Making Money in Consulting
In History of Psychology, a course I was required to take for reasons still unclear to me, each students was required to give a presentation on a famous, dead psychologist. It got kind of boring after the first 13 seconds, so we all started doing different things – debates, slideshows. My friend who drew Sigmund Freud did her presentation as a one-man (woman) show where she, as Freud, began by going into detail about hours and billing.
It turns out old Sigmund was a good businessman and some of his tips are worth following still.
1. Keep track of your hours. I use Google calendar simply because it is available wherever I am. Every day I do any work on any project, I put it on the calendar by the end of the day, with the hours and a one-sentence description of the work. This makes it so much easier to do invoices.
2. Bill. Send out invoices every month. If you have a small job where the bill is due upon completion, mail it out as soon as you get done. I don’t know any consultant who enjoys writing up invoices, keeping track of hours and sending out bills but the sooner you bill your clients, the sooner you get paid. You can get a bookkeeper or accountant to mail out your invoices but you’re the one who is going to have to document how many hours you worked and for what. Do it!
3. Don’t take every client. I don’t do work on a contingency, “We’ll pay you if the grant gets funded.” Funny thing, the people who say that are always working for a salary. THEY are getting paid. I’ve had people tell me, “But I don’t want to lose the business.” Hey, if they’re not paying you, it’s not much business, is it? Many of our clients are non-profit organizations and we charge below market rates. Given that, we also expect consideration in return. Almost all of our employees telecommute. We have flexible hours and interesting projects with awesome people (really). All that being said, I look at the whole package and if it doesn’t seem like a good deal, I say thanks but no thanks. Really important point here, so listen up – sometimes it is more profitable in the long-run not to take a low budget contract and to spend the time instead learning a new programming language, writing a proposal or building your business in some other way. If you want to pay me $25 an hour, guess what, I’ll “pay” me more than that out of my indirect cost budget for training.
4. Don’t keep every client. One of the quickest ways to get fired by us as a client is not to pay your bills on time. I have had clients who paid months late and eventually I dropped those and took on other clients who paid on time . I pay my bills on time and I expect other people to do the same. If you have the attitude that I should just be happy I get paid at all, we probably aren’t going to have a very good relationship.
5. Track expenses. I have enormous travel expenses because so much of my work is out of town. I track those religiously. Many times I am reimbursed and anything not reimbursed is tax deductible. You don’t need a system. Get an envelope and throw all of your receipts in it, then turn it over to an administrative assistant or bookkeeper every month. You’ll be amazed how they add up. If you’re not sure what are allowable business expenses, talk to your accountant.
None of this is the fun, cool side of solving technical problems that probably attracted you to consulting. But, it is the part that pays the bills.