> Or you can start a consultancy, very classic business, low risk.
Low risk? Consultancy/freelance businesses are very high risk. Easy to start, very difficult to maintain.
Low risk? Consultancy/freelance businesses are very high risk. Easy to start, very difficult to maintain.
You don't need equity. Profit margins are high. Depending on your particular expertise your services will be in demand for years to come (anything software-related). If you do it right you can work for several clients at the same time. At least you can always have a full sales pipeline so losing a contract won't be an end-of-the-world event for you.
Growing a consulting business beyond yourself, not selling your time but results, those are more of a problem but risk? Not really. At least not when compared to other businesses.
I'll agree that a single person consultancy is 0 risk. I can accept a job offer tomorrow and stop accepting new clients.
But growing your consultancy is just as risky as any other business, if not more so. You don't have a wide range of low paying clients, like a SaaS model. You have a few high paying clients. Any one of them leaving (or not paying) directly affects you and your employees.
I live in Washington DC, so I see this constantly. A large government contractor loses a re-bid on a contract, and they fire the team that was working on it. Fire them!
Not speaking for anyone else, but having to fire people every time a contract goes away sounds risky to me.
The fact that it's an unpleasant reality doesn't make it any more risky than e.g. having to pay taxes.
This also mirrors my experience with startups. I've been lied to about money many times to get me to keep working. The only things the owners care about is how they look to investors.
I'm running a single person consultancy. If I need help with handling the work depending on the client I can hire other freelancers. The secret to reducing risk is to always be selling / marketing and to not accept full-time projects. This precludes many project offers but you can stay flexible and don't have to decline projects or stop accepting new clients. Offering products, coaching and productized services besides your main consulting business also helps.
I agree that consulting becomes risky once you've got other developers on your payroll. It can be done, too though but you'd have to grow slowly and carefully.
Due to these situations, I try to always have 3 months of salary in the bank. I never do, but I try. If you are paid net 30, and invoice at the end of the January, that check will clear your bank account early March at best. This results in Just In Time mortgage payments.
If I were to hire somebody to code, and focus on sales, I'd need even more money in the bank than I have. This leaves me in a bit of a pickle.
You need a lot of capital. If 3 months of buffer salary for two employees isn't a lot of capital..... it's time to admit you are in a strong financial position and not everyone can simply be an entrepreneur.
(To answer the inevitable "charge more" question, I'm available for hire and I'll charge as much as you'd like :)
Writing software for someone else is kind of like painting a scene from someone's dream. There is a good chance you wont hit 100% of what they were looking for, and your goal is to make them just happy enough to pay you. If they part with their money already, they are much more likely to accept what you give them, than if they haven't already bought it.
A better strategy is to make sure the company that owes you money knows you are serious about collections and will aggressively pursue. Something as simple as having your lawyer send a collections letter by certified mail will deliver a good portion of the time.
If everyone did this, it wouldn't work. Companies that consistently pay late or continuously try to get out of paying are doing so because they simply don't have the cash. If they think you are going to cause them to spend more cash by them not paying you on time, you will get moved up the list.
Love it