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Thread: Consulting advice: how to get started and not get burned

  1. #1
    Member
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    Consulting advice: how to get started and not get burned

    Hi all
    I made this a new thread to help those of us out there who want to seek a consulting career. My story is I am soon to graduate with my MLA and realize the job market can't support full time work as much, so I am looking to consult as a way to make money and experience while not burdening employers with full time salary.
    I've had a great response so far when I said I was willing to do this, but heres the big question....HOW do I start? Soem have said they would like to know what services I provide and a rate range. Whats an appropriate rate for a MLA/BFA willing to do graphic presentations/visual representations/ landscape design/land planning work?
    What do I need to do to protect myself?

    Thanks all!!!

  2. #2
    Cyburbian
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    Mar 2009
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    Salt Lake City, UT
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    A Couple of Ideas

    I have been a land planning consultant for over 25 years and have owned my firm for the past 20. I add this to illustrate that these thoughts come with a lot of experience.

    1. Consulting fees are a market driven number. Different for different areas. Find out what established consultants are charging for similar services. You can often get a rate sheet by calling and requesting one be sent to you without telling them what you want it for. Charge anywhere from 15 to 25% less than the going rate to get started.

    2. Offer to do some initial work for free to get your foot in the door. Do the concept work for free to get the construction document work for pay.

    3. Be extremely client oriented. When I am in the midst of a project, I email or talk to the client at least every other day and more often once a day. So many consultants are terrible at client relations that if you are client oriented they will notice the difference. I attribute my success as a consultant much more to my client relations than my design ability and I am a pretty good designer.

    4. Figure out how much you need to make to cover your expenses and then increase by about 50% at a minimum. Social security payments are about 16%. Payroll taxes can range 20 to 30%. Many consultants figure our their expenses including what they want to be paid and start by doubling the number. More established consultants often use a 3:1 or more ratio depending upon the location of the firm and the overhead.

    5. Most important thing of all. Learn to use Quickbooks and take a basic small business accounting seminar. More young consultants get themselves in trouble with the IRS for not keeping track of income and expenses correctly and get behind on Social Security and Payroll Tax payments. Find an inexpensive bookeeper and/or accountant who works with small consulting firms tax issues.

    Good luck and remember that it takes time and effort to develop a consulting practice.

  3. #3
    Cyburbian Cardinal's avatar
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    Consulting without a good deal of experience behind you is not something I would recommend, but if you are going to give it a try...

    1) You need a strategy for getting yourself known. Who is your market? Communities? Developers? Other consultants who you will sub for?

    2) What is your niche or angle? Why would somebody want to hire you instead of doing the work themselves or hiring your competition?

    3) Get insurance. Many communities require it, and if you sub to others, they may also require it of you. General and professional liability, workers comp, and business auto may run $3500 or more.

    4) Follow th eadvice you just got on costs - mine run about 45% of gross income, and that is cutting it pretty lean. Add more if you will need to purchase computer equipment, software, etc.

    5) Responding to RFPs can be expensive. Printing, binding, and postage can easily top $100 per proposal. While more expensive up front, investing in a color laser printer, binding machine, etc. can save money in the long run.

    6) Ditto the advice on the IRS. You need to file and pay those taxes.
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  4. #4
    Cyburbian Michele Zone's avatar
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    If you haven't already, check out your local Small Business Administration http://www.sba.gov/smallbusinessplanner/index.html. They typically give free or inexpensive classes for start up businesses.

  5. #5
    Cyburbian
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    Do NOT go into business for yourself unless you already have work lined up. This isn't like having a business degree where you can just whip up a new company and sell a product fresh out of school. In private sector planning, arch, landscape arch, economic development, etc., you need to build up experience over time, and it can take a few years of working for someone else. Smaller established firms that have been around for decades are being pummelled in the bid process for smaller municipal work by larger national/international firms who usually do not go after smaller projects when the times are better.

    I have talked to several students fresh out of architecture and landscape architecture school on a couple of other blogs who barely have anything more than an internship and are trying to start their own company without any practical experience in how a firm operates. I am trying to convince them they are going in over their heads and should consider other, safer, alternatives. After working on the dark side for 4 years, I am still learning new and interesting things about how consulting works and what NOT to do when running a company. This cannot be learned over a summer or even in an internship. There are also plenty of experienced and brillant planners and other professionals who don't know a damn about business and should really not be running any company. I'm not saying this to discourage you. Very few of us have the business acumen to turn a profit in shaky times and keep a company intact. Many owners are successful at riding the wave when times are good but are not innovative enough to make changes when things detoriate, such as the owners at my last job. I would recommend you find a skills assessment test on business/marketing to find if you have the right skills to make it out as a businessman.

    If you STILL want to consider setting up shop, I would also add the following to the list:

    1. Take on small side jobs as an independent contractor first. Starting a full-fledged business requires insurance (as cardinal mentioned), a business license, financing (if money is even available), reserve funds, reporting quarterly earnings, membership/sponsorship in APA, ULI, or even the local chamber of commerce, etc. Develop a good relationship with your client(s) and build that over time. I have done independent contract work as a planner/illustrator for 4 1/2 years in addition to my full time planning job. Now that I am out of work, I am capitalizing on those contacts to bring in some extra cash while I look for fulll time planning work out of state.
    2. If you do go after the RFPs, especially those without a pre-determined budget, I think you are going to have to low-ball for the first few projects to get your foot in the door (I say this with extreme caution). Low-balling, or under-selling your services to earn a contract, is a very very risky way to drive up business, and I usually discourage the practice. Since you are fresh out of school with no full time experience and entering a tight market, you WILL have to do things on the cheap (including working for free) to gain the experience and develop your reputation. However, low-balling can also backfire: you are more likely to loose significant money on larger projects if you are a more established company not to mention soil your reputation as a cheap company (clients and potential clients do talk). Planners, landscape architects, architects, etc. sometimes work 70-80 hours a week for the first few years before even turning a profit. As I mentioned before, you need to have enough cash in reserves because you will be blowing through it while you are in the red for the first few years. Profits do not occur overnight.
    3. Diversify your income stream (piggy-back on cardinal's #2 comment). I think you need more than just one niche, although some people might disagree. In addition your core services (planning, historic preservation, economid development, whatever, etc.) develop other services that reach a much bigger crowd. This can include web design, marketing material, powerpoint presentations, graphics preparation, grant preparation, survey writing (not just for comprehensive plans but for consumer products, political campaigns). You might even consider something totally unrelated like tax preparation, auditing, fitness training, etc. Who says that all of your services have to be related to each other? Look at Warren Buffet's Berkshire Hathaway, one of the largest conglomerates in the world, which is basically a "mall" of unrelated companies under one holding firm. During the Great Depression companies offered non-related side jobs to stay afloat. I think that more companies of all kinds might end up doing that to stay alive. Some of these unrelated services can either be sold off, siphoned off, or phased out, as profits in the main core services improve over time.
    4. Builld up your reputation through community/professional involvment. Take advantage of pro-bono projects. Sometimes this may be advertised in your local APA chapter. If not, you might have to google opportunities through community development corporations, environmental justice groups, the local community college, chuches, etc. These projects often allow competitors to colloborate on projects where everyone can take credit. Volunteer your time through a committee on APA, promote a lecture series, wirte magazine articles for ITE or ULI, etc. Start volunteering for politicians, especially those who have powerful connections: you will slowly build political capital, make more network contacts, and may lead to an endorsement on a project down the road.
    5. Find as much free money for small businesses from the federal government. I imagine this might be through www.recovery.gov.

    Bottom line, with so much fierce competition for jobs and contracts right now, I think it is a terrible time to start up a business without any experience. I would devote your time to working on state and federal job applications.

    Hope this helps-
    Last edited by nrschmid; 16 May 2009 at 11:35 AM.
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  6. #6
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    Thanks all for the advice...as wary as it is.
    I want to make it clear that I have been approached for work already and it is really more in a graphics capacity...I specialize in the presentation and "packaging" more than anything, so maybe this is why I thought I could extend the kinds of work I've been doing freelancing into a consulting career. Obviously consulting is another ball of wax, and I would definitely wait before I go responding to RFPs or anything of that sort. But all these are great points taken!!

  7. #7
    Cyburbian Emeritus Chet's avatar
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    South Milwaukee
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    I've been in planning and related fields for 20 years, 5 of that - in the LATER years - was consulting.

    I generally agree with smccutchan1, nrschmid, and Cardinal. A few additional comments:

    (A) The higher priced firm that I worked for looked to get compensated at gross salary x3 for the employee in question. This covered ovderhead, E&O insurance, etc. Being a 1 person shop, and being fresh out of college, Don't expect that. On the flip side, if you undercut your competition too much, they'll think you don't know your business.

    (2) In my municipal dept. head days, I would have a hard time "selling" my City Council on a consultant that was fresh out of college and working alone. They want track record and a "bench strength" that larger fiurms have.

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