Consulting is like selling crack (go work for a startup)
team.adzerk.com
team.adzerk.com
That's why people don't do that. They build a solid pipeline of consulting work, then they hire people.
It is straightforward to build a software business with 1-3 people paid near-market wages by another 1-2 people doing hardcore consulting.
I could go on and on and on and on about how much better this model is than the "eat ramen and hope for VC" model, but the nut of the rebuttal to this particular post is so simple that I'll spare you.
To me that sounds way scarier and more difficult than doing a project on the side until it's big enough to mostly support me, and then cutting back on the real job/consulting.
I guess if you're in a very lucrative field - like you are - things might be different, but it seems like it would be so easy to just get caught up in 'building a consulting business', which strikes me as requiring a different set of skills than a 'building a product' business.
I meant 100% commitment to a project. So if I'm working for the man - I'm 100% committed to working for the man. If I'm doing a startup then I'm doing that 100%. Hustling vs hacking is not an issue to me. It's just that doing a startup "project" while working for the man would seem inefficient to me. What I mean - if my idea/project has potential - I will find a way to hustle it into a proper 100% thing - else I am risking too much.
I'm the same way with women. I don't even flirt if I am with someone - it just seems a waste of time to me. And I have always been with single woman at a time.
To me if something is worth doing - then it has to be 100%. I don't read two books at a time - I devour them one by one.
Edit: I do have a life - that's why most of this post is meant in a professional context.
So - no wife, kids, friends? Everyone has interests and activities - even passions - outside of work, and for some people that can be a nascent startup, simply a fun side project, or maybe some open source code that's great for learning or honing skills on. What you do in your own time is your own business.
> doing a startup "project" while working for the man would seem inefficient to me
The problem is this: startups at the 'idea' or 'a bit of code thrown together' stage can't really earn you a living, so you need to find a way to fill that gap. You can work on the side, a bit at a time, ala patio11. You can get investment money, so that you can commit full time, which is great, but is something outside your control. You can also save up some money and take the plunge, but that's not always a possibility either.
In short, different things work for different people.
If you aren't doing consulting, this model is not open to you. But if you can't consult, you probably can't sell product either. This is like asking, "if you're a business guy who just needs a web guy to implement his idea", &c &c.
On the other hand - if you are lucky enough to run into people who are better at executing than you are - then funding them seems like the smartest thing to do, should they want to work with you that is.
Contribute to your product offering as much as you can. Participate in discussions. Talk to customers. If you're lucky, your consulting customers and your product prospects will overlap. Over time, ramp up revenue so that you can wean yourself off consulting.
This attitude that there's some status hierarchy of kinds of people in a startup is toxic. Working companies are comprised of people who will move mountains to get stuff done. You can spend tons of time pushing on the mountain of external funding, or you can push on the mountain of getting immediate and comfortable levels of cash from consulting. Both have their upsides and downsides. Either way: you're going to have to do stuff you wouldn't otherwise want to do.
Not necessarily. I product manage http://decalcms.com/ but don't really do much of the "actual work" on it until it's time to do a release at which point I focus a lot on the marketing.
The rest of the time I drum up business, run game on support and client queries and generally keep things ticking over.
Since I do have (too many) ideas, but didn't like any of them enough to commit myself to it - the plan was to build a dream team (I have a knack for leading people - The Right Way(tm)) - and just practice execution until a killer idea in a good scalable market came along - and then run with it.
Most professionals in the world are "chumps" willing to fund X for other people. I'm on a project right now that's going to save my org $20 million a year. Do I see any of that? Nope, just my normal salary, which is quite good IMO. If you pay your "chumps" quite good they'll be perfectly happy to consult while you use your money to do other things. After all, they are able to earn consulting thanks to your connections.
If they build up enough connections and have the same courage they might do the same thing but so be it. Most people won't. I know someone making less than I am who works as a high end consultant billed out at $500/hr. I've pointed out how he's being exploited several times but he likes the stability of an employer.
My plan was to start consulting on my own, get the deal flow running, bootstrap the consulting company and offload my work to the new guys with time. Then I would use the profits from the consulting company to fund my own startup(s) OR do some angel investing PG style.
But then while I have been slowly probing and negotiating some odd 7 gigs, on my third actual meeting I turned a potential customer into a co-founder and we're currently working on the project he wanted to hire me for.
By September we will see if the project takes off. If not - I will have spent my nest-egg by then, find a Job (for a year or so), save as much as I can and start out with the original plan again.
Why do I like this plan so much? For one I have similar view of capital as Niccollo Macchiavelli had of soldiers - I would rather fail with my own than succeed with borrowed money. The reason being that here in central Europe - typical "angel" investor expects a 50%+ share in your company for any money they commit. And if I wanted a boss I would keep my original job.
The fact that I was a consultant prior to bootstrapping wasn't all that relevant. I could have done the same with a salary, but I would have been forced to quit when my start-up's time requirements encroached on my job. With my consulting gig, I was able to sell the work to a couple of trusted consultants and collect a trailing commission on work I wasn't even doing. I couldn't have done that with a job.
Transitioning to a start-up will be whatever you make of it. Yes, one should be aware of the pitfalls you outline. If your trajectory is that of a founder, having three kids and moving in to an expensive house is probably not going to make things easy, but there's nothing about being a consultant that implicitly requires these things.
"Consulting is like selling crack, if you want to be a founder of a startup - so go work for a startup."
should be the title. As an independent consultant I can only laugh at fallacies ridden in this article as if it applies to consulting in general.
"You get used to spending whatever you want on hardware, furniture, tools, and being fairly loose with your money...You get used to making that much money personally...bad habits, blah blah"
Give me a break. Proper personal finance is almost always relative to your income. If you make $250k/year or $50k/year it is still your responsibility to be responsible with your money. If you buy a $1M condo on a $250k/year salary and drive a Maserati, yes, you may have issues as a FOUNDER of a startup with no $$, but maybe you should have thought about investing or even saving (gasp) your money for padding when you started your startup. Common sense.
* How to maximize billable hours. This translates well to finding your minimum viable product and staying focused.
* How to hustle. I guess it depends on what kind of contracts you are getting, but the client relationship has parallels both to the customer relationship and b2b relationships. You often have to sell your ideas to your clients.
* How to build a lot of different things. If it's software you're doing, you'll get more under your belt by contracting than working at one company for a long time.
* How to run a business. You will learn a reasonable amount about the boring accounting, tax and legal issues of running a business. May not be super-applicable, but on the other hand it's a lot more useful than the distorted edicts that make their way down the corporate pipeline ostensibly because of some business or legal requirement way outside the view of the rank and file.
I guess when it comes to entrepreneurship I'm a glass half-full kind of guy. Pretty much any job you have can lead to experience that helps you succeed as an entrepreneur. Even a burger flipper may see things on the inside of the fast food world that could form the seed of a startup idea. If there's one thing that good entrepreneurs have in common, it's a relentless pursuit of success using the tools they have available.
It seems that if you look at full or part time consulting as simply a way to pay the bills while you work on getting a startup off the ground (or working for free as a super early employee at a startup), to the point that its ramen profitable, then consulting can be quite beneficial. In fact I believe I read somewhere that Chris Wanstrath and PJ Hyett were both doing freelance work when they first were bootstrapping github. Remaining extremely frugal despite a six figure salary also seems key here.
This seems like a "it depends on the individual" sort of thing.
I talked with a handful of consultant recruitment companies before landing my current contract through one of them. They all said that to get seriously considered, you need a degree and 5 years of full-time commercial experience, OR no degree but 10 years of full-time commercial experience. And that is today. Just 2-3 years ago the requirements were much tougher, due to many consultants on the market, but not very many assignments. This is on the Scandinavian market at least.
Basically, the more experienced you get, the higher hourly rates you can generally get. You'll also need to be able to sell yourself though, which can naturally be hard. That's where the recruitment agencies or agents come in. You get 10-20% less money by going through an agent, but they take care of the selling. You just show up for the interviews.
I believe it was Joel Spolsky that said the success of a software company was based on how well it turned developer hours into money. What better place to do this than somewhere where you trade your own hours into your own money?
It's obviously not a seamless transition from consultant to startup founder, as the author has indicated. But in general you'll learn a lot more about running a business as a consultant than you otherwise would as an FTE anywhere.
Can anybody mention the disadvantage of being a consultant over having a startup? Or could it be that consulting is better than starting a startup, at least sometimes?
Edit: what about consulting only for interesting projects, for example?
It's just that if you do consulting but get caught in the golden handcuffs, then you're only earning for the present and not the future.
On the other hand, if like me you keep your previous lifestyle even after raising your income, then you can also build for the future as a consultant.
EDIT: but like james commented, you only go so far as scaling yourself as a consultant, whereas you can definitely scale out as a company/startup.
Building a startup you are building a company that can grow and end up being worth millions and millions of dollars (and it more rewarding to me then working on other peoples projects).
The choice you present is as if a person with the motivation and insight to start something has no choice but to throw caution to the wind, abandon any semblance of stability, and burn the ships (as the saying goes). Plenty of very successful entrepreneurs have proven this wrong -- there is no need to romanticize a very risky proposition.
On the one hand, you present a choice where a lot of one's income is scalable and under your (mostly) direct control. Sure, there is a limit of around $250k/year -- that's a gross of $2M+ in a decade. Meanwhile, you have more flexibility with your time than you would at most jobs. The typical startup entrepreneur, if they last a decade, will have gone through multiple ideas/ventures in that time frame, while earning 10-20% of this.
On the other hand, you present the notion of taking a wild, largely unmitigatable risk -- live an austere lifestyle while devoting 60+ hours/week to your pet project. Your only way to manage risk is to try to confirm early-on in the process that you are actually building what people will pay for (or even want) ... before you build it. Even then, the territory remains largely unknown. Any number of black swans can swoop in and completely destabilize your agenda, turning what you think you know upside-down. You simply cannot plan for success -- high-risk proposals are always subject to wild fluctuations in the landscape (or else they wouldn't be high risk) -- the best you can reasonably plan for is to make a product and release it.
The end of your post does your argument no favors either. Establish a practice where I can sell my talent for (at maximum) $250k/year, or go work on one of four me-too ideas? There's a reason why the devs you approached said that they want to work on their own idea, or in lieu of that, consult.
EDIT: I'm sorry if this reads harshly. I tried to give you honest criticism without insulting you. I regret using the phrase "me-too ideas".
I know plenty of people who were happy making their six figures and found enjoyment in other areas of their life - It wasn't for me and I wanted to found a startup. Looking back I should have quit consulting and gone to work at a startup instead of continuing consulting and hoping it would make it easier to transition to startup life.
This becomes an issue when you want to settle down and grow your family.
Sure, I doubt most of us would disagree with that. Startups are risky... they're bloody f%!#kng risky... but if you succeed, you have a chance at being legitimately rich. To some people, that's a chance worth taking, to some people it isn't.
Me personally, I prefer the idea of trying to build a product company and work for the big exit, to the idea of being a consultant. But I'm not making any claim that either lifestyle is objectively better... clearly it's a personal choice.
Even with crazy startup hours, we could usually get at least one shared meal a day and you know... see each other. We could also workout together. Maybe get a hug while I'm talking to a customer on one hand and coding in the other. It adds up.
When you are in another state - its really away.
I guess it's a matter of picking the right customers maybe; not everyone will work this way.
The advantages are, that i was profitable from day 1. Although i've always wanted to do a product startup, but the point is i don't have to. Now i have sufficient lee-way on time/savings to do my own product startups. But one caveat is that you're more likely to favour money in hand(i.e. more clients consulting) rather than "hope money"(i.e. a successful product). So you have to be prepared to step out of the circle and do what you started out to do i.e. if a product was your aim.
So let's see how this pans out in a year from now for me.
1. Pure luck - i got a nice little project starting out, which had a nice, unique design and where i became a lead and got a chance to do some neat stuff. They also got some neat press, which added weight to my portfolio.
2. Used Elance etc for what they are, i.e. lead building. Initially i was the lowest bid, since i could afford to be... just to get some links to showcase. Also, i moved back to living with my parents, thought it's the norm in India.
3. I was everywhere, wherever i could find a lead. It didn't matter if i wasn't interested in the project, although i focused only on django, python gigs. I just shot a mail to get some eyeballs. I would look for startups that needed full-time people and sent them an email if they were open to freelancers. That sometimes lead to long-term projects which are still continuing. Infact i still spend a couple of hours everyday on stuff like this. But my hit-ratio has definitely increased, out of every 10 emails i get atleast 5 responses.
4. I started my rate at $20/hr :-|, and kept increasing it after one or two projects.
5. I didn't really sleep much initially, or could only manage ~4-5 hours every 2 days. But i was working equivalent to 3-4 people, and thus was building a portfolio at a double pace. Although it seems obvious in hindsight, but i realized late that this wasn't gonna scale up much.
5. I collaborated with some offshore(i'm in india, so i mean offshore as in other 3rd world countries). It took a while to find the right sort of people, since most of the freelancers out there are not good. They don't have a sense of urgency, and closure on projects. They don't meet deadlines, and disappear after a few days. I usually got a constant string of excuses like hard-disk failure, laptop screen busted, grandfather died. But i found some good devs along the way. So i started delegating more stuff to them, and increasing my bandwidth.
I'm not sure if those points are of any help, since your mileage may vary!
If people pay for your time then the three ways you can grow the business are:
1) Charge more (which has an upper limit. This limit is higher than you think though - eg: lawyers are effectively a very specialized form of consultants)
2) Work more hours (which has an upper limit)
3) Hire people (which increases your costs along with your revenue)
If you sell software though, you can sell the same piece of work an infinite number of times. Maybe you need to spend more on marketing to increase your revenue, but marketing budget scales much better than paying full time employees as other consultants.
However this advantage is often theoretical. The risk/reward ratio of consulting vs startup makes consulting more attractive to many. It's pretty simple (and not very risky) to jump from an employee to a consultant: sign up for a medium term engagement, then quit your job. Provided the engagement is long enough and you set your rate correctly you don't even need any savings to do it.
If someone was really earning $250k a year (and living in a moderate cost-of-living area) with plans to start a company, I'd certainly have no sympathy if they hadn't managed to accumulate some significant savings to get started with. There may be situations where more than one person's savings is required - you may need hundreds of thousands or even millions to attack certain markets, but I can't think of too many, and can think of many more markets where it takes but a small fraction of that to get started.
Also, FWIW, good luck with adzerk! Been meaning to swing by DU lately to see how things are going with all the great companies going on in the area.
Isn't their success a blueprint for doing what this article says cannot be done?
Consultants can roughly be considered "external, temporary employees", paid by the hour, usually by one or two clients. The web design shop will typically have a whole lot of different customers, and charge fixed price for projects.
So there is a not-entirely-insignificant difference between the two.
In the web dev shop, you'll probably learn more about business in general, but will work less / earn more as a consultant.
I think the authors point is that being a consultant (not service company) is bad if you want to do a startup, as you get too accustomed to having lots of money and relatively low hours of work. In that sense, you can't make a direct comparison with 37Signals as they were the more traditional service company. At least in case I remember correctly :-)
In any case though, consultants naturally can and do start startups. Often with less debts due to large savings.
I quickly realized though as others already know there are only so many waking hours I can work. I did some napkin math and saw my top end was low. What I really wanted was to have more time and more money which requires a business that makes money while I'm not looking so I'm off consulting and focusing on other ideas.
Consultants often work on a single project they bid on in their own time.
Typically you'd associate the "freelancer" with the scruffy php dev who does localpetshop.com sites from home, and the "consultant / contractor" as a temporary, full-time team member in one or more enterprise-scale projects on-site at a large customer.
In reality though, it's all the same.
A few companies these days are willing to hire you remotely, since there's a shortage of developers. That means you can get NYC level salaries working from Kansas. That just doesn't happen with full time.
One thing I would recommend against is the daily rate. Some recruiters prefer it for some reason. Hourly only.
If you can get a direct deal with the employer, you can get much more money, but you must know somebody on the inside to do that.
p.s.
Always, always negotiate the overtime rate. In most places you can get 50% more for any hours over 40 per week.
Short answer - it's easiest to get work as an independent by leveraging connections in your personal network first, and then by focusing on intentionally growing your network in directions you want to grow in.