8
Growing Pains

A goal is a dream with its feet on the ground.

Anonymous

Kyle sat on the park bench, looking out at the lake. How had things gone so wrong? He had been excited about starting his business five years ago. Corte Consulting grew quickly—well, at least according to his standards—$2.4 million and seven employees. It had started with a $20,000 savings withdrawal and a six-month contract with the new glass manufacturer in town. Things had been humming along and growing in spurts. He had a client list from coast to coast that would make many consulting firms jealous. The travel was a bear, but every job had its drawbacks.

Growth had been stagnant for more than a year. Kyle was the sole marketer for the company. He knew he had no one to blame but himself: he was a big part of the problem. Now he had to make a decision. To grow or not to grow—that was the question. Did he want to grow a business with real equity value so that he could sell it at some future date? Or did he want to remain the small company that “worked harder”? He knew this tagline would have to go, no matter what. Everyone at Corte Consulting was working long hours. And while Kyle claimed to like it, he had to admit that working weekends was getting old.

Did he want to grow his business? It would require huge changes to crack through the $2.5 million glass ceiling he was bumping up against. According to Pat, from Equiteq—an M&A advisory firm—Kyle would need to maximize his firm’s growth and scale the business. He’d have to transition from doing the work to increased delegation. He wasn’t sure about that, since he loved working with clients to solve their problems. Yes, he had to admit that there was very little planning in the company’s growth to date. It was profitable—usually—and he paid his employee consultants well. But he also had huge turnover. His employees joined the company, learned the tricks of the trade, and left to start their own competing consulting companies.

His other option was to settle for a lifestyle business and not grow. This felt better to him today—but then it just could be exhaustion from the latest round of proposal writing. He’d continue to be the sole rainmaker and continue to work directly with clients. He’d probably need to scale back on employees, too; he was more profitable when he had four consultants. Perhaps he could use a couple of subcontractors. The big question was whether his ego could handle it. A company that didn’t grow? Who’d respect that? On the other hand, a different lifestyle was the reason he’d left his 8-to-5 (which was more like 7-to-7) position with the big New York firm.

Decision time. It was easy when he turned in his laptop and decided to start Corte Consulting. He left and never looked back. But that was different. It felt like he was going forward. Now one of his options felt like he’d be going backward. He was never very good at decisions, and this one felt overwhelming. What to do? Well, he knew exactly what he’d do. He had all the advice from the experts. He had the data. It was time to talk to his long-time confidant, Lisa, who was at home preparing his favorite, chicken cacciatore.

■ ■ ■

All business owners reach a point at which they begin asking themselves questions about growth. In this chapter we explore a few of the many opportunities for growth.

What does growth mean? We can probably assume that it at least means more income. Does growth also mean more people in your organization? In what capacity? Do you want someone who replicates your skills? Complements them? Do you want a staff?

Growth may mean many more questions than answers. Are there ways to increase income other than increasing the number of bodies? Do you need to figure out how to level the peaks and valleys of your business cycle? Do you have products that you could market? Could you offer other services? For example, if you are a training consultant, do you also want to offer to be a keynoter at conferences? Perhaps you want to design an online training course. Or perhaps it is simply time to increase the fee you charge.

Think long and hard about this step. Once you change the makeup of your business, it will never be the same. You have dozens of options and combinations of options to consider. For example, when I decided that I wanted a “partner” in my business, we sat down and came up with the following list of possibilities for the business configuration:

• I own; you’re employed.
• You own (buy me out); I’m employed.
• Equal partnership.
• Unequal partnership.
• I own the primary business; you own a subsidiary.
• We both own the primary business (equally or unequally); I own a related subsidiary.
• We create a franchise arrangement.
• You start your own business; we share overhead.

We were creative and tried to identify all the possibilities. You will want to do the same. Think hard and long, do all your homework, and talk to others who have done what you are thinking about doing before you make the move to grow. If growth is on your mind, this chapter presents several options for you to consider.

Adding People

Because increasing the number of people is usually the first thing people think about when the issue of growth comes up, let’s begin there.

Should You Hire Staff?

Beth was the first person I hired. I hired her to work part-time, to be in my office when I wasn’t in to answer the telephone. This was in the early years of answering machines and voice mail. An answering machine was a dead giveaway that you were new to the business and probably working off your kitchen table. In the early 1980s, working from your home was not regarded as professional. Wow—has that changed! Now being a freelancer, solopreneur, gig worker, and, of course, a consultant, is viewed as having flexibility and control of what you want to do.

After I hired Beth, things started to snowball. I hired Beth for her telephone voice. I knew she would be great with clients. In addition to having a great voice, Beth also loved computers. She immediately started to do some of my word processing. That freed me up for more billable days. I took on more clients with more sophisticated needs. Therefore, we needed a better computer and a copying machine.

To pay for the new equipment, I started to take on larger projects. I was unable to provide the highest-quality services by myself, so I started to hire other consultants. Beth could no longer keep up with the demands of additional clients, so we hired additional administrative staff for support. Of course that meant we needed more computers and a larger office. To pay for the additional equipment and … well, you get the idea.

Before you begin to hire staff, have a clear plan in place for exactly how much growth you desire and how you will fund this growth. Study the various glass ceilings that consulting firms hit, typically at $2.5 million, $5 million, $10 million, and $15 million, and what needs to occur to break through. To push forward, owners need to make different things happen at each point. The pain points can also be predicted by the number of employees. I have experienced the diminishing returns, and I can tell you that they are real.

Hey, wait! You’re just starting out. Let’s not talk millions yet. As a solopreneur you will experience similar roadblocks, although not so well defined or researched. See the sidebar for what you might expect.

Stages of Growth

As a solopreneur, your business will move through several stages. Here’s what I can tell you about each stage. In this outline you will see gaps between amounts because once you solve the issue in each category you will tend to move quickly to the next stage.

$25 to $75k. You will be in the largest business classification in the United States, with around 22 million other business owners. It is likely to be stressful and you will have feelings of doubt. Most of your business has come from friends and other contacts. You may have started out accepting all work. Actions that are required are constant marketing, but you need to improve the consistency of your marketing. This may be difficult because you may not be 100 percent sure of what you are marketing. You will not be likely to move forward until you figure this out. You need to clarify your niche.

$100 to $200k. You now have consistent marketing in place but realize you can’t do it all on your own. This is the point at which you are likely to hire someone to support you. You may hesitate because you aren’t certain that you can afford it. You may have a confidence crisis to get through. You’ll need to scale your marketing plan, since much of your work is coming from referrals, which is good; it’s just not completely sustainable.

$300 to $600k. At this stage you’ll likely experience capacity constraints and may not be able to fulfill all the marketing requirements. You may have been reluctant to hire the caliber of people you need, but it’s time to let go. The only thing that will allow you to break into seven figures is to hire the kind of people you need to support you and the business. Now listen up—that does not necessarily mean you need to hire staff. You might, but there are other options. Review your business plan and develop procedures for each function so that you can increase your efficiency and everyone knows what’s expected.

$800k to $1.5m. At this stage you are in constant demand. This is flattering, but exhausting. This is the point where you have one to three employees and need to decide whether you are going to grow, stay the same size, or create another growth strategy. You are still expected to make every decision. If your goal is to grow a business with employees, it’s time to step back to determine whether your employees are too reliant on you. You probably feel as if people are not pulling their own weight. It is likely that you are putting out fires instead of making decisions. In order to grow you need to make time for planning. Also, this is the point at which you need to be sure that you have a diversified client base—that you are not too reliant on one or two clients or too many clients in the same industry. Be sure you have someone to talk to about your business. You need a good listening ear—a mentor.

If you have decided to hire additional consultants, hire those who are passionate and love what they do. Experience is important, but passion is more important. You will also want to hire employees who are willing to take a few risks. If you want your business to grow, risks are required. In addition, be sure that your new hires are reliable, confident, and detail-oriented, but see the big picture and have a high level of emotional intelligence.

Advantages.

The greatest advantage to hiring staff members is that they will be a part of your organization. Clients will see that you are growing. Some clients will be impressed with the number of employees that you have. In my early years of consulting I was often asked, “How many employees do you have?” I noticed that clients’ interest levels rose in direct proportion to the number of employees we had. That has changed. The gig economy has influenced how we think about self-employed individuals. Hiring a subcontractor or a part-time employee is more accepted, so there are fewer questions.

A larger staff affords you the luxury of pursuing larger, more complex projects, and it is usually easier to manage several large projects than many small projects.

As staff members become a permanent part of your organization, you will become familiar with their talents and limitations. That means you will be able to more knowledgeably match them to the project, the client, or the industry.

Disadvantages.

The greatest disadvantage of hiring staff is the ongoing payroll commitment. When our company was at its peak, I worried about how many people, roofs, tires, braces, and dogs were dependent on the success of the company. You need to engage in more marketing activities to keep up with payroll and benefits demand.

It may be difficult to find productive work for employees. You’ve read that the true cost of employees is twice as much as their salary, and if you want to make a profit you may want to triple that. The question you will face is whether a client will pay that much for the employee. So you need to pay more to hire good people so that clients will be willing to pay what you need just to break even! Yes, one of those circular issues.

So how do you make that work? You need to scale. Having several employees gives you a bit more wiggle room. But that’s not a simple solution either, because:

• You’ll likely need larger office space.
• As Kyle experienced, you’re likely to be in a near-constant hiring mode due to turnover.
• You’ll need to keep more client engagements going to keep your consultants billable.
• Consultants will have downtime. If you have staff who have specialties, they may experience gaps in their billable time. For example, employees whose specialty is lean six sigma design may experience downtime between these large projects. Do you assign them to designing creativity training? Probably not if you want to do right by your clients.
• You’ll need to invest time orienting, training, and developing new consultants.
• You will be busy with all these additional tasks on top of what you’ve already been doing.

More administrative tasks are required. As soon as you hire one person, you become an employer and the paperwork mounts: you need unemployment insurance, new federal and state tax configurations, an “office” where they can work, and a dozen other employee-related items. You’ll also need more administrative staff to manage the increased workload.

One of the greatest disadvantages is one that you might think is an advantage: If there are other people in the organization, they can do more of the client face-to-face work and you can do more marketing. Wrong! It has been my experience that clients will want you to do the work. You have the reputation, and it’s your name on the door. No matter what you do, clients will still want you. The only way to keep all the demands from falling on you is for the consultants in your organization to generate some of their own work. They need to make face-to-face contact with clients and also do their own marketing.

No matter what you do, clients will still want you.

You might wonder, can’t the consultant employees generate some of the work? Yes, they could, but I learned that few want to sell. If they did, they would probably have their own consulting firms.

So if having additional consultants on staff was your solution to freeing yourself up from the grind of billing, go back to the drawing board. Unfortunately, it isn’t likely to happen.

Exhibit 8.1 explores additional advantages and disadvantages. If you are considering hiring employees, take time to add your own thoughts under each item. When you have finished, go back and look at what you have written. Which side appears to be the stronger for you?

Exhibit 8.1 Building a Firm

Advantages	Disadvantages
Increased ability to serve more clients	Increased time necessary to educate new employees
Increased availability and types of services	Increased time in managing others decreases time to serve clients
Increased earnings base	Increased overhead, responsibilities, and accountability
Security of backup in an emergency	May invest time in those who will leave and compete with me
Spread my philosophy and increase name recognition	May have different values from employees

Should You Recruit a Partner?

I had a partner for five years, and I would do it again if I could find another exactly like him. We were alike in some respects and very different in others. We communicated well, trusted one another completely, made decisions effectively, and complemented one another’s skills. I’ve heard it said that taking on a partner is more like a marriage than marriage itself. So the choice of who to partner with is not a simple one.

Taking on a partner is more like a marriage than marriage itself.

According to small business owners, the single biggest mistake entrepreneurs make is choosing a partner too casually. A trial relationship can be established to explore the likelihood of a successful permanent one. I highly recommend an arrangement that allows you and your potential partner to work together for six to 12 months before making the relationship permanent.

How to configure your partnership is a second concern. We decided that, although we were going to be partners, it made more sense for us to incorporate legally as a subchapter-S corporation. (Chapter Four described the advantages of this legal entity.) We also decided that because I had more equity and eight years in the company, I would maintain slightly more than half of the ownership. Although we didn’t consider it at the time, my slight edge of more than half of the ownership meant that the company would be a woman-owned business. Some organizations use that designation to make final decisions for awarding contracts.

We agreed that we would draw the same salary after the partnership was formed. The split of dividends, of course, is governed by law. We would each receive an amount proportionate to the percentage of ownership.

Prior to becoming a partnership, my partner and I agreed that he would work for at least one year at a reduced salary. The salary not taken was his way of buying into the company. We established several other parameters. One was that, in addition to working for a year, he needed to show that he was generating an equal amount of work.

Tip: Plan ahead.

In the excitement of forming a partnership, you may forget that something could go wrong in the future. Put all agreements in writing and devise a plan for the details of a breakup, should one be necessary. Depending on your situation, you may want to tap your attorney to help make it official.

Often, dividing responsibilities and roles is the most difficult task. If you can be as lucky as I was, you can have roles and titles that clearly define the responsibilities. For example, a founding partner can focus on work with major clients and maintain the corporate vision, while a managing partner can manage the daily operation of the company, including taking over responsibility for sales and profitability. In our case, we were separated geographically: my office was in Wisconsin and his office was in Virginia. Each of the offices was responsible for different aspects of the business—for example, invoicing clients, bookkeeping, or producing client materials. Each of us had responsibility for an office.

Exhibit 8.2 is a discussion generator for checking partner compatibility. Each partner completes the questionnaire separately. At least half a day should be set aside to discuss both partners’ responses. The discussion will uncover concerns and issues that could create problems within the partnership. Take care of them before a legal entity is formed.

Exhibit 8.2 Partnerability

Each potential partner completes this questionnaire. Set aside at least one‐ half day to discuss your responses.
Rate each item on a scale from 1 to 7, with 1 being low and 7 being high.
	Low	High
The importance of my title My ideal title would be … The importance of salary My ideal salary would be … The importance of responsibilities The responsibilities I want are … The responsibilities I do not want are … My commitment to this partnership Because … My willingness to challenge you Because … My level of trust with you Because … My willingness to take risks Examples are … The strengths I bring to this partnership are … The liabilities I bring to this partnership are … My five‐year vision for this partnership is … My “must haves” or things I will not budge on are … My philosophy about travel expenses is … My philosophy about quality of work is …	1 2 3 4 5 6 7   1 2 3 4 5 6 7   1 2 3 4 5 6 7     1 2 3 4 5 6 7   1 2 3 4 5 6 7   1 2 3 4 5 6 7   1 2 3 4 5 6 7

Advantages.

Consulting is a lonely business. Often the thought of having a partner seems like the perfect answer. There would be someone to bounce ideas off of (consultants like to bounce ideas) and someone to cover for you if you became ill.

A partnership broadens your business capabilities, expertise, skills, and experience. This is one reason for partnering with someone who is unlike you—someone who complements what you bring to the business.

A partnership sends a message to the world that you believe the person you have elected to partner with is at least your equal. This is important if your present clients are to accept the person as a qualified substitute for you.

From a business perspective, there is someone to share the responsibilities or the cost of doing business—someone with whom to share the decision making.

Disadvantages.

The greatest disadvantage to having a partner was already listed as an advantage: you must share the decision making with someone! Depending on your agreement, each of you will probably need to check with the other before making a change. If you like independence and not having to ask permission to do something, shared decision making could get in the way of your relationship. In addition, it may take more time to make decisions.

You will need to share resources. This can be a concern, especially if one of the partners is either generating or billing a greater proportion than the other.

Guidelines for Selecting a Partner

If you are considering bringing a partner into the business, use this quick checklist to help you make the decision. To make it more helpful, make notes for why you think each item is critical for you. Look for a partner who:

• Shares your values and vision
• Is a natural entrepreneur
• Is financially stable
• Brings credibility to the business
• Brings skills, experience, resources, and contacts to the business
• Is good in sales and marketing
• Is ethical and trustworthy
• You respect and genuinely like

Should You Consider a Practice?

Although you will find various definitions, I think of a practice as having one key person (you) with others on staff in assisting roles, and a firm as having numerous people who can do the same thing (many you’s!), plus support staff (receptionists, administrative assistants, or researchers). A practice focuses on providing services and doesn’t usually sell products.

Advantages.

The greatest advantage of a practice is having dedicated support. Someone is there to help with the ordering, scheduling, typing, copying, cleaning, filing, billing, packing, and the dozens of other things that need to be done. Someone is available to pick up the slack and share the administrative stress. If you’re on the road and need something, someone is available who can fax or mail it to you.

Disadvantages.

The greatest disadvantage of a practice is having someone on payroll who is not billable and cannot generate income. This means that you are working to support two people. If you decide to hire someone, make sure that it is worth your while. Will the person free up enough of your time so that you can easily pay the individual’s salary, benefits, and added overhead? If not, it is not a worthwhile pursuit.

As an author, I frequently receive requests for advice. The sidebar shares an actual example that occurred in August. Misha had a question that pulls together many of the concerns we’ve touched on.

A Question about the Business of Consulting

I frequently receive requests for help from consultants. This past August I received this interesting request.

Hi!

I’ve been reading and really enjoying your book The Business of Consulting. I read it because it was recommended by my friend and mentor Geoff Bellman (whom I think you know, too). I wonder if you might be able to answer a question about something you wrote in the book.

I work mostly as a trainer, teaching communication and collaboration skills. After years of working alone, in the past year, I’ve started to work with a couple of part-time people—one who helps with sales and one with general admin work. I love it! It frees up a lot of my time, and also makes the work a lot more enjoyable.

Both of these folks want to increase their roles: They want to work more hours, and get paid more per hour. You wrote in your book, on the subject of hiring help, “Will this person free up enough of your time that you can easily pay the individual’s salary, benefits, and overhead?” I’d love to know more about that. Do I need to consider the 3× Rule here, too? I’d be really grateful if you were able to shed any light on this.

Thanks!!!

Misha

I responded with this:

Hi Misha!

Let me begin with a general comment about what the 3× salary statement refers to. The 3× Rule applies when you are hiring another trainer/consultant. The consultant needs to sell (generate) and deliver (usually called billable time) at a rate that is at least three times his or her salary in order to be profitable for the organization. This is common practice in large consulting firms. Why? One-third is, of course, the individual’s salary; the other two-thirds include benefits, equipment, supplies, office rent, company liability insurance, electric bills, moving costs, furniture, at least 10 percent profit to your business, your time to train, supervise, and mentor them, and on and on. But this is not the job role you are asking about.

In your case, you are asking for two very different kinds of support staff. It is wonderful that they both want more hours with you—you must be doing some very good things. And of course everyone wants a higher salary! Me, too! The fact that they want more hours and more money does not justify your rationale to schedule more hours or to pay them more money.

Let’s look at each situation.

Assistant: I discuss hiring Beth, my first employee. I actually hired her over the phone, sight unseen, because I wanted someone with good telephone presence. Beth had it. She was with me for 20 years until I closed the office in Wisconsin and she had other plans in life. The key to hiring an assistant is to ensure that you find someone who has a passion for the work he or she has to complete. Too often I hear about people who hire assistants who want to be “trainers” instead. It sounds like a good idea at first, but the truth is you will have someone who is dissatisfied until he or she is a trainer. And then you will face the same issue you have today—needing to find an assistant.

How much more do you need to make? The person’s salary, of course, + benefits + any additional office trappings you’ll need to purchase (e.g., one-time costs such as a desk or new phone system) + equipment and software to make both of you more efficient. You’ll also need to consider the cost of additional internal services. Will you now need an accountant to do payroll and your quarterly taxes (in the United States), and the additional bookkeeping that comes with staff? The advantage is that an assistant can free you up to do other things. And I always advocate for hiring an assistant if you can afford it. The drawback is that you are now responsible for keeping a roof over someone else’s head. It’s a big step.

Sales: One of the lessons I learned is that sales staff are paid differently and are motivated differently. I learned early in my business that the reason sales were stagnant in my company was that I was being too generous with the base salary. Salespeople are generally paid on a base salary plus commission—or a percentage of the dollar amount of what they sell. You may be working with your salesperson on a customized situation in which he or she also delivers, so your plan may be customized. I have learned that employees have no idea of the cost to run a business—some of which I noted in the book. They don’t see that you pay liability insurance, that you do not get a “paid” vacation, that your website requires a monthly fee, or that you work on Sundays to get a proposal out. The key here is to be as transparent as possible.

So the bottom line is that you have two different kinds of people you are asking about. It sounds like everyone is happy working together—especially you. That’s wonderful! Start any increases in pay slowly. It’s always easier and more practical to give a bonus at the end of the year than to overpay during the year and come up short in the end. Make sure that all employees know exactly what they are expected to accomplish. What are they accountable for? And how will they be rewarded when they meet their goals? And what happens when they don’t? Oh gosh, I don’t mean to take the fun out of all of this for you. I just don’t want you to trip up in the same places that I have been.

You had a question about the 3x Rule. You need to be making 3× YOUR salary plus the salary of the person plus the cost of having that person on staff, such as I listed above. I guess the real question here is if you pay these two individuals a higher rate for more hours, will YOU be able to sell and deliver enough business to pay for them? And also, can you see a direct correlation in the value you create to the time they save you? In other words, what is the dollar proportion of (billable to clients) to (cost of employees)? I don’t like to be that crass nor do I think the only reason we are in business is to make money. Not at all!! I just don’t want you to lose money.

Working as a freelance trainer/consultant can be a lonely job. There are other ways to build collegiality, alliances, friendships—and just to have someone to talk to—than to hire employees. You could create your own monthly network where everyone gets together for coffee and to chat or share ideas. You could (or maybe should) meet with your mentor regularly. You could just have another consultant you meet for coffee or drinks after work several times a month. Or maybe you do all of these. It is critical that you network with your colleagues to share ideas and let off steam.

Good luck to you! I hope I’ve helped you.

Say hello to Geoff for me!

Elaine

Do You Want to Hire Subcontractors?

The gig economy has seen subcontracting increase dramatically. Companies must be agile, and subcontracting is one way to ensure that can happen. It can be helpful to consultants, too. If you accept a project that is too big for you to handle alone, you may choose to hire subcontractors. It is an excellent idea from a tax perspective because you can add people on a temporary basis.

In addition to being helpful for large projects, the arrangement allows consultants to tap into one another’s expertise. This allows you to seek projects for which you may not have all the qualifications.

Although I often work on a handshake, if you have a large project for which you will use multiple subcontractors, I recommend that you use a subcontractor agreement. The more people involved, the higher the chance for mistakes, misunderstandings, and disagreements. An example of a subcontractor agreement can be found in Exhibit 8.3; head to www.wiley.com/go/newconsultingbiech to check it out. In addition, the subcontractor expense record in Exhibit 8.4 can be adapted for your use. Using subcontractors is a great time to check in with your attorney. Consider using clear “paid-when-paid” terms and milestones in your agreements to avoid issues.

Exhibit 8.4 Subcontractor Expense Record

Advantages.

Subcontractors can be hired on a per-project basis. That means that there will be no ongoing payroll expense. You will not be required to withhold income taxes or pay any share of their Social Security or Medicare taxes. Generally, you will hire people who are skilled and professional. Subcontractors increase your flexibility, as you are able to hire the talent you need on a project-by-project basis.

Because they are independent, they know how important it is to produce high- quality work. They will work hard to satisfy your needs because it could lead to repeat work for them. They also require less administrative overhead. Your only obligation in the United States is to send completed 1099 forms to them by the last day of January.

Disadvantages.

The greatest disadvantage is actually only a potential one. The Internal Revenue Service has adopted common-law rules for differentiating between an independent contractor and an employee. The rules cover things such as whether you have the right to direct the person’s work, whether you supply the person with tools and a place to work, whether you establish the hours of work, and whether you have a continuing relationship with the individual. Even if you have studied the guidelines and are complying with the law, the Internal Revenue Service could tie you up in an investigation for months. As an independent consultant, you can imagine what this might do to your business.

Tip: Tax tip.

Learn the language of the 1099. For additional information about the how the IRS differentiates between subcontractors and employees, contact your accountant or attorney, from whom you can obtain up-to-the-minute information and learn how the laws clarify the difference. For example, the IRS does not allow a subcontractor to work full-time for one company. No more than 80 percent of a subcontractor’s income can come from one source.

Subcontractors are not always available when you need them, and because they most likely substitute for other consultants, they will not know your projects well and may not understand your consulting preferences. This means that you may need to spend almost as much time bringing them up to speed for a project as if you did it yourself. You can only hope that the investment of time will have a payback in the future.

Subcontractors may also become your competitors. Ethically, subcontractors represent your company when they work for you. In addition, they are not supposed to discuss their own business nor are they to market themselves to your clients while on your project. Even if they do not, your client may discover the arrangement and may want to hire them directly to save money. This can be uncomfortable for everyone, especially you. By the way, check with your attorney; the last I knew is that you can’t have a subcontractor sign a noncompete agreement because it reclassifies the sub as an employee. And that is probably not what you want.

Don’t Assume Business Acumen

Subcontractors, are likely to have their own businesses. Unfortunately, that does not mean that they really understand how a business works. I remember one of my subcontractors bringing a “deal” to me. She was excited about working with this company in our city. I was, too. They had name recognition and the potential for repeat business. When I read the proposal she was about to send under our name, I quickly saw that she was going to make her normal daily subcontractor rate. Yet the client was going to pay a couple thousand dollars less. My company was going to lose money on this “deal”! What?

What was worse is that as I tried to get her to explain why I would want to lose money on an engagement, her only response was, “because they could be a good client.” Yes, they could be a good client, but first, I was going to lose over $5,000 (by the way, she was unwilling to cut her daily rate). And second, when you set the price lower than we could afford, you have to explain why the next engagement would be priced higher. To this day, I am not sure she could understand why I turned the deal down, or if she was trying to pull the wool over my eyes.

Bottom line, don’t assume that anyone with whom you work understands business basics. Kevin Cope (2018) is my go-to guy for learning more about business acumen.

Can You Use Graduate Students?

University graduate students may be hired as interns for project work under arrangements similar to those of subcontractors, but you must still follow all IRS guidelines. You could also hire them as part-time employees, in which case you put them on your payroll.

On occasion, you may be able to locate a student who will work for credit only. If you have a thriving practice that provides an opportunity for learning to occur, this may be an option you should check into. Call at least the business and communication departments of your local campus. There may be other specialty departments to call also.

Advantages.

Graduate students usually are interested in the experience more than the salary. That means that you can find lots of talent at a very good price.

You can complete projects that you have been unable to tackle in the past due to a lack of time. For example, you may assign a student to one specific project, such as researching and developing a new seminar.

Disadvantages.

The greatest disadvantage is that graduate students usually lack experience. They may have lots of knowledge, but not the practical hands-on experience that your clients expect. Even if they work as support staff, they may have little experience with running a copy machine, creating computer graphics, or answering client questions.

University students are generally short-term employees. That means that you will not often have them for more than a school year—and usually for just a semester.

Due to class schedules, they may not be available when you need them the most. Sure as heck, they will have a big exam scheduled when you have a major project due for your best client.

Growing without Adding People

As soon as you hire your first employee, you change the complexity of your business. You no longer have choices about where, when, and how much you will work. You now have a responsibility to another human being. Before you take that big step, consider growing without employees. How can you increase profits and yet maintain your practice as a sole employee? First, consider using your local temporary services to help you out on occasion. Second, try several configurations involving other consultants: subcontracting for or collaborating with another consultant; joining a joint venture; offering other related services; or selling products that are related to your consulting work.

As soon as you hire your first employee, you change the complexity of your business.

These are all viable options. Consider the advantages and disadvantages of each.

Could a Temporary Service Meet Your Needs?

One of the fastest-growing industries in the nation is temporary services. Corporate America is outsourcing almost every kind of job. We use temporary services when we have repetitive tasks or simple processes to complete. Temporary services are useful when we have huge mailings (envelope stuffing, stamping, labeling) or for a large amount of computer input or copying.

We find temporary employees to be especially helpful when everyone in the company is busy with a huge project and we need someone to serve as a receptionist.

Advantages.

Temporary services can provide the specific skills necessary for repeat work. It is a reasonable price for short-term prequalified support. If you are in a bind, temps can fill in at the last minute.

Disadvantages.

The disadvantage of temporary employees is that the individuals have to be trained each time you are sent someone new. It is highly unlikely that you will be able to use the same person more than twice. If the person is good, he or she will be offered a permanent position.

Another disadvantage is that you will not always have the best person from the agency if there were many requests ahead of yours. Also, no matter how clearly you define the task, the person who shows up may not be able to live up to your standards of quality.

Tip: The temps have it.

More employees are turning to gig work either as a side hustle or as their primary career. There is a site to locate almost any kind of skill you need for your consulting practice. The freelance marketplace has created three levels. The most basic level includes sites like Fiverr.com (which claims to be the largest) and microWorkers.com. The second level is still aimed at low cost, but freelancers bid for jobs. It includes sites such as Freelancer.com and UpWork.com. Finally, the last level includes Toptal.com and ScalablePath.com to support the best freelance talent. Know what you are getting into before using any of these.

Do You Want to Subcontract?

You could become a subcontractor for another firm, offering your services directly or perhaps completing design and development behind the scenes. Remember that, as a subcontractor, you must be seen by the client as an employee of the firm for which you are doing the work. Many consultants’ egos will not allow them to do that.

Advantages.

As a subcontractor, you could continue to run your own business while subcontracting with others. This provides an opportunity for you to fill in the gaps when you don’t have billable work. If you have been offered a long-term project, it could provide a steady income.

A big advantage is that you will be able to work for or with other professionals. This will certainly give you experience and knowledge that you might not acquire any other way.

Disadvantages.

The greatest disadvantage to subcontracting is that you will most likely make one-third to one-half of your daily fee. It is possible that you may need to turn down a full-paying project to fulfill your subcontracting responsibility.

You may have a difficult time working under someone else’s business name—especially if you have had your own consulting business for any length of time. As stated earlier, we consultants typically have healthy egos that may create dissonance within ourselves.

Have You Considered a Joint Venture?

Some use the term virtual partners to describe a temporary arrangement, usually aimed at completing one project at a time. The parties involved may be separated geographically, but that is not a requirement. The partners in the joint venture may work under a name that represents the group. That name may remain while partners may come and go, depending on the project.

Typically no legal agreements are made. However, you should not become involved in a joint venture without some written agreement among all parties. This will save you time and energy should something negative occur.

Advantages.

A joint venture provides a temporary arrangement. This allows you to work with others on an experimental basis. It allows you time to determine whether you would like to create a more permanent arrangement with some or all of these individuals.

The individuals have a shared responsibility for the outcome of the project, for completing the work, and for the financial success of the project.

Disadvantages.

Because the joint venture operates under a loosely drawn up agreement, it is likely that something will be forgotten. The temporary arrangement exacerbates the situation, as individuals in the venture may not be as dedicated to its success as if they were in for the long term.

One of the biggest disadvantages is that the decision-making process may become convoluted—especially if more than two people are involved.

Do You Want to Collaborate with Another Consultant?

A collaborative arrangement is a fashionable growth option. You may hear a number of terms, such as “alliance” or “coalition” or “consortium,” to describe a loosely formed arrangement of shared resources, clients, and decisions.

Although a collaborative agreement is similar to a joint venture, there are some key differences. A joint venture is project-oriented; a collaboration is relationship-oriented. Membership in a joint venture is temporary and ends when the project ends; a collaboration is a continuing relationship and is maintained whether or not there is a project.

Collaborating is similar to a partnership but has fewer legal ramifications. Sometimes consultants collaborate with one another as a way to determine whether they would like to form a partnership or corporation. Although the consultants may have good intentions, using the arrangement for that purpose is rarely a good idea. The loose agreement between two collaborating consultants is not the same as truly working together under a legal description that encourages individuals to make the best of any situation.

Before becoming involved in a collaborative arrangement, scrutinize the other individuals and the arrangement. Does the person’s image reflect favorably on you? His or her values, ethics, expertise, experience, and reputation should be similar to yours. In addition, you will want to ensure that there is value in the relationship.

Working in a collaborative effort will most likely result in a greater investment of time than you may have originally thought. It will take longer to make decisions. It will require long, time-consuming communications. Sorting out support mechanisms and staff issues will take time. Planning will take longer. There are some common elements that should be in place for a successful collaborative effort to flourish:

• Trust. The effort should be based on trust by both consultants.
• Value. Each party must recognize the value he or she brings as well as the value the other consultant brings. In addition, each must clearly articulate the added value that neither of you would create if working alone.
• Risk. Both consultants must recognize the risk and the pros and cons of that risk.
• Alignment. Both parties must determine the degree to which they are aligned in mission, goals, values, and priorities and to what extent the differences may prevent success.
• Guidelines. All must agree on the guidelines, which will include communication, responsiveness, the ability to withdraw financial support, and so on.

Advantages.

Some of the greatest advantages are for your clients. Collaborating with someone allows you to add services to those you presently offer. The collaboration means instant growth in your customers’ eyes. Another advantage to your clients is that you will have backup if something should occur that prevents you from being available on a scheduled date.

Another advantage is that the collaborating parties have more for less. The collaboration allows two consultants to pool resources for efficiencies in marketing, product development, and other high-ticket items. In addition, it allows them to share support staff.

A collaboration also increases opportunities for you to learn from another professional. I recently formed an alliance with Halelly Azulay to produce online training for new training consultants. We each bring a different expertise. She is knowledgeable about the online training phenomenon and I bring the resources that will form the content for the course. It’s a win-win for both of us as well as for the clients we will serve.

Disadvantages.

Time becomes one of the greatest problems in a collaborative effort. Joint activities usually take more preparation time than solo events because you must discuss and plan as a team. Sometimes the projects each party brings get in the way and limit the time for joint activities. It is difficult for the individuals to give up these projects, because they are loyal to their clients, and the projects most likely are their source of cash flow. In the end, it becomes difficult to find time to generate collaborative efforts.

Lack of a legal agreement causes continued separation, which can prevent the collaborating parties from learning to work together. The logistics may cause problems if the individuals live a distance apart. If they rarely see one another, they may not find the time to begin to meld their businesses together. If your values clash and you are not working together, the collaboration is doomed.

As with most things, money can create problems. Because the collaborative arrangement keeps the individuals separate, they may not make final decisions about how much to charge, how to share revenues, how to determine required investments, and a host of other issues.

If the two individuals are working in the same field, there may be crossover of clients. If this creates a competitive situation, the collaborative arrangement will end.

Do You Want to Offer Other Services?

If you are a trainer, you might consider offering keynote addresses for conferences. Keep in mind that the two require very different skill sets. You could offer other services. For example, a computer consultant could teach evening computer classes at the local college. Consultants can also write newspaper or journal columns, write and sell articles, tutor college students in their professions, or create and sell subscriptions to a for-profit newsletter.

You could monetize your most popular service into an online course. What is your most popular service? Does it lend itself to creating an online course product? It would teach others how to do what you do. You have to choose carefully, because many topics have been so commoditized that they sell for under $25. If you can make the numbers work, go for it, but with just a little personal attention you can raise the cost to $99 or $999. It really depends on the topic and the audience.

Tip: Join the online course sensation.

You may be inundated with many offers to teach you anything online. You can launch a product for almost anything. Before you do, note that several pioneers have perfected the process and are happy to sell it to you. If this interests you, I suggest that you check out Jeff Walker at www.productlaunchformula.com. He seems to have done the most research and claims to have done over $400 million in product launches. That seems like a record you can launch from!

Before you decide to take on a new service, decide what effect, if any, it will have on your business image. You may decide that it will have a positive effect and will enhance your consulting business. On the other hand, you may decide that it will engulf your consulting business or be detrimental to your image.

Advantages.

The advantage of offering other services is that you broaden your skills and capabilities. There is always the possibility that you may discover another career that you like even more than consulting!

Disadvantages.

The greatest disadvantage is that you may spread yourself too thin, taking on too many different things. You may not focus well. You may also become so tied up in a new venture that you will not be available for a consulting project when it comes up.

Tip: Try coaching.

Have you considered coaching? Much of the work can be conducted through email and telephone calls. The field of executive coaching has been in existence for several decades. Today, it’s not just the executives who have coaches; people in other key positions also avail themselves of coaching. I have a friend who has had the same coach for over 10 years. When I met him he was a new director, and he is now a vice president of the same organization. That is one measure of success. He has never met his coach in person. All of his coaching is conducted using the phone and email.

Most other jobs, such as teaching at a college or writing a newspaper column, require you to meet a consistent schedule—for example, show up every Tuesday and Thursday to teach. This does not fit into the erratic schedule of a consultant. You will need to determine whether two different services can live together under the same hat.

Can You Expand into the Product Market?

If you have been in business for a number of years, you probably have enough potential products in your files to fill a small library: questionnaires, activity pages, surveys, survey results, reading lists, topic papers, quotes, checklists, tests, quizzes, summary sheets, games, puzzles—books’ worth of things you have used once. Could they become products to sell to clients?

The members of the National Speakers Association (NSA) are truly experts at turning their content into products. They take the best quotes from their speeches and turn out planning guides, pins, T-shirts, plaques, posters, videos, workbooks, newsletters, and special reports! They may sell such products in the back of the room or to the client, who distributes them after the presentation.

Tip: Write a blog.

Making money from a blog is possible and isn’t even difficult anymore. Make money by putting ads on your pages (check out BlogAds or Google’s Adsense). Use affiliate marketing, whereby a company agrees to pay you a commission for helping to sell their products (Amazon, Linkshare). Get sponsored by a company; deals range from including obvious advertising to adding a company’s name, logo, and brand to an existing blog. Or get hired by a company to keep their blogs going. And finally, sell your own and others’ intellectual property through your blog.

As a consultant, you don’t want to open a store, but surely there is one book among all your stacks and files. Turn your favorite workshop into a how-to book for managers. How about a collection of self-evaluations or 10 activities that will improve [you name it]? An interesting phenomenon occurs after you are a published author (even if you self-publish). You become an “expert.” This automatically gives you the authority to increase your fees!

How about recording your next presentation and selling it? You could create both video and audio recordings. Many listen to audiorecorded books in their cars during a long commute to work each day. Perhaps the next book they listen to will be yours!

Tip: Record a podcast.

And as long as you are taping content, consider podcasts. Podcasts present a way to distribute an audio or video episode via the Internet for playback at any time. Podcasts allow development in the form of event capture, new product information, negotiating ideas, or even new employee orientation that can be delivered on demand to anyone, anywhere. Before you start recording your first podcast, consider these suggestions for success: keep them short. Depending on your topic, the podcast could be as short as 10 minutes or, for a more in-depth topic, 60 minutes long; plan a series released on a specific schedule; script them just as you would any show; incorporate music; focus on one succinct idea; maintain professionalism; and archive your old podcasts. Perhaps you are a sales training consultant. Wouldn’t it be great if past training participants could download one hot tip every Monday morning to start their week? The cost could be included in your original fee as a featured benefit for choosing you over your competitor. Or it could be sold as an add-on component.

Before you jump up and grab your iPhone, think about distribution. Who will sell your products for you? You could approach some of the large training product catalogs or publishers. It takes specific knowledge and special skills. For minimal sales, you could advertise on your website.

Tip: Look like a pro.

If you decide that recording in any format is something you want to try, be sure to check with the experts about what to wear, how to format, and how often to change scenes. For me that would be Jonathan Halls. Check out his book, Rapid Media Development for Trainers.

Product possibilities are endless. Here’s a list that may pique other ideas:

• Sell an e-book.
• Publish and sell a newsletter.
• Print and sell articles, checklists, templates, or other tools to clients.
• Publish and sell instruments or surveys.
• Sell articles to magazines and trade journals.
• Syndicate your articles electronically.
• Conduct research, compile the results, write a white paper, and sell it.

Advantages.

The advantage of producing products is really twofold. First, you have ways to make money while you sleep; you could be selling an asynchronous webinar on the other side of the world at the same time that you are consulting for a client in your own city.

Products may help to even out the dips in the uncertainty of consulting. Products can provide not only an additional revenue source, but a steady revenue source.

Second, your products keep your name out there. Not only are you making money from them, but they will serve as marketing tools as well.

Disadvantages.

Products take time and an investment of cash to produce. Then you must distribute them and let people know that you have them for sale. Although most print media can be done print-on-demand, if that’s not an option, products won’t do you much good sitting in your garage. You must put them into potential buyers’ hands.

Again, this is something you should discuss with others who sell products to determine whether it is a viable option for you to consider.

Tip: Use your IP to build new revenue streams.

Examine all the things you do for your clients. What intellectual property is hidden among all the client folders you file? What stand-alone products, processes, tools, or methods exist that would be valuable to others?

Expand Your Geographical Market

If your business has been located in the same geographical area and you want to expand your horizons, you may want to look across the country or even to another country.

Do You Want to Expand Domestically?

You might ask your current clients for references to other similar organizations. Sometimes clients have locations in other cities, but they assume that you do not wish to travel. Let them know that you do.

You could also select cities or other states to which you would like to travel and identify several organizations for which you would like to provide services. Contact these organizations using the same process described in Chapter Five. If you live in Boston, Dallas probably sounds like a great place to go in January. Remember, however, if you do acquire work, it is doubtful that it will be seasonal and you will need to travel to Dallas in the middle of July’s heat as well as the middle of January’s welcome relief from Boston’s blizzards!

Do You Want to Expand Internationally?

Perhaps you are interested in building business in Europe or Asia. How can you do that? One of the best ways to begin is to attend international conferences, such as IFTDO (International Federation of Training Development Organizations) or IODA (International Organization Development Association). Consider networking with the international attendees at domestic conferences. Many will have an international room set up for guests; visit them and exchange business cards. Of course, submit a proposal to speak at these conferences as well. You may meet foreign nationals who need someone to distribute their material in your country. This may grow into a two-way partnering. Let your clients who have global sites know that you are interested in working in their offices in other countries. Offer to provide similar services in other regions of the world.

My consulting in foreign countries all came because someone heard me speak at conferences held here in the United States. They asked me to take my message and my skills to Columbia, Peru, China, Taiwan, Malaysia, and Singapore. A couple of contracts led to repeat trips and over $1 million in additional consulting fees.

Tip: International contacts.

Would you like more information about IFTDO and IODA, the two international associations previously listed? Check out their websites at www.iftdo.org and www.iodanet.org.

Obtaining work in other countries may be difficult without someone to introduce you—someone who knows the culture. Unless you are a well-known “guru,” it might be wise for you to work with a local firm or your own client organizations located elsewhere in the world. Read all you can about the culture before you go, and talk to people who have lived and worked there. Plan your trip so that you will have time in advance to meet with your local “coach,” who can give you some guidance on the culture and specific organizational issues. Ideally, that same person will be available when you are with your foreign clients and provide feedback to you at breaks.

If you want to work internationally, the most important thing of all is to think of yourself as being a learner. You will be of the greatest value to your clients if you are a student of each culture that you visit and remember that no matter how competent you may be in your own fields, you are a beginner at the art of working, living, and learning in that new place. The rewards of being “at home” in the world are great. It all starts with being a learner and developing relationships that will make you a welcome visitor wherever you go.

International work brings two distinct advantages. The first is greater credibility among peers and clients. The second is that you will most likely be able to charge more for your services when working in foreign countries. By the way, always request payment in U.S. dollars and ask to have the funds wired directly into your account. As an alternative, request U.S. funds drawn on a U.S. bank. Fees for collecting from a foreign bank can be 20 to 25 percent of the transaction.

Tip: Get comfortable with the customs.

Once you land a job in a foreign country, gather advice about appropriate business etiquette, customs, protocol, and behaviors. An excellent website to help you is www.cyborlink.com.

Doing Everything You Can to Grow Your Current Business

Ask yourself whether you have done everything you can to grow the business you now have. Sometimes we are so busy we forget the basics of the business we are in.

Some Questions

The following questions will jog your thinking about what you may be able to do with what you have:

• Have you recently studied your numbers? Have you compared them with past data? Have you conducted a reality check with another consultant to determine if your expenses are in line? If your income is reasonable?
• How closely are you following your business plan? Is that good? Or not? Just because you have a business plan does not mean you should shut your eyes to anything but what you have in the plan. Stumbling onto success may be just as good as planning for you. However, you do need to assess and redirect.
• Have you become overly dependent on one industry? Is it time to expand or at least to explore other industries?
• Have you expanded the coverage of your market area? Can you serve clients in the next state? On the other coast?
• Have you selected clients who hire you for the kind of projects you prefer? Who can provide repeat work? Who can pay the rate you charge? Who appreciate the value you bring?
• Are you selling the unique value proposition you can deliver, how to solve your clients’ problems? Or are you still selling your competencies, processes, and tools?
• Have you professionalized your selling skills? Buyers buy, but they aren’t sold to.
• Have you evaluated your consulting rate? Is it time to increase it?
• Have you kept up with technological advances? Are you current with how they affect your work? Have you incorporated them into your projects appropriately?
• Have you built relationships with your clients? With other consultants?

Your answers to these questions may contain some interesting answers for growth.

Ideas Outside the Norm

And then consider these ideas that go outside your business.

• Invest in your business and yourself. We all get too busy to do what we should to stay up to speed. I always return from a conference with a notebook full of ideas. Implementing just a few of them saves me time, improves my lifestyle, and increases profits.
• Join a mastermind group. Being a consultant can be lonely. You need someone to share ideas and solve problems with, and confirm that you are not crazy! Mastermind groups are excellent for holding you accountable for your growth plans.
• Join an association. There is a little-known association for consulting organizations called ISA—The Association of Learning Providers. Its purpose is to help training, performance, and talent development firms build, enhance, and share their success. Member companies range in size from $1 to $200 million. C-Level Forums, similar to mastermind groups, are held quarterly and included in your membership fee. More information at www.isaconnection.org.
• Try a consulting matchup. Check out PwC’s Talent Exchange, where they connect independent consultants with PwC opportunities. I reviewed the roles available as I am writing this and found a finance transformation consultant on the West Coast; a benefits design lead in Irving, Texas; and a change management lead in St. Louis, Missouri. MBO Connect is a similar sight. They are located at TalentExchange.Pwc.com and MBOpartners.com.
• Identify the next big thing. This takes a little research on your part. Try to predict the next urgent issue one of your clients will face. What’s the next major challenge? Are they prepared for AI in their organization? Have they embraced agility? What’s hot in their industry? Predict it and present it. Then offer to solve it.

Your Options

As a consultant you have many options. And because you are your own boss, you can decide which option to choose. Want to grow your business? First, define what you mean by “grow your business.” Is it more income? More profits? More locations? More employees?

Next, review your strategic plan: Think about the kind of consulting you conduct, how your clients define your brand, and what makes your products and services unique. Also identify your ideal client. Third, determine the options for growth and the pros and cons for each and narrow your choices down to three or four. Then speak with consultants who have grown their businesses using these methods. Decide on the marketing techniques that will match your growth option.

Last, consider the implications for the bottom line, your time, and the added responsibility. Is it worth it? That’s what Kyle was struggling with at the beginning of this chapter. His first three years in business were fun, but lately he’s not feeling the same. Are there reasons to not grow your business? You bet. You could glean them out of some of the disadvantages listed in the early choices. We’ve summarized some of the key reasons in the side bar.

One of the advantages of being a consultant is that there are so many other avenues open to you. As you consider all your options, take care that you do not trap yourself into a financial commitment that you cannot support. If you decide to add individuals to your present business entity, consider the responsibility you have added and how it will affect you and your present business. Don’t talk yourself into a situation that will negatively impact your lifestyle.

In the end it is all up to you. To grow or not to grow—that is the question.

Reasons to Stay Small

Growing a large consulting company is one route. But you may also want to remain small. Here are a few reasons to stay small.

• To maintain control.
• For a more balanced lifestyle.
• To have lower margins and higher profits.
• To gain agility for a faster response to market changes.
• For the ability to explore different specialties.
• To be able to choose your risk.
• It’s less stressful.
• It doesn’t require an office outside your home.
• It is easier to maintain quality.
• To limit your workload.
• To avoid regulation.
• To customize a personal retirement plan.
• For potential niche domination.
• To ensure customer reliance.
• Fewer distractions make it is easier to focus.
• It is easier to build and maintain a stellar reputation.
• To manage and supervise less.
• Your schedule is your own—mostly.

For the Consummate Consultant

Like most consultants, growing your business is always foremost in your mind. Be smart in how you approach this challenge. Growing your business does not always mean hiring more consultants. There may be more savvy ways to grow the bottom line without a huge office filled with consultants.

Trade a Name. Review your network of consultants to identify someone whose work you respect. Is there a way that you could each introduce the other to a current client? After the introduction make a warm call to expand your client base and land a new client.

Replicate Success. Review some of the engagements you’ve completed this past year. Which have delivered a substantial return on investment—200 percent or more? If they were implemented in only one department or at one site, can you replicate that success to the rest of the organization?

Grow or Go. Getting bigger is a choice, but getting better is essential. Don’t follow the growth mantra without first examining what you really want out of your own gig.