Starting a Consulting Practice - TheStreet

Starting a Consulting Practice

If you have the network and the nerves, consulting can be a great way to earn a living.
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For the past 10 years, I have made the majority of my living as a consultant. Every now and then, my father shakes his head and asks me when I am going to get a "real job." He wonders whether I have become unemployable after running so many different businesses. Clients call my office and email me to inquire about what's on

CNBC

or ESPN or ask if I'm watching reruns of

Law and Order

with a bucket of popcorn.

Some of my clients invite me to lunch and proceed to tell me how they want to reduce their stress levels and become consultants. I laugh and shake my head. All I can think is that they have no idea what it takes to be a successful consultant.

The great part about being a consultant is that you have a lot of flexibility and can wear Hawaiian shirts in the middle of winter. You can play Grateful Dead tunes as loud as you like, and a typical commute is 10 to 20 seconds.

Unfortunately, unless you are Jack Welch or the head of marketing or sales for a Fortune 500 company, your road to building a profitable consulting practice will be as difficult as getting your first job out of college.

Most consultants want to pontificate on the pros and cons of a particular strategy and then, like the oracle of Delphi, provide their words of wisdom.

A friend of mine, a chief marketing officer of a publicly traded company who recently became a consultant, told me that clients don't care as much about his strategic prowess as they do about his industry contacts. At the end of the day, clients want consultants who help them ring the cash register.

Now that you know that your genius isn't as important as you thought, if you still want to become a consultant, here's what you do.

Step 1: Make a list of what you would offer and what makes you unique. The market for consultants is very competitive. If you do a Google search for "consultants," you'll get more than 125 million hits; "U.S. marketing consultants" gives you 87 million results. It's important that you know what sets you apart from the field so you can convey that to potential clients.

Step 2: Make a list of industries you can serve and the companies in those industries within an hour's drive that could use your services. This is going to give you a sense of the size of your market.

Step 3: Make a list of all of your business contacts, friends and family members who could make introductions on your behalf. I would suggest joining business networking sites such as LinkedIn.

Step 4: Develop a spreadsheet of how much money you need to pay your bills. You need to figure out whether you have the financial wherewithal to support yourself. The ideal amount of seed capital would be a year's salary. It will probably take you two to three years to make what you were making in your last corporate job, though I have known people who have doubled their corporate salaries by going out on their own.

Step 5: If you have a family, you need to get your spouse's support. When I told my wife I was thinking about starting a consulting practice, she was totally behind me because she felt we would have great control over our financial future.

Step 6: Go on the Internet and contact colleagues to find out how much consultants in your field with your experience are charging.

Step 7: Review your list of potential companies that would consider hiring you, and contact the ones that admire your work.

Step 8: Develop a PowerPoint presentation that outlines what you offer, your experience and how you would help the leaders sitting across the table from you. If they are smiling and asking about what you would charge, start with the highest fee -- you can always reduce your price. Ask them how many hours of your time they would need or what they budgeted for the project they are considering you for.

Step 9: After a handful of meetings, you will have a sense of whether there is a market for your services and what price you need to charge to compete. My model is a low retainer -- $2,500 to $5,000 a month -- plus bonus based on performance. Clients love the performance-based bonus, because they like to know you have an incentive to be wildly successful on their behalf.

Step 10: After all of your research, you need to develop a business plan and map your strategy for success.

Consulting is a wonderful way to make a living when money is coming in, and a very frustrating business when it isn't. If you are the type of professional who likes to network and have a cast-iron stomach, take the plunge. It's the best way to secure your financial future. The only one who can fire you for poor effort and performance is you.

Kramer is the author of five business books on topics related to venture capital, management and consulting. He is a faculty member at the Wharton School of Business at the University of Pennsylvania and the veteran of over 20 startups and four turnarounds.