Each year, countless professionals leave their corporate jobs to become consultants. But launching a consultancy is a lot harder than you might think.
Tim Armitage has done many things in his 19-year consulting career. He's been an executive at some of the nation's top firms, spearheading a wide range of projects--from helping Boston University market its combination M.B.A.-Master of Science program to overseeing the development of a website for pop star Britney Spears. Thinking big thoughts was Armitage's specialty. While other employees were out rustling up business, "I had the cachet of being the thought leader," he says, "the guy who could develop and convey the strategic vision."
Then, last year, Armitage left his corporate job and, with two partners, launched a Culver City, Calif., sales consultancy called Pitch. He soon realized he had a lot to learn. "I had to buy desks--and figure out how to put them together," he says. He hung shelves from Ikea, learned how to purchase and replace the copy-machine toner, and figured out how to order signage for the office's door. "I used to think of a business challenge as a disagreement over strategic vision," says Armitage, 40. "A challenge today is something I used to be able to pass on to other departments. Now, there's no one to call."
Each year, thousands of professionals walk away from--or are pushed out of--comfortable corporate jobs to become consultants. The goal is to parlay years of contacts and experience into a business of their own, and it's one of the most common forms of entrepreneurship. Not only are the start-up costs low, but many consultants figure they have loads of experience telling other managers how to run their companies. How hard can it be to run one of their own?
A lot harder than they think. Consultants are a brainy bunch, with a well-trained eye for the strategic issues that escape many other managers. But ask a consultant to change the toner and see what happens. Perhaps the biggest problem consultants face when flying solo is the one they least anticipate: the need to perform all the mundane tasks that they had formerly delegated to others. "Consultants don't need a corporate infrastructure to do what they're best at, but they discover how much that infrastructure frees up their time to focus on whatever that is," says Bruce Phillips, senior economist at the National Federation of Independent Business Research Foundation.
In fact, the one thing that Tim Armitage and his partners, Julie Glassman and Julie Kim, expected would be the most difficult--wooing clients--has been fairly easy. The three had planned to spend their first few months getting an infrastructure in place before hustling for customers. But as word of their venture spread through L.A.'s media community, they found themselves being asked to tackle projects, including one for a television network. "It was a surprise to find we could secure new business based on little more than our reputations," says Glassman, 33, who left a job as a creative director at Viacom to help start Pitch.
Other surprises were less pleasant. The worst came in early February, when the trio triumphantly announced to 1,000 potential clients that Pitch's new website--months in the works and equipped with the latest Flash technology--was up and running. The problem: Not all of their clients' computers were capable of running the technology. Within hours, Pitch was flooded with frustrated e-mails from the very executives they hoped to, well, pitch. They scrambled to build a parallel site without the offending technology. "It was worrying, and a bit deflating," Armitage says. One thing that's helped Pitch negotiate such obstacles is the extensive planning the three consultants did. Before leaving their corporate jobs, they spent nine months of evenings and weekends plotting strategy, defining their client base, and figuring out how to reach profitability--partly at the insistence of an angel investor who is providing some $500,000 in funding. "Ideally, you want to leave your current job already knowing that you have one or two consulting clients lined up who will generate a big part of your cash flow for the next year," says NFIB's Phillips.
Ideally, you want to leave your current job with one or two clients lined up.
Play your cards right, and that first client just might be your former employer. Some 12 years ago, Bob Blackwell walked away from a high-level job at IBM to start his own firm, Blackwell Consulting Services, based in Chicago. When a major client voiced dismay upon hearing that he was planning to leave IBM, Blackwell suggested the client approach IBM and ask that Blackwell's new company be retained as a subcontractor. "I worked like a dog to walk out the door with that one client, and as a result was able to start off renting an office and hiring people," he says. In his first 15 months of business, IBM generated more than $2 million in billings. But Blackwell knew he had to diversify. In his second year, as IBM's business fell to $600,000, he landed two more big clients, Waste Management Corp. and Abbot Laboratories. By his fourth year, IBM had vanished completely, but Blackwell Consulting boasted $8 million in revenue. This year, he expects billings to reach $36 million.
But a smart consultant never rests. With new refugees from corporate America setting up shop every day, few industries are as cutthroat as consulting. Even at your busiest, you can never say no to a client. Even more challenging is the constant struggle to update and refine your offerings. After all, success in consulting is largely the art of identifying a client's problems before he even knows they exist, says Mary Ann Galloway, a health care consultant in Saluda, N.C. Starting out 20 years ago, Galloway's business was designing managed-care plans. Now, she is helping clients restructure or consolidate. But she's also spending most of her time helping physicians' groups integrate technology into their practices. "It's all about reading the tea leaves and staying on the cutting edge, but not getting ahead of your clients," she says. "This whole consulting thing is really just a giant balancing act."
Sweat the small stuff You can't help clients if the phones don't work.
Never say no You can't afford to, even when you're flush.
Work your network Your former employer makes a great first client.
Demand is fleeting So be prepared to change your offerings.