Financial

Any Regrets About Jumping???

Here is an answer posted to the question “Any Regrets About Retiring Sooner?” at a private financial forum to which I belong. I thought the question applicable here regarding making a JumpToConsulting.

When my business partner was dying from cancer, I asked him if he had any regrets about our business. He replied with an ironic chuckle, “Maybe one. Perhaps we should have started the business sooner.”

This is not a sad story. We shared 28 years working together as partners in a small engineering consulting practice. We had a ball, and enjoyed the independence so much we often joked we were already retired. We both hit Financial Independence a few years after starting the business, but kept going just for the fun of it. BTW, we also took time off to enjoy life along the way.

Just suggesting you not wait too long to follow your dreams, retirement or otherwise. As the old saying goes, “Looking back, one does not regret what they did as much as what they did NOT do.”

The forum is an extension of a public blog esimoney.com (Earn-Save-Invest)  where readers share their goals and successes with financial independence. The blog includes over 300 interviews with millionaires, where we share what we did and how we did it. The 300 interview represent well over a half billion dollars of self made wealth. Check it out here.

While the blog is free, the forum has a fee and is currently closed, but it does open up once or twice a year. ESI has plenty of practical information for those interested in financial independence. Consulting is just one path.

Life is short… Have no regrets…


The FREE Monthly Teleconference is Back!

Join us with your questions – or just listen in learn

“Ask Daryl Anything About Consulting”

Register Here


 

© 2021, https:. All rights reserved.

Appearances Can Be Deceiving…a Humorous Personal Story…

Never judge a book by its cover, right? And never judge this consultant by what he is wearing – particularly on the weekend…

The more I thought about the following personal story, the more humorous it was to me. I hope you enjoy it too.

In my last post, I mentioned my wife breaking her hip. Happy to report she is now home and doing well.

In order to facilitate things, I decided to buy her a new set of wheels — a wheelchair. Not absolutely necessary, but it was a good move.

I first checked Amazon, but the model of interest would not be available for a week or more. On a hunch, I decided to check Craig’s list.

Lo and behold, there was the exact same model she was using in the transitional care facility — immediately available and about half price. And it was only four miles away. How much better could it get?

It was Sunday afternoon, I immediately respond, and yes, it was available. But it would be best if I picked it up right away. So I dropped everything and hustled over.

Not thinking, I grabbed my checkbook rather than the cash machine. Who uses cash these days anyway?

Here is where it becomes humorous. Not knowing the neighborhood, I arrive in my 25 year old Toyota and park next to a shiny brand new BMW in the driveway of a $1.5 million dollar town house.

Posh neighborhood on the Mississippi River in downtown Minneapolis.

The neighbors were having some sort of soiree of in the front yard, when this old guy (me) shows up. I was wearing ragged shorts and my free t-shirt with the motto “Life is Short – Do Stuff That Matters.”

Hadn’t shaved. Did I mention I’m missing a bunch of teeth awaiting dentures and eventually implants? The Beverly Hillbilly had arrived 🙂

The wheelchair was brand new, with a mileage of about 500 yards. When I whipped out the checkbook, the guy gets a pained look. “Did you not bring cash?” Oops.

I gave him a business card and assured him the check was good. He reluctantly took the check – probably not wanting to miss his sale. Turns out he was a realtor – and who knows – may have even needed the money.

As I left, I detected some “stink eye” from the neighbors. Pretty sure they told the seller he would never see his $250. In retrospect, I should have hit the cash machine, but doubt that would have changed the neighborhood reaction (which matters to me not at all.)

As I reflected on this, I found it more and more amusing. But then I also wondered how many of these young millennial “high fliers” were actually wealthy (net worth) or were just living a pseudo-glamoros lifestyle (aka “Keeping Up With the Jones.”)

This is not meant to be critical nor is it even my business, but I felt some sadness that the latter might be the case — at least for some of them. I remembered an early boss who was house poor (story #2) and trapped in his job.

Hope you enjoyed this, also hope it also provided some perspective. If you are reading my blog, you are probably  interested in becoming independent (occupational-financial-locational) just as I have. With rare exception, you don’t get there showing off and going deeper into debt.

PS – Shared this on a private financial forum (more details in the next post) and it generated many humorous responses. Many of us subscribe to a “stealth wealth” philosophy. This was the financial message of the Millionaire Next Door series by the late Dr. Stanley.


The FREE Monthly Teleconference is Back!

Join us with your questions – or just listen in learn

“Ask Daryl Anything About Consulting”

Register Here


 

© 2021 – 2022, https:. All rights reserved.

Insurance Question Updates…

During our most recent FREE Monthly Teleconference, questions were raised about insurance.  This led to an interesting discussion I thought best to share here.

But first, let me share some personal opinions on insurance. These are based primarily on an insurance class I took as an undergraduate engineering student. Although not a technical class, looking back it was one of the most valuable courses I took for the common sense advice it provided. Here were my general takeaways:

  • Be sure to insure the big risks. Buy what you need, but make sure you cover major risks that might bankrupt you. Consider umbrella policies, which are often inexpensive for the extra coverage they provide.
  • Self insure small risks. Take the largest deductible you can afford. Use the savings to add coverage at the high end if needed.
  • Shop around. Brokers can be helpful as they can search many companies. Dedicated agents can often save money by bundling policies, particularly personal insurance.
  • A good agent is worth their weight in gold. I consider my personal insurance agent a member of my business team, and am willing to pay a reasonable premium for service. Just as I do for other advisors — accounting, legal, financial.

Business Insurance – two types to consider – typical purchase options include business insurance brokers or professional societies.

–General Liability-– AKA business liability insurance, it covers costs for property damage claims against your business, and medical expenses if someone gets injured at your company. It does NOT cover malpractice (see below.) Often required by clients if you are going to be on-site. We carried this insurance.

–Professional Liability– AKA malpractice or “errors and omissions” insurance, it covers you and your company if you make a mistake in your professional services. On the advice of our attorney, we did not carry based on the nature of our work. But be sure to discuss with your attorney to determine if you need it.

Personal Insurance – four types to consider – typical purchase options include personal insurance agents or professional societies. The first will likely offer individual policies,  while the latter may offer group rates.

Medical Insurance — In my opinion, everybody should carry medical insurance. A catastrophic illness or accident could wipe you out. But don’t insure the small stuff. Instead go for the highest deductible you can afford. Consider “health savings accounts.”

Group plans are usually cheaper than individual plans, so check for plans though professional societies or similar organizations. If married with an employed spouse, simply go with their plan. Many of my consulting colleagues do the latter.

In my case, I went for an individual family policy with a high deductible. It was still pricy, but necessary. When I became eligible for Medicare, it was like getting a raise. One of the few benefits of growing older 🙂

–Life Insurance-– The goal here is to cover survivor needs for the foreseeable future. If you have dependents, yes, you need this. If not, or if you are older and/or financially independent, then may no longer be needed.

In my case, I carried two large term life policies when younger, but decreased coverage as I aged, the kids left home, and the mortgages were paid off. I have one remaining term policy with my professional society that decreases in value each year. It is relatively inexpensive so I keep it, although it may not make sense.

–Disability Insurance– Like life insurance, the goal is to provide income if you become incapacitated. A good idea if you have dependents, or if you are not financially independent and could not survive financially without your business income.

There are two flavors — short term and long term — the difference being the “waiting period.” I never carried short term, but carried long term with a six month waiting period. When I approached 62, I dropped it as I could apply for Social Security disability if needed.

–Personal Liability– Not business insurance, but good to have through your homeowner’s and auto policies. For extra coverage, consider a liability umbrella. Even several million dollars of umbrella coverage is pretty inexpensive. I consider it worthwhile to protect my net worth that I have worked hard to achieve.

The bottom line – Don’t fret about insurance. Rather, consider it a cost of doing business and a way of managing risk. The business premiums are normally tax deductible. Shop for rates – don’t over insure, but rather buy what you need at a comfortable level of risk.

Hope this very basic insurance review was helpful. More information here:


Disclaimer – This is not professional advice. If you have questions, ask your attorney or accountant for advice. (Always a good idea anyway.) Finally, don’t rely solely on insurance agents. As my financial advisor always says, “Never ask a barber if you need a haircut.” That said, I have found my insurance agents to be honest and helpful.


The FREE Monthly Teleconference is Back!

Join us with your questions – or just listen in learn

“Ask Daryl Anything About Consulting”

Register Here


 

© 2021, https:. All rights reserved.

Why I use a Financial Advisor…

With tax time* upon us, I thought it might be helpful to share my thoughts on financial advisors (aka consultants.) I am all in favor of paying for sound financial advice from professionals.

Although semi-retired (and financially independent) I follow several financial and retirement blogs. They often provide confirmation of the my financial/retirement philosophies, along with new ideas to consider.

One area where I disagree with many financial bloggers is the use of paid financial advisors. Too many demean those who do so, implying advisors are a waste of money. I strongly disagree!

Many people (especially my fellow members of the male gender) seem to feel they are smarter than the professionals, and smarter than the market. I suspect many feel they are smarter than the casinos, too. Perhaps too much ego?

So even if you are well versed in financial matters (as I think you should) getting independent advice may still be well worth it. I consider the money I’ve spent on both my CPA (Certified Public Accountant) and my CFP (Certified Financial Planner) to be well spent.

Even after the fees, I’m pretty sure I’m ahead of where I might be had I gone alone. That is the same argument I often make to clients for using my professional engineering services. Furthermore, I already pay for professional legal and medical advice — why not professional financial advice?

A bonus is the saved time that was better invested in making money on my own expertise. And to me, more enjoyable too.

The key to success is finding the right professionals with the right credentials, the right experience, and the right “fit.” You may need to interview several, but a good place to start is to ask business colleagues for referrals. That is how I found my team of advisors.

— Credentials — I use both a CPA and a CFP. I also use an attorney for estate planning. All three are in small firms, which I appreciate as a small business person myself. We all understand each other, and the challenges we face.

My CPA was a referral from a business colleague dating back 40 years. Over the years, my accountant changed after the first retired. My CFP was a referral from my CPA dating back 20 years. I’m also on the second CFP after the first retired. In both cases staying with one firm provided continuity.

As a bonus of sorts, the current CPA and CFP are both younger than me, which I expect will be advantageous as my wife and I age.

— Experience — All three advisors have many years of experience, particularly with small firms like mine. They also often share general business advice.

— Fit — Last, but not least, you must be comfortable with your advisor. Many years ago, I tried an estate attorney at a large downtown law firm with poor results. It was a referral from a friend, but not a good fit for me.

After being charged double what he estimated, I replaced him with a single person firm with much better results. No fancy office — no fancy suits — no fancy fees. Just good solid advice at much more reasonable rates. And honest estimates.

Some final thoughts…

First, go with a “fiduciary” which means being legally and ethically bound to act in your best interest. Unfortunately, not all advisors meet this criteria, thanks to good lobbying by those who are not fiduciaries.

Second, I prefer fees based on “money under management.” That way you are both on the same page — the better you do, the better your advisor does. “Fee only” advisors are good if you only want occasional advice. I would steer clear of commission based advisors.

Third, I prefer small professional firms much like my own engineering consulting firm. As an aside, my doctors and dentist are also small independent practices. Probably a personal bias, but it has worked well for me.


* Even though tax deadlines are now delayed, it’s back to work on my taxes. Actually, back to the very helpful tax worksheet supplied by my CPA. She will take it from there, and I am delighted to let her do so. I’ll stick with engineering.

As I once told my MBA/CFO son who was with an accounting firm at the time, “People like me will pay people like you big bucks to take care of this stuff.” He just grinned…

P.S. Special thanks to Tom G (CFP) & Jessica V (CPA).


The FREE Monthly Teleconference is Back!

Join us with your questions – or just listen in learn

“Ask Daryl Anything About Consulting”

Register Here


 

© 2020, https:. All rights reserved.

On joining the “Laid Off Twice” club…

Here is a reply to a post by Cubert at Abandoned Cubicle regarding layoffs… which somehow seems appropriate for Labor Day…


Best damn thing that happened to me – twice. The first time got me thinking about starting my own business — the second time (a dozen years are) cinched it.

Thirty+ years of running my own consulting engineering firm was great – much better than another thirty+ years of cubicle life!

The first layoff came two years out of college, with a very pregnant wife. Fortunately, soon found another job, but the experience profoundly affected me. I became a frugal Mr. Money Mustache (a fellow blogging engineer) of the 1970s.

I also started planning my escape – whatever it was going to be. Dropped the MSEE studies. Got practical — took a class on TV repair (not practical today), followed by getting a Master Electrician’s license (a bit more practical.) The goal — be able to put food on the table for a now growing family.

Stepped in up a bit when a friend (who became my business partner) and I started moonlighting. Got my PE (Professional Engineer) license, something I had blown off in school. Spent time learning and doing, not wasting time on TV or sports events.

Even made a career change to Sales Engineering to hone my business skills. 

The second layoff came twelve years later with a startup. After providing much needed help with sales and marketing, got laid off (OK – fired) after 18 months when the founder’s buddy joined the company. (The buddy that did not have the cojones to do so at the start. )

Oh well — it was a “learning experience.” That means it cost me, was painful at the time, but in retrospect worth it for the experience gained. Plus it vastly improved my BS detector.

So I hung out my consulting shingle. Bad way to start a business — I lasted about three months before climbing back into the corporate womb. Was not FI (Financially Independent) and could not generate income fast enough. But even more determined to have my own consulting business.

Socked money away, and started creating credibility and visibility via writing and teaching. When it became apparent layoff number three might be on the horizon, I made my JumpToConsulting.

That was in October 1987 — the day the stock market crashed. But once again I survived, and was now OI (Occupationally Independent.) Thanks to hard work, frugal living, a very supportive spouse, and a bit of luck I achieved full FI status a few year later. 

The last 30 years have been a blast. I’ve traveled the world solving problems and teaching classes in my engineering speciality. In 2010 I started a blog (JumpToConsulting) to help guide others who might be so inclined to pursue this path to independence.

In 2015, my business partner and good friend of 40 years passed away, and I decided to wind the consulting practice down. I still do about 6-8 projects a year, mainly training which I love to do.    

Now semi-retired, I split my time between MN (where there are grandkids) and AZ (where there is no snow.). With LI (Location Independence), I achieved the “hat trick” of FI/OI/LI.  


Those are MY layoff stories. Last fall, Cubert and I met for coffee in MN. I encouraged him (and encourage all of you) to make your dreams real. Frugal living and focused hard work pay off. 

Independence rocks — Uncle Daryl


Join us for our next FREE monthly teleconference.
“Ask Daryl Anything About Consulting”
Register Here


© 2018 – 2019, https:. All rights reserved.

Consulting Fee Study – 2018…

Here is a link to a recent consulting fee study from Consulting Success.

Over 33,000 consultants were polled, including Yours Truly. Not sure how many responses, but with that size database the results are statistically significant.

Here are some a key findings:

  • 44% of the consultants with less than 4 years experience earn over six figures. Yes, even if you are just starting out, the potential is there.
  • 72.5% of consultants bill based on time. Very popular with technical consultants, but I recommend charging by the project rather than by the hour.
  • For 56.7% of consultants, their average consulting project is $10,000 or less. Many well executed smaller projects still add up to big $$$. They did for us.

Unfortunately, the study does not share specific rates. But primarily serving management consultants, Consulting Success emphasizes ROI (return on investment) based fees.

For example, if you can show a predicted ROI of $100,000, one should be able to sell a fee of $10-20,000 — regardless of time spent.

In my opinion, ROI is not as useful for technical consultants where clients are looking for concrete solutions to specific problems. Nevertheless, the data is still useful.

Special thanks to Consulting Success for sharing their results.


You may be interested in these past posts:

© 2018, https:. All rights reserved.

My top 5 mistakes as a consultant…

Making mistakes are part of starting and growing any business (including consulting firms.) In fact, if you’re not making some mistakes, you’re probably not trying hard enough — nor are you learning.

Here are five mistakes I’ve made:

(1) Not sticking to the knitting – Back in the late 1990s, we got caught up in the dot-com frenzy. When a colleague approached us about collaborating on a web portal, we jumped right in. After all, we didn’t want to miss the boom.

If didn’t take too long before the boom went thud. But not until we had spent thousands of dollars for a software developer, and hundreds of hours trying to sell ads to pay for it. We even took out a booth at a trade show, secretly hoping Microsoft might buy us out.

It became obvious this business did not fit with our consulting practice. We had no leverage. It really belonged with a magazine where they could add it to their advertising options.

So we sold it. Remember the trade show booth? One publisher had expressed interest, so we approached them about partnering. They countered with an offer to buy us out. Done deal, and everybody was happy. We even escaped with the shirts on our backs.

Lesson learned — stick with what you do best, and make sure anything new fits with your existing business.

(2) Not paying attention to receivables – When we started, we provided contract instruction for a training company (no longer in business.) They were a major client, and kept us pretty busy.

Everything went fine for a couple years. Then they started to slip in paying their invoices. Pretty soon they owed us a about $25K, which included both time (soft cash) and expenses (hard out of pocked cash.) About that time, we discovered they owed all of their contract instructors similar amounts.

After a brief panic, we got mildly aggressive about getting paid. We liked the work, and didn’t want to antagonize them, but we still needed to get paid. It took a year or more with continued pressure to get their account current.

Not long after that, the training company filed for bankruptcy, effectively stiffing many other instructors. As much we liked working with them, we no longer extended credit — all jobs were “payment in advance.”  It soured the relationship, but it saved our bank account.

Lesson learned — watch your receivables, and enforce payment. You are not a bank.

(3) Not getting a deposit – This one blindsided us, and cost about $10K in lost time and travel expenses. It was a small company, and they were in a panic. So we dropped everything to fight their fire.

Unfortunately, before getting paid they went bankrupt. Our invoice fell within a 90 day window, which meant the payment was denied by the courts. Had we been paid, it would have been “clawed back.” All completely legal.

The bankruptcy itself was a sham. The small company was owned by an equity firm (affiliated with a certain past presidential candidate from Utah.)

They put several firms in bankruptcy after shifting assets. It stunk to high heaven, but there was nothing we could do. We eventually got ten cents on the dollar, which paid our  lawyer.

Losing the travel expenses was really annoying. Not only did they steal our time, they stole our money.

Our lawyer suggested getting a travel advance from everyone, or even the full fee in advance. Apparently if you don’t extend credit, the advance payments can’t be “clawed back.” (Check with your own attorney on this.)

Incidentally, this has not been a major problem. In 30 years, we only lost money twice, and had one close call as discussed in Lesson #2. But I still get an advance deposit prior to travel (typically $2500.)

Lesson learned – get a deposit prior to travel.  If worried, get progress payments or full payment in advance.

(4) Not controlling our own training programs – After a few years of consulting, we decided to offer our own training programs, based on solving the problems we were seeing. Clients began asking for this to avoid future problems, and we decided to add classes to our services. It took several attempts to get this right.

We started by collaborating with a test lab with moderate results. Their emphasis was on testing and regulations, while our was on design. So we split the time for our first class.

The initial feedback showed much higher interest in how to prevent and fix problems, while the testing interest was more esoteric. It was bit touchy, but we decided to go on our own. We did, however, remain good friends with the test lab and collaborated on other projects.

Later, we approached a test equipment vendor about adding us to their seminar program. Working with their field sales personnel, we presented two multi-day seminars which were well received.

We promoted via highly targeted direct mail, and that worked well. We then wrote a white paper with recommendations on how to proceed.

Unfortunately, their marketing department had their own ideas. They spent a ton of money on a fancy promotion with almost zero results. No second chance – they had blown the budget.

So after licking our wounds, we offered to run the program. We would pay for the direct mail promotions, prepare and print the materials, and present the classes. They would provide meeting space and local support, but at no cost to them.

If finally worked. We trained over 10,000 students with that project, netting us $12-15 million. Not too bad for a couple of goofy consulting engineers just having fun.

Lessons learned – take control when needed (and don’t give up.)

(5) Not appreciating barriers to entry – Already addressed this in a previous post, but it bears repeating.

This little adventure took place during out “part-time” consulting phase. It took place in 1981, in the early days of the personal computers. We were still very green about consulting, but willing to experiment and learn.

We developed a three hour seminar on using personal computers for business for a local vocational school. The initials offerings were highly successful, so with the schools permission we decided to do a full day version which we promoted at ran our expense.

But instead of the 80 people like our last class, 3 showed up. What happened ??? Unknown to us, a new computer store decided to promote their business with FREE seminars. How do you compete with free? You don’t.

Thus ended our computer seminar adventure. We learned about barriers to entry. As I groused to my business partner over beer, “We’re engineers. Never again will I go into a business where some kid in a computer store can eat my lunch.”

Our later training programs took an engineer with several years of experience, along with the ability to actually teach (another barrier.)

Lesson Learned – First figure out the barriers to entry. Then use them.

There have been other mistakes over the years, but these were the biggest ones. We always looked at our mistakes as learning experiences. As such, we paid our tuition and gained new knowledge in how to run our consulting firm.

Closing thought –  My late business partner often mused, “I never make the same mistake twice. It often takes me three or four times until I realize what I’m doing wrong.” And then we would laugh and move on.


RIP Herr Kimmel – It has now been three years since you left and stuck me with this crazy engineering consulting firm. So here is a toast – which I hope is wrong 🙂 

© 2018 – 2019, https:. All rights reserved.

An epiphany on financial priorities…

Time for a mini-rant…

While walking the dog (Sami the Shih Tzu) a few nights ago, I was struck with an epiphany of sorts. It involved a neighbor and his vehicles.

Parked in his driveway were a new Cadillac Escalade and a new Audi, along with a pretty nice Harley motorcycle. Nothing wrong with that, except he has complained in the past about not being able to retire.

That is when it struck me. For the cost of those vehicles, he could have bought a rental property, which would increase in value with time (rather than decrease) and throw off cash in the meantime. He would own a cash producing asset, rather than cash sucking liabilities.

Which is what we did several years ago. We bought a rental property, and continue to drive two old vehicles instead (a 10 car old truck, and a 20 year old sedan.) I could care less about impressing the neighbors.

The cash flow is great — the property has increased in value — and we enjoy the tax advantages of being a landlord. It has outperformed many of our other investments.

Not bragging or criticizing here. Just sharing an observation.

Maybe my attitude came from starting and running my own business – or maybe it was a reason I was able to do so in the first place. Hmmm…

Too many people have told me they would like to start their own business (including consulting), but can’t afford to do so. Yet they drive fancy cars and more.

It is often just a simple case of financial priorities.

End of rant…


P.S. Remember – Uncle Daryl want YOU to find your freedom too — financial, occupational, and more.


Read more here:

© 2018, https:. All rights reserved.

Consulting Fee Study – 2017…

Here is a link to a recent fee study by Consulting Success.

While this blog focuses on general business consulting, technical consultants should find this of use as well.

FYI, typical fees at Kimmel Gerke Associates were project based. Typical projects were in the $5,000 – $20,000 range and up. Typical annual compensations exceeded our corporate salaries, plus providing retirement funding, profits, and tax benefits.

As such, we did better than staying “employed.” Plus we had a lot more fun and freedom.

Not bragging — just saying it can be done. But it doesn’t happen overnight or without some work. You first need to build “credibility and visibility.”

Never too soon to start the process, so ask “What can I do TODAY?” Best wishes…


Here are three posts to help you start…


P.S. May slow down here for the summer, but stay tuned as I continue to share  thoughts on making your own JumpToConsulting.

© 2017 – 2018, https:. All rights reserved.

Setting up your team of advisors…

As a consultant, you’re offering your expertise as a more efficient way to do things. Follow your own advice, and hire the expertise you need.

Years ago a new consultant (and fellow engineer) was grousing about how much trouble he was having with a fax program on his computer.

My response was “Why spend time on that when you could spend that time promoting your practice? Just go buy a fax. ” Sheepish, he agreed.

Done things like that myself. It is an easy trap to fall into, particularly when starting out and the budget is tight.

Here are my recommendations for setting up your professional team. Over the years, I have acquired eight that have all proven valuable to my consulting business.

(1)Attorney — Seek out an attorney who works with small businesses. If you brother-in-law specializes in divorces, move on. Better yet, ask him for a recommendation. If you don’t have a BIL, ask business colleagues.

That is how I found my business attorneys (MN and AZ.) They handled incorporations and also acted as “statutory agents.” The latter means they kept track of the annual corporate filings, for a very nominal fee.

They can also be very helpful if you are threatened with legal action. Yes, it happens, but having your attorney respond often nips things in the bud. (The voice of experience…)

(2) Accountant — Like your attorney, find an accountant who works with small business. I strongly recommend a CPA, which is very helpful if you are ever audited.

In addition to preparing your taxes, your accountant can set up your chart of accounts, and can handle payroll reports, retirement plans, and more. Trust me, it is worth it, and it leaves you free to pursue your business.

Accountants are also a good source of referrals to other specialists like financial planners (how I found mine.)

(3) Banker — As you should establish a separate business bank account, so should you establish a business relationship with a banker. The latter is very helpful if you ever need a loan for equipment or a vehicle.

While I’ve been with the same bank for many years, I’ve seen individual bankers come and go. As a result, I suggest an occasional short visit just to stay in touch.

(4) Computer — Unless you are a computer consultant yourself, find someone who can advise you and bail you out when thing go awry.

For years, we used by late business partner’s son for our PCs. When I recently switched to Apples, I found a local Apple consultant who was worth his weight in gold.

He accomplished in two days what might have taken me two months. Money well spent, and he is available if I have additional questions or problems.

(5) Internet – Planning a web site? Or have one that needs upgrading? Hire a web designer to both design and maintain your site. If you are blogging, you still provide the content, but you web consultant handles the rest.

Just today, I had a small problem with one of my sites. A quick email resolved the problem. Who knows how much time I might have spent trying to figure out what went wrong?

(6) Insurance Broker — Sooner or later, you will need business insurance. As a minimum, you’ll need “General Liability”, and perhaps “Professional Liability” insurance. If you have a business vehicle or commercial office space, you’ll need insurance for those too.

While your personal home/auto/life agent may be able to help, I’ve found a broker very useful in locating specialized policies for business.

(7) Estate lawyer — Even if you are young, it is never too soon to think the unthinkable. A sad example is the entertainer Prince, who died suddenly without a will. Not only is there infighting among relatives, but his philanthropic wishes will likely never be realized.

Ask your business attorney for a recommendation — and then meet with him or her!

(8) Financial planner — Last, but not least, add this member to your team. Time flies by, and suddenly you are looking at retirement – or worse, wishing you could retire.

Although many people fancy themselves good investors, unless you are willing to put in a lot of time and energy, I suggest professional help.

My recommendation is for a fiduciary whose fee is based on your assets under management. That way there are no conflicts — both of you are on the same team.

I found my financial advisor through my accountant, and could not be more pleased.  I often joke that even when the market crashed, he lost less that I would have lost.

But the losses were on paper, and thanks to his advice, I am now very well positioned in my retirement. Which allows me time to spend on the JumpToConsulting project 🙂

 So those are the eight members of my team of professional advisors. An now, the standard disclaimer – this post is educational only and does not constitute professional legal or financial advice.

But do seek out that professional advice — you will not regret it! 

P.S. As an aside, most of my advisors are in small practices themselves – often one or two people. I prefer that — they provide a perspective often missing from larger firms.

© 2017, https:. All rights reserved.

Saving for retirement…

Time for a financial rant – based on a recent news article.

One of the first things to do upon making your JumpToConsulting is to set up a retirement account. Trust me — years later you will be glad you did. I am!

According to a recent on-line article by CNBC, about half of US families have ZERO retirement savings. Nearly 70% of adults have less than $1000 in retirement accounts. Not good…

So take this important step right away, even if you are moonlighting. You can do it as part of setting up your business bank account, with automatic transfers to savings.

Better yet, set up automatic transfers to an IRA with Fidelity or Schwab.

We did this soon after starting EMIGURU. We first set up Fidelity IRAs. Several years later, our accountant suggested a Keogh, which let us put aside up to 25% of our income.

The best part is that 25% is tax deferred. In the meantime, compounding does its magic.

We use a financial planner with who manages the Keogh (and other investments) through Schwab. Fees are based on a per-centage of the portfolio, which in my opinion is the only way to go. As such, he is a fellow consultant and fiduciary, which means (unlike a broker) he puts my financial interest first.

Why not do it yourself? You can, but I prefer having a professional manager, letting me concentrate on making more money at what I do best. The same reason I use an accountant, lawyer, and other professionals.

Here are some savings guidelines/suggestions from the article:

  • By age 30, have your annual salary saved.
  • By age 35, have twice your annual salary saved.
  • By age 40, have three times your annual salary saved.
  • By age 45, have four times your annual salary saved.
  • By age 50, have five times your annual salary saved.
  • By age 55, have six times your annual salary saved.
  • By age 60, have seven times your salary saved.
  • By age 65, have eight times your salary saved

Fidelity simply recommends salary saved by age 30, and ten times your salary by age 67.

When younger, I must confess I was lax about this myself. Fortunately, my business partner insisted we do this. We started at age 45 for me. Never missed the money, and after 25 years at 25%, we both ended up with nice nest eggs.

Now at age 70 and starting to draw on the Keogh, I’m so glad we did this!

It is never to early (or late) to start. Do it TODAY – whether you are consulting or not!

End of rant. Remember, Uncle Daryl wants YOU to find your freedom too!

P.S. Stay tuned. The long promised Newsletter is about to launch, along with a free white paper based on a recent magazine article. If you have not done so, sign up now.

© 2017, https:. All rights reserved.

Don’t cut your fees… cut the scope…

Sooner or later you will be asked to cut your fees. The reason may be legitimate (budget constraints) or your client may just be testing you (particularly if you are new.)

Either way, do NOT cut your fees. Rather, cut the scope…

  • If the budget is truly limited, this may salvage the project and allow you to still help your client, albeit in a more limited fashion.
  • If you are being tested, it sends a message that there is no “fat” in your proposal. This testing tactic is quite common with purchasing agents, who are tasked to get the “best deal” for their employer.

Don’t fret about doing this, and NEVER buy the business. Your time is better spent finding a client who is willing and happy to pay for your services.

This is the voice of experience speaking. Prior to consulting, I was a sales engineer for ten years. On two occasions I spent considerable time to round up “demo” equipment at substantial discounts for some “needy” customers.

Both turned out to be very poor customers, demanding extra support and hand holding while grousing all the time. Not a good deal.

As a result, this lesson was learned prior to starting my consulting firm. Good clients appreciate your value, and are willing to pay for it. If they don’t, move on.

Another example. I once put together a proposal for an overseas training project, which involved several extra tasks. Upon submission, the purchasing agent asked for a reduction, so I asked for a target price. Based on that, I revised the proposal – no small task in itself.

The purchasing agent’s response was, “We like the new price but we still want everything in the original proposal.” My response was to withdraw the proposal. I no longer felt comfortable working with the client.

I found out later that the engineering manager who initiated the project was unhappy — but not with me. Apparently this purchasing agent had done this to other consultants. While I didn’t like losing the business, at that point I felt justified in my action.

The best part was some good business came in, which I would have passed up had I gone with the bad business. Karma anyone?

Finally, the late Howard Shenson advised setting your fee at the minimum amount you would accept. That way there is no fat, and if you lose the business, you don’t end up second guessing yourself. Good advice – I’ve followed it for years!  

P.S. Now back in Arizona, and hope to be posting again on a regular schedule. It was the “Lost Summer” with my sister-in-law. Alzheimer’s is a cruel disease.

© 2016, https:. All rights reserved.

Avoid Tax Audits… Keep Your Books Clean…

Just finished gathering my annual tax information, so taxes are on my mind. It gets shipped out tomorrow to my accountant, who (as a consultant) will do the financial magic.

Years ago my accountant advised me to keep good records and to keep them clean. One never knows when one might be audited. Sometimes it is purely random, and sometimes it is the result of an abnormal condition that flags your return. .

According to a recent news article, 1 % of IRS tax returns are audited. It is slightly higher for small businesses. It seems some business owners can’t resist the temptation to fudge the numbers, either through questionable deductions or hiding income.

My advice — do NOT do this! An audit can easily cost you thousands of dollars — fees, lost time, and lost revenues. And while you can deduct the legal/accounting expenses, you can’t deduct or recover lost revenues — they are gone forever.

Furthermore, once you fail an audit, expect to be audited again. I know one small business colleague who learned that lesson the hard way. His audits went on for several years.

More advice — use a CPA! Even if you can do the taxes yourself. Nothing like having a CPA (Certified Public Accountant) sign your tax return for credibility with the tax agencies. Or at least signal them that you have a professional tax advisor in your corner.

To keep the costs down, I keep my own books. Nothing fancy here — I used Quicken for years. Although a simple check register system, it can generate various reports. Such as the P&L (profit and loss) statement, which my CPA uses to prepare my taxes.

My CPA has helped in several other ways. Setting up a chart of accounts, sharing general business advice, filing other reports, and providing vetted referrals for insurance and financial management. It has been money well spent.

If you do get audited, don’t despair. I’ve been audited twice — once by the IRS, and once by the great state of Arizona.

The IRS audit was supposedly “random.”

The conversation went something like this:

Auditor – Which is better for you? To come into our office next Tuesday or next Wednesday?

Me — Neither. But can my CPA handle this? He prepared the return.

Auditor — Uh… yes… I guess that would work.

I suspect the audit was not random at all. But the issue got resolved, whatever it was.

End of audit.

The Arizona audit was supposedly due to high medical expenses one year.

The conversations went something like this:

Auditor – I need to verify all your medical expenses.

So I sent copies of all the bills.

Auditor – Now I need to verify all your insurance payments.

So I sent copies of all the payments.

Pretty sure the auditor thought I did not save these statements. I also included a list of expenses I had missed — a couple of drug charges, plus mileage for the various medical appointments.

I then asked if I should file an amended return to get money back.

End of audit.

Thanks to a CPA, clean books, and good records, I passed both times. And I didn’t lose any sleep over either one. In fact, it felt pretty good to put a stop to any fishing expeditions.

Keep your books clean too — it is just good business to do so!

© 2016, https:. All rights reserved.

Do you need a public office???

It depends… If your clients come to your office, it probably makes sense… If you go to your clients, it probably just wastes money.

In the first case, a public office adds a level of professionalism, and keeps you out of trouble with home owners associations or zoning boards. But don’t get carried away – a modest space will do just fine for the solo practitioner.

In the second case, a spare bedroom works fine. You should, however, set aside a dedicated space for your office. Working on the dining room table gets old very fast. It can also be disruptive to family life.

Some people, however, simply need a separate place to work – regardless of client contact. And some need the outside human contact that an office brings. This is often true for those migrating from the larger corporate environment.

The most important thing when starting out is to conserve resources. You don’t need fancy digs with a prestige address — you just need a safe quiet place to work with adequate resources (desk, computer, telephone, file cabinets, etc.) You are selling your capabilities, not fancy brick and mortar.

Here are some examples I’ve seen over the years:

(1) Kimmel Gerke Associates (yours truly) – Since we almost never had clients visit us, my business partner and I set up separate offices in spare bedrooms.

While we once considered sharing an office, we were both traveling so much it didn’t make sense. Besides, the telephone and the Internet worked fine to stay in contact. And we both liked our twenty foot commutes.

Our “office managers” were our wives, so we truly ran a “mom and pop” operation. Not for everyone, but it worked very well for us.

(2) Advertising A one person agency, this consultant leased about 100 square feet of space from a print shop. I used her services with good success many years ago after a misfire with a fancy downtown agency. Hire the person, not the office.

That was all the space she needed, plus the shop provided a phone line with a receptionist. It was mutually beneficial, as the print shop now could offer additional services. Besides, she did all her printing with her landlord.

(3) Sales consultant – Another one person firm, this friend leased space in a restaurant, which I found quite clever.

His office had a separate entrance on a lower walk out level. The rent was very attractive, as this was bonus income for the restaurant, and parking was never a problem. And he always had a place to take clients for lunch.

(4) Attorney – My estate attorney is located in building with other small professional firms.

He has about 300 square feet, divided into two rooms. The back room is his legal office, with the appropriate lawyer’s desk, credenza, and meeting table. The front room is the reception area with the requisite legal library, with a desk for his office manager (his wife.)

The office is nicely appointed, but not pretentious. His fees reflect the lower overhead too. I discovered him after being gouged by a large law firm with fancy digs and high overhead.

(5) Web design My web designer is also located in a building with other small firms.

He has about 200 square feet with a couple of desks for he and his office manager (once again, his wife.) He has a back office in Nepal (where he grew up) so this space is modest but more than adequate. He recently became a US citizen, and is doing very well – the classic immigrant success story.

He started out working from home, but with the birth of two children, he got “kicked out” of his office. He is still close to home, but is not distracted by family activities.

(5) Consulting engineer – Now, a not so successful example story from many years ago.

When we started out as consulting engineers, this refugee from a large government agency told us we MUST get an office. After all, HIS office was located downtown with a prestigious address. He even chided us for working out of our homes.

Within the next year, he went bankrupt.

So, as you consider YOUR JumpToConsulting, do YOU need a public office? Weigh the decision carefully. Unless you are seeing outside clients (or you simply need the private space,) I generally advise against it. But if you do decide on a public office, I’ve shared some clever (and inexpensive) solutions.

Conserve those resources — you can always move to a public office later. Unless you are like me, and just love that twenty foot commute!

P.S. – I once asked a fellow consultant sitting next to me on a cross country flight where he had his office. He looked out the window, grinned, and replied, “Well, today it is about 30,000 feet over Denver…”

© 2015, https:. All rights reserved.

How much is enough?

How much IS enough? The question still haunts me…

Here are three stories. All three affected my thinking. Perhaps they will affect yours.

Story 1…

The question of enough was posed by a fellow consultant several  years ago. His wife had just been diagnosed with cancer, and we were talking after a professional society meeting. He was doing some serious introspection, and as a friend and colleague I lent an ear.

“How much is enough?” he mused. He had worked hard, was successful, and had enough in the bank. His immediate priority was enjoying whatever time his wife might have.

So he backed off on the business, and they went on some cruises. She responded well to treatment, and happily, she recovered. But it did reset his priorities on what was enough.

(Update 7/19 – Sadly, she recently passed away, but he reiterated how glad he was that the last several years were well spent on time together rather than gaining a few more dollars.)

Story 2…

My first encounter with enough goes back 45 years. My new boss hosted a Christmas party at his new house on a lake. It was a beautiful place in a beautiful setting. Being recently married, I thought how nice it might be to someday have similar digs.

Later, I thanked him for the party and complimented him on his new house. He smiled, and then offered some fatherly advice.

“Thank you,” he said. “It is nice. It makes my wife happy too. But there is a downside. We put all our money in the house, and as a result, we can’t do anything else.” He continued, “You are just starting out. Be careful about committing to a big fancy house.”

I decided that our modest house was enough. Each time we moved we stuck with enough. And today we have still have enough. 

Story 3…

My next encounter with enough came 12 years later. I was working for a successful entrepreneur, who net worth somewhere around $50 million.

An old German who had escaped Hitler, he came to America and worked as an engineer. Following a dream, he started a business in a garage. A combination of working hard and being in the right place at the right time with the right product led to phenomenal success.

But he was still  an old engineer at heart. One evening at a trade show, he hosted a bunch of us for dinner. After a few beers (after all, he was an old German), the subject of how much was enough came up.

He said, “You know, a couple of million is probably enough for most of us. How can you spend it all? After that, you are only keeping score.”

Finally, how much is enough for you? Thanks to starting my own consulting practice combined with prudent living, today I can say I have enough.

© 2015 – 2023, https:. All rights reserved.

Small town living – a path to financial independence?

Here is a reply I left recently at my favorite financial blog, Mr. Money Mustache.  Pete, a fellow engineer, spent the last several years challenging and cajoling people to become financially independent.

He “retired” at age 30, and now does what he wants with no financial worries. Lives a nice lifestyle in nice digs, too.

His formula is simple — cut consumption and increase savings. When your income from investments equals your expenses — viola — you are now financially independent. He did it in seven years, and you can too.

So what does this have to do with consulting? You don’t need to be fully financially independent to make your JumpToConsulting, but you DO need some reserves. Assume at least six months with no income.

So if you are overconsuming and living pay check to pay check. you can’t make a JumpToConsulting, or any other jump. You first need to cut your expenses and change your mindset and your lifestyle!

One way to do this is to move to a small town. That is what my older son (the inspiration for this blog) did this year. Here is his story:

Don’t overlook small towns – particularly those about 100-150 miles from a major city.

After living in the city, my older son recently moved to a small town in Minnesota – population 5000. About 100 miles from Minneapolis, it is beyond commuting distance so it is no longer a suburb. But it still close enough for city resources (hospitals etc.) or a big city “fix” if needed.

They bought a nice house for 1/2 the cost in the city. The grade school and a park are across the street, and the high school is a few blocks away. The kids love it – they can bike all over town with their new friends. His commute is under ten minutes of country driving. His wife works in the high school as a teacher’s aide, and loves it.

They were concerned about leaving the city, but have been pleasantly surprised. Small town festivals –wineries — microbreweries — parks with uncrowded campgrounds. It may be rural, but there is still plenty to do. And the big city is still only two hours away.

Looking for a job change, he stumbled – almost by accident – on an executive opportunity with a small medical manufacturer. The company was delighted to get someone with his talent and experience, and they pay him accordingly. The school was delighted to hire his wife too. Big city wages with small town cost of living — how great is that? Plus the quality of life.

These opportunities abound, but you must seek them out. So if you are not yet financially independent, consider this as one way to speed things up — and enjoy the journey immediately. My son admits he never dreamed they would live like this.

A few more details on my son. After taking a company through a complex acquisition, he no longer had a job. Small thanks for helping grow the firm by 10x in a couple of years as their financial guru.

So he took his MBA in finance, his experience, and his proceeds and hung out his shingle as a consultant. The early discussions with him were the catalyst for this blog.

Although he was building the business, it was going slower than hoped. When one of his clients make him an offer he couldn’t refuse as the VP of Finance for a start-up, he jumped at it. Besides, like his dad, he has a love of small business.

But after a couple of years, it became obvious the start-up was stalling. Furthermore, there was friction with the founder, who was unwilling or unable to make necessary changes. (Been there myself.) So rather than wait for the axe to fall, he started a job search.

One interesting opportunity was with a medical device manufacturer in a rural community. As both he and his wife grew up in the city, there was some reluctance to purse it. Still, the job sounded interesting, so they decided to go in a new direction. So far, so good.

I’m proud of my son for taking that chance, and for working hard, like a good consultant, to make a positive impact on the world.

I’m also proud of his brother. A financial attorney in a large Manhattan firm, he recently took a chance and initiated a special project on alternate currencies. As their “Bitcoin-guru”, he too is working very hard to make a positive impact on the world.

Well done, both of you!

P.S. Thanks to the Internet and Fed-X, one can easily consult from small towns. And depending on your niche, you may even find plenty of clients right in you own backyard. 

© 2015, https:. All rights reserved.

Should you take equity in lieu of cash?

Here is a reply to a post by Michael Zipursky over at Consulting Success, where Michael discusses the pros and cons (mostly cons) of accepting equity or shares as payment for services.

Either way, both Michael and I do NOT recommend this. 

I completely agree! Never took stock, nor did I ever agree to work for free on proposals, with the idea that I would get the business if the company won the project (sometimes suggested by defense contractors.)

If asked, I simply explain that I’m too small to carry anyone for free. Better to pursue paying jobs than to lose opportunities being tied up with freebies. Besides, if they really need you they will find the money.

While I have a soft spot in my heart (or maybe my head) for startups, I’ve avoided them and pursued Fortune 1000 clients instead. Even then I’ve been burned (bankruptcies), but only twice in 28 years. Great post!

As a new consultant, you will run into this sooner or later, particularly with smaller firms. Some are strapped for cash — probably not good clients anyway. Others may be testing you — assuming you are hungry for business.

Neither are a good deal. Better to focus your time on real paying prospects.

Remember, you are a professional, just like your dentist or doctor. Very doubtful they would go for this either.

 

© 2015, https:. All rights reserved.

Some comments on fees…

Here is my reply to a post at Consulting Success regarding fees. Good info on this site — but with an emphasis on business/management consulting rather than on technical consulting.

As consulting engineers, we’ve used “project fees” for years. When quoting, we provide a budget and a general estimate for time. We use an internal hourly rate for estimates, but don’t include that in our quotes.

To me, hourly rates are useless. For example, if I’m getting a kitchen remodel, I don’t care what the contractor’s hourly rate is — I just want to know how much the project will cost. BTW, I’ve used that analogy on procurement people when asked about hourly rates.

Finally, we don’t bid “fixed fee.” Rather, we include a statement that “we will not exceed the budgetary estimate without client approval.” This gives us some room for contingencies or small changes. Clients and procurement people seem to like it too.

Hope this helps. I always appreciate Michael Zipursky’s insights.

Do you have questions of fees?  Ask away…

P.S. Been a crazy week here, as Mary broke her arm. On the mend after surgery…

© 2015, https:. All rights reserved.

Rating your clients…

Do you treat all clients the same? That question was posed recently on Succeed, a small business forum on LinkedIn. Always ready to share my opinions, here is the answer I posted there.

Like so many have said already, we strive to treat all our clients with respect. But in reality, some clients are better than others.

So, we divide our clients into three categories: A, B, and C.

Everybody starts out on the “A- list”, regardless of income potential. Size doesn’t matter. We’ve had small clients turn into large clients and/or great referral sources.

— Those who pay promptly and are pleasant stay on the A-list.

–Those who pay late drop to the B-list.

–Those who pay REALLY late or are difficult in other ways drop to the C-list.

Since much of our business is repeat business, it helps us prioritize our responses. Most of our clients are a sincere pleasure to work with. As for very few who are not — well, life is too short to put up with them.

Some further clarification. Just because they look like a good client does not make them one. Over the years, we’ve had to move a couple of well known companies to the C-List. Usually the problem lies with the bean-counters, not our direct clients.  But getting paid on time is important – and it shows appreciation and respect for your work!

Take care of your GOOD clients — and they will take care of you!

© 2013, https:. All rights reserved.

Consulting as a Path to Financial Independence – Part II…

In my last post, I discussed how consulting eventually led me to Financial Independence. The primary focus was prior to making my JumpToConsulting. In this post, I’ll elaborate on things done at and after my break for freedom.

First, I put away a startup stash. This is key, as there is nothing worse than having to give up too soon because you’ve run out of money. In my case, I had enough for six months with no revenue, or a year with half revenue.

Although I was pretty sure I’d make it this time (after a false start a few years earlier), a safety net still made sense. That also made Mrs. JTC more comfortable, although she was behind me right from the start. Plus as an engineer, it is always good to have a Plan B.

As it turned out, we never really needed to dig into the startup stash. Thanks to all the plans and a couple of startup contracts, we ran in the black right from the start. And although I stepped out first, my business partner was able to join me in a few months.

Next, we watched our income/outgo like a couple of hawks. No fancy offices – we both used spare bedrooms in our homes. No fancy cars either. Neither were really necessary, as most of our business was on-site, and often out of town.

Each month we would review both our bookings and our billings. The latter is really important for cash flow. Unfortunately, clients often delay paying (particularly their smaller vendors), so you need to stay on top of your receivables.

We did spend money on necessities, such as collateral (business cards, brochures, etc.) but even then we did not overspend. No fancy multicolor brochures — just two colors (blue and gray) on gray stock. We did hire a graphics artist for a logo and typesetting, and it all turned out very professional looking.

After two years, we set up retirement accounts. By that time, we knew we were going to make it, and the income was more predictable. Our accountant suggested Keogh plans, which let us put away up to 25% of our income in tax deferred accounts.

To even out the personal cash flow, we both drew modest salaries – about 80% of our previous corporate salaries. This forced us to be frugal, and helped maintain a cushion in the business account for slow months. It also assured that the Keogh funds would be available at year end.

Any additional profits were distributed as a bonus. Since we were a Subchapter S corporation, these were not “retained earnings” so we paid taxes on the bonus. These funds were put into our regular savings/investments.

At our accountant’s advice, we eventually hired a “fee only” financial advisor. Good thing we did — when the market went sour, he minimized our losses. That lets us focus on making money, while he manages it. Like us, he is a professional who knows his stuff and does his job well. We consider it money well spent.

A word of caution! You need to discuss these issues with financial professionals – your accountant, attorney, and financial advisor (if you have one.) The laws are constantly changing, and unless you are a financial professional yourself, you need their advice. The last thing you need is to tangle with the IRS.

Finally, we didn’t win the lottery — our incomes were comparable with corporate salaries for engineers, plus a reasonable profit for our risk. It was the combination of regular savings in the tax deferred retirement plan plus self-enforced frugality that eventually led to Financial Independence.

You can do it too, and you don’t need to be a consultant. But you do need to exercise some financial discipline and planning. Trust me, it is worth it! Good luck…

© 2013 – 2020, https:. All rights reserved.