for cause.
The sizes of programs for temporaries-numbers employed and duration of assignments-vary widely. NASA has used large temporary forces, notably in engineering and computer-related work, and General Electric Company (GE) employed large numbers of temporary engineers in their missile and space programs. Where the project requires large numbers of temporaries, it is not unusual to have a half-dozen or more firms working together on the premises.
Duration of assignments also varies from a few days to several years. A consultant may be employed on an indefinite basis and be kept on for one project after another. At the Philadelphia-area plants of the GE missile and space systems, many consultant temporaries were "temporary" for as long as five years, as were temporaries at the large training center Xerox Corporation established in Leesburg, Virginia. These training technologists were all "hired"-placed under contract-as self-employed individuals or independent contractors working on the client's premises.
It is usually not by design that these assignments last so long. Frequently the assignment starts as a relatively short-term one, but new contracts come in and the consultants are asked to remain. This can continue indefinitely, the client always acting on the reasonable assumption that the need is temporary. (The word temporary thus becomes a flexible term.)
The practice of bringing in whole staffs of specialists, whether called consultants, contract labor, professional temporaries, on-site contractors, or contract labor, has become widespread in many sectors-major government contracts, commercial or nongovernment industry, and the government itself. Many federal institutions and facilities are staffed and operated by such personnel, especially by agencies doing technical work-NASA, EPA, and DOD, for example-but not exclusively so. The Air Force contracted with private industry to manage and operate a warehouse where it stores technical documents. The Postal Service Training and Development Institute contracted with a private firm to administer its correspondence courses in Norman, Oklahoma. The General Services Administration hired a private firm to run a chain of stores selling personal computers to government buyers. The NASA Scientific and Technical Information Facility in Maryland is staffed and run by a contractor. There are many government owned, contractor operated (GOCO) contracts, where it is more expedient or efficient to contract out management and operation of a government facility.
Clients who hire consulting specialists as contract professionals have the common problem of needing a temporary force of specialists, usually to staff a special project. But some clients have more classical problems; problems that are solved by a staff of specialists-consultants. A computer division of Sperry Corporation had such a problem, having built a custom-designed computer for the U. S. Navy. The Navy rejected the user manuals and demanded an acceptable set of manuals. The company contracted for a crew of technical publications specialists to assist their publications staff in making the manuals acceptable to the customer.
The number of computer consultants is still growing, along with the number of computer owners and computer technologies. When IBM entered the desktop-computer market, its IBM PC quickly became a dominant design influence, and the entire industry began a rapid conversion to the production of IBM lookalikes, advertised loudly as "IBM compatible," or "IBM clones." But IBM and the rest of the industry went from the original PC to ever-faster and more sophisticated systems so rapidly that the original PC became a Stone Age computer almost overnight. The universe of possible configurations into systems is so great that even experts can't keep up with all of it, but must choose an area in which to specialize.
Sometimes the client has a problem so highly specialized that solving it requires finding the right consultant. One of my clients had need of a specialist in Tempest and EMP-hardening technology, areas concerned with data security and system survival under nuclear attack. There are many engineering people who know a great deal about these technologies, but this case required precise compliance with highly detailed and sophisticated military technical specifications. Esoteric although this subject is, there is enough demand to keep an expert in the subject quite busy advising electronic companies, even the largest ones, about this. They managed to find one such expert who turned in an excellent performance, but there are probably not a half dozen others quite as knowledgeable about this specialized lore.
A few years ago NASA commissioned a venerable Japanese scientist to write a definitive work on celestial mechanics because he was considered to be the world's leading authority in the subject, and he was so well along in years that NASA feared the loss of his great knowledge if he did not soon record it.
There are many consulting specialties that are not in common supply. My own specialty is one of these. I write, lecture, and consult on marketing generally, but especially on government marketing. Clients call on me often to help them write proposals, the key to government contracts. There are not a great many consultants with an impressive track record of writing winning proposals-good proposal writers must be sought out-but the skill is not so highly specialized that the talented proposal writer is a rare and much sought-after expert. But everything changes. Once there was only a relative handful of proposal consultants. But that is changing rapidly as a result of high-tech developments and the Internet, which have led to an increase in the number of proposal consultants.
During the 1930s, there were consultants known as "efficiency experts." They claimed an ability to raise operating efficiency and reduce costs in companies. Businesspeople succumbed to the lure of relieving some of the economic pressure of those hard times, so more than a few companies brought teams of efficiency experts aboard to work their magic.
How good were they? It's hard to say because they ran into a buzz saw of opposition from employees and labor unions, many of the latter struggling then to establish and justify their very existence. They understandably saw efficiency experts as the enemy determined to eliminate jobs. (That has not changed a great deal!) Efficiency experts vanished into history or, more accurately, evolved into industrial engineers and methods engineers.

THE CONSULTANT ORGANIZATION
There are at least two distinct types of consulting organizations, although there are the inevitable hybrids. One is the supplier of technical/professional temporaries. The other is the consulting organization that undertakes a project, generally under a contract, with a defined end-product or service to be delivered, and with work done most often on the consulting organization's own site, but if necessary on the client's site or on both sites.
The Job Shop or Supplier of Temporaries
Typically, the job shop must submit a bid for each contract to supply on-site consultants. In most cases, the job shop offers resumes of those who are their potential employees, to be employed by the job shop only as long as the job shop has a client to send them to and bill for their services. Employment by a job shop is a technicality and coincides exactly with assignment to a client.
Normally, clients do not simply order a number of anonymous warm bodies, but review resumes of available individuals and often interview the candidates as well.
Typically, the job shop quotes consultants by classes, asking the same rate for each person in a given class, although not necessarily paying each person in a given class the same rate. (Beginners in this kind of work almost always sign up too cheaply, but they soon learn what to demand.) Fringe benefits are scant, if they exist, consisting of a few paid days off and perhaps a group hospitalization plan. And the employee often qualifies for paid days off only after employment for six months or a year, which is far from certain in that work. (Most "job shoppers" change employers frequently, as contracts end and new opportunities arise.)
This arrangement permits the job shops to operate at minimal overhead, an absolute necessity for survival in that field. Typical overhead rates are about 35 to 40 percent, which must cover insurance, taxes, miscellaneous costs, and profit. However, when the job shop is fortunate enough to hire on some well-qualified beginners, they may earn considerably more than their usual profit on those individuals.
There are many hardy individuals who savor the frequent changes of jobs and locales, the financial benefits of job shopping, and the many vacations they are able to take between assignments so they make a career of such work, earning at least half again as much as they would on salary, and in many cases considerably more than that. There are also some individuals who choose that mode of working because they are unable to obtain jobs on the regular payroll of a company, either because they are too old or can't pass a medical examination. Job shopping is also a boon for people who are retired but still active, alert, capable of a full day's work every day, and eager to have a second career.
Although there are many hardy perennials in the field, there are a great many who turn to that mode of working for a short while, attracted by the money or unable temporarily to find a job. Many tire of the uncertainty and the constant moving about necessary to work steadily in that field. Seasoned by the experience of a few assignments, they move on to work they find more satisfactory as employees or as independent contractors. It is not at all uncommon for job shoppers to be offered permanent employment by clients. All of this results in a steady turnover in the field, making it relatively easy to break into it as a training ground, or a starting point in a career.

W2 CONSULTANTS VERSUS 1099 CONSULTANTS
The distinction between the individual on an agency's payroll but assigned to work for the agency's client and the individual contracting directly with a client or with a prime contractor is drawn by identifying the first one as a W2 consultant, and the second one as a 1099 consultant. The W2 is the IRS form kept by the employer and furnished to the employee at the end of the year as an accounting of relevant taxes (withholding and FICA) paid to IRS. The 1099 is a form the client must furnish to a contractor showing the money paid during the year to that contractor.

THE CONSULTANT COMPANY
Many people do not consider job shops to be true consulting organizations nor contract professionals to be true consultants. But that is part of the difficulty in defining consulting. For example, among the many procurement categories the government employs to classify and organize its purchasing, there is H: CONSULTANT AND EXPERT SERVICES. One might expect that anything listed here would be consulting without question. Among the services requested here are real estate appraisals, computer software programming, technical writing, surveys, and other chores that we may not normally conceive of as consulting.
On the other hand, there are a great many services firms offering management consulting, among other services, because that term appears to encompass and include virtually any kind of service a business or any other kind of organization might need.
Prominent among these are the major accounting firms. Accounting firms apparently find it expedient-perhaps easier than others do-to make the transition to management consulting and conduct major operations under that business umbrella.
It is not only accountants who find that a useful transition. Engineering firms, such as Booz Allen and Hamilton, have also migrated into management consulting, as have firms in training development, public relations, and other specialized businesses. Nor is it only established companies who make such transitions. Individuals launch their independent consulting practices from a base of experience in some given industry because the potential for practicing as a counselor or consultant in any of today's many specialized fields is almost unlimited. Although such practitioners do not list themselves under a main heading of "consulting" as their basic category, they make it clear that they offer consulting services, whatever their listing. (See the list offered later in this chapter.)

HYBRIDS
There are two basic types of consulting, which may be at the extremes, classic consulting, recognized even by the purists, and a second type, which qualifies as consulting only dubiously. But the world is not black and white, and a great many consultants and consulting firms fall between these extremes having at least some characteristics of each.
There is a distinct difference between supplying technical/professional temporaries and carrying out projects on the client's premises. In providing technical/professional temporaries, the provider is selling hours of professional effort, normally at a per-hour rate. The supplier is obligated only to supply qualified personnel, as agreed to and contracted for, and does not incur responsibility for success of the project. It is up to the client to make best use of this labor-to manage the effort and the people. It is the client who is responsible for the result and who must pay for every hour worked by the temporaries, regardless of result, just as with internal, direct employees. On the other hand, the client may summarily terminate the services of the supplying firm or of any individual supplied. In contracting to carry out a project, however, regardless of where it is to be done, the contractor must assume responsibility for the end-result, which means also for the management of the staff, regardless of where they do their work. It's a critical difference.
Some firms who specialize in supplying professional temporaries also have in-house capabilities for staffing, managing, and carrying out projects on their own premises. But many of the firms whose main enterprise is handling projects in-house are equally willing to carry out projects on the client's premises or to supply professional temporaries, so that distinctions between the two tend to disappear.

THE CONSULTANT AS A SELF-EMPLOYED, INDEPENDENT
The individual independent consultant-the independent contractor-must be aware of the various organizations available, the markets for services, and the distinctions in obligations. As a temporary, you are responsible for best efforts, as directed. As an independent contractor, no matter where you work, you must be project-oriented and manage your project.
Whether you work mostly on clients' premises or in your own office depends on the kind of service you provide, the nature of your clients and their needs, and your own choices. If you counsel individuals in personal matters, it is likely that you will have to arrange to meet them in your own offices for at least two reasons: One is that in that situation fees are generally by the hour, usually running to only an hour or two per consultation and by appointment. That means that you must see several clients a day, making it impractical to call on clients. Another is that it is usually necessary to have a controlled environment-privacy and quiet, for example-something often difficult to achieve in a client's space. And in at least some cases, you will need direct access to certain resources on your premises, such as a computer, a library, or files.
On the other hand, if you serve organizations and the nature of your work is such that most of your assignments last at least several days and are billed by the day, you may work largely and perhaps entirely on the clients' premises.
However, consulting is a custom service and therefore must be tailored to each assignment. Even when dealing with large organizations, clients may visit you and work with you on your premises. In fact, except for presenting seminars, it is rarely that I do not carry out at least part of my consulting projects in my own office.
This does not necessarily mean that you must rent offices in a downtown location or in an office building. Although I did just that for some years, I subsequently discovered that even major companies who were my clients were not concerned to find that my offices were in my home, and they were entirely willing to call on me and work with me there. (In fact, many appreciated the wisdom of minimizing overhead costs by working from an office at home.)
Overhead reduction and other benefits of working from an office at home are obvious. However, you must decide for yourself whether it is a desirable alternative for you-whether you have suitable facilities for an office at home, whether it is appropriate to your practice, and whether there are local ordinances that you must consider.

FIELDS AND SERVICES SUITABLE FOR CONSULTING
Anyone who enters into independent consulting gets an education: My own early experience in presenting seminars reflected the common problem of underestimating the value of what we offer.
The "Graduate" Course Seminar
We all have a tendency to assume that what we ourselves know well is common knowledge. The first time I conducted a seminar on writing proposals for government contracts, I assumed that it would be a waste of time to teach the rudiments and such coverage would not attract registrants. I thus planned to focus my presentation on the grand strategies that distinguish the great proposals and brush hurriedly by the basics that I assumed were common knowledge to everyone with an interest in proposals and marketing to the government. I even stipulated in my advertising that I offered a "graduate" course, not at all suitable for beginners in proposal writing.
To my surprise, a generous portion of the 54 attendees who registered for that first session proved to be beginners, lured by my promises to reveal a number of inside tips, techniques, and strategies I had learned or developed over the years. (In fact, the cautionary note that it was not for beginners proved to be more an attraction than anything else, and undoubtedly was at least partially responsible for the extraordinary results I got from the uncertain groping of my first seminar venture.) But there were also a few experienced people, including two senior executives who were in the process of forming a new division of their large corporation. They had come to the seminar to see if they could pick up a few useful ideas.
Until I conducted that session, I had doubts that I could reveal enough little-known information to justify the cost and the full day's time spent by each attendee. (I seriously underpriced that first seminar because of this fear.) I was amazed to discover that even senior, experienced people were unaware of many basic facts that I thought to be quite fundamental and even obvious about proposal writing, facts that I would have expected senior executives to know as well as I knew them. (Later, I had the satisfaction of having a senior executive of one large company bring groups from his staff to two successive sessions of my presentation, remarking that he found just one of the ideas I imparted to be worth the entire day's cost in dollars and time.)
Let the Client Choose the Services
We make the mistake too often of trying to decide for ourselves what our clients need and want, when we should be "asking" the clients. That is, we should be experimenting by offering services and concentrating on listening and observing client reactions, to discover what works best in satisfying them.
I was surprised by the reaction to my first seminar's coverage of cost estimating-those cost analyses and presentations required in most proposals. I had originally planned to do little more than mention these briefly. To my amazement, that portion of my presentation proved to be one of the greatest "hits." Even senior people, I found, tend to be somewhat confused and uncertain about direct and indirect costs, overhead, other direct, and many other basic cost elements and concepts, let alone the more esoteric jargon and concepts such as G& A and expense pools. I had originally thought that even if the attendees did know something of the subject, they would be intensely bored by it.
This experience has been repeated in almost every seminar I have conducted, and I am always surprised by it. Aside from my difficult-to-shed feeling that accounting is a boring subject to most people, I am always surprised that experienced proposal writers have so little understanding of and interest in what costs are, how they are generated, how they proliferate, how they are classified, what they really mean, and how they must be analyzed and presented. Many years ago when I first became involved in proposal writing, I was not content to surrender the accounting portion of the proposal effort to accountants. I decided that costs were too serious a matter to be left to the accountants! I would work out the costs and let the accountants review them. I insisted that I would not submit (and be responsible for the success of ) a proposal until and unless I personally approved of everything in the proposal.
It's a common error to assume that our peers know exactly what we know. Not so: You can probably sell your services to your technical/professional peers too, once you learn in what areas they most need help or what special knowledge or skills you have in your field that is helpful but not widely known or available in your profession.
Following is a list of just a few of the many fields/areas in which consulting services are offered. Even these are mostly generalized items, with various specializations in each. Study this list. You may find yourself qualified to consult in more than one field!
Even these descriptors are often too general. One security consultant, for example, may be a specialist in security devices-locks, alarms, barriers, safes, surveillance equipment, and other such items, while another is a specialist in guard forces, patrolling, background checking, and other security measures based on direct human surveillance, and still another in computer communications security. Most categories have subcategories. Career and vocational counselors, for example, may easily specialize in at least a half-dozen areas. There are many kinds of engineers-civil, construction, mechanical, electrical, electronic, stress, and industrial, and these are all subdivided into many narrower specialties. Designers likewise fit into all kinds of categories-package designers, lighting designers, presentation designers-as do most of the specialists listed here. In fact it is a rare field today that will not support a well-experienced specialist as a consultant in that field:
Accounting
Administration
Advertising
Agriculture/farming
Arbitration
Audiovisual presentations
Auditing
Automation
Aviation
Business
Business writing
Career and vocational counseling
Communications
Club management
Computer advisory services
Convention, conference, meeting planning/arrangement
Data processing
Design
Drug and alcohol abuse
Editorial services
Educational counselors
Engineering, general
Executive search
Financial management
Food preparation
Gardening
Grantsmanship
Hotel management
Human resources
Industrial engineering
Industrial methods
Insurance
Labor relations
Lighting, interior/exterior
Management
Marketing
Municipal services
Organizational development
Payroll management
Personal security
Public relations
Publishing
Recreation program counselors
Restaurant management
Safety
Sales promotion
Strategic planning
Taxes
Training
Transportation
Weddings and social affairs
Word processing services
Writing services

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