So what is it about insurance (particularly health insurance) that spooks so many people?
After the Four Key Questions (a previous blog post), this is probably number five. The question is usually posed as, “So how do YOU handle insurance?”
For many, this issue is a potential show-stopper from making the Jump to Consulting. It need not be, and the answer is simple. You buy it — it is simply a cost of doing business, just like a computer or a copier. Furthermore, since it is tax deductible, you buy it with pretax dollars just like the big guys do.
Sure, the cost may seem like a lot, particularly if you are currently in a company subsidized plan. But in reality, you are already paying for it as part of your benefits package. Although you don’t see it in your paycheck, your employer certainly sees it as part of your overall compensation. As the old saying goes, “their ain’t no free lunch…”
Although health insurance is usually the main concern, you likely need several other types of insurance, including disability, life, and liability. Here are some comments.
Health Insurance – Even if you are young and healthy, you need health insurance. This is particularly true if you have a family or other dependents. Without health insurance, one accident or a bout of cancer can mean financial ruin. No, I’m not in the insurance business. Just get the insurance — it is the responsible thing to do!
Thanks to the recent government health legislation, medical insurance should be easier to obtain for individuals and small businesses. (This is not a political statement — just my opinion.) I’ve know several people who might be consulting today, were it not for a past medical condition that made them or their family uninsurable. Hopefully, that has now changed.
I suggest a basic, no frills plan, with as high a deductible as you can stand. If you are mathematically inclined, you can figure out the level at which you are no longer paying someone else to handle your money. As a bonus, if you don’t meet the deductible, the money you might have spent on a premium is still in your pocket.
You should consider a major medical rider, although with the new legislation, this may no longer be needed. You should also consult your accountant about tax preferred medical savings plans to see if one makes sense for you.
Life Insurance – If you are young and/or have a family, you also need life insurance. On the other hand, if you are single, retired, and/or the kids are all raised, this may no longer be important. This insurance is not for you — this is for those who depend on your income.
I suggest term insurance, which generally gives you the most bang for the buck. Yes, insurance sales people will emphasize the accruing monetary benefits of whole life plans, but do you want insurance, or do you want a savings plan? Remember, insurance is there to mitigate risks.
Also remember the sales agent is working on commission, and makes more money on a whole life policy. The younger you are, the more affordable and reasonable the term insurance.
Disability Insurance – Like life insurance, you definitely need this if you have others depending on your income. But even if you are single with no dependents, you still may want to consider disability insurance. The real question is, “What are you going to live on if you become incapacitated?”
I suggest a long term disability plan, with a waiting period of six months or more. Like any high deductible, a longer waiting period reduces policy costs. As far as short term disability, I’ve only carried that when offered by an employer and have never purchased it directly for myself. Set up a rainy day savings account to self insure for the short term risks.
Liability Insurance – If you are dealing with corporate clients, you will likely be required to show proof of general liability insurance. This typically covers risks like slipping on the customer’s icy sidewalk, or driving your car into their lobby. Their goal is for you to have insurance in place to minimize the need for legal action if something bad happens during a consultation.
Depending on your business, you may also need additional specialized liability insurance. Two examples are a physician’s malpractice insurance, or an architect’s error and omissions insurance. These are often available from professional organizations. You should definitely discuss the liabilty issues with your attorney.
Other insurance – You may want to consider other insurance offerings, such as coverage for expensive equipment or business interruptions. Keep in mind that your homeowner’s policy probably does not cover business related issues. Check this out with your insurance agent.
Here are some final thought on insurance. Shop around, as prices will vary. If you belong to a professional organization, they often offer individual plans at group rates.
One way to simplify your insurance needs is to find a good insurance broker. You want someone who specializes in small business insurance, which may or may not rule out your personal home/auto agent. Check with your accountant or attorney for a recommendation, or ask other small business owners. A good insurance broker can be a very valuable ally.
Well, I hope this has helped put insurance in its proper perspective. As I learned from a wise old college professor many years ago, “The goal of insurance is to protect yourself against the big losses, not the small losses. You can cover the small losses, but the big losses can wipe you out.”
Good advice today, too.
© 2011, jumptoconsulting.com. All rights reserved.
Whenever someone gets curious about consulting, they usually end up asking one or more of what I call the “four key questions.” As such, we’ll spend a lot of time on this blog addressing those questions. Here they are:
1. How do you get your clients?
This is probably the question most asked, and for good reason. No matter what business you start, you won’t succeed without customers.
The answer, of course, is Sales and Marketing. For many considering consulting, this is a potential show stopper. It may be due to professional pride (I’m not a peddler) or even fear (I can’t stand the rejection.) Either way, you need to get over it if you want to be a successful consultant.
But never fear, I’ll share a bunch ideas that have worked for me (and others too.) Personally, I view the Sales/Marketing challenge as just another problem to be solved, no different from any other consulting challenge. Put in this perspective, it can even make getting customers fun.
A final thought — if you are just starting out, you’ll need to do this yourself. If you decide you can not take on this on, you may want to reconsider consulting.
If you are really set on consulting, you could join an established consulting firm that already has the sales/marketing process in place. But sooner or later, you should learn to master these challenges yourself. Even as an employee, the “rainmakers” are cherished.
2. How do you decide what to charge?
This is the next question that arises, and there is no simple answer. Always remember, however, as a business you must make eventually make a profit. Otherwise, you might as well stay where you are at, even if that just means going fishing.
We’ll look at several ways to price your services. These can range from hourly/daily rates to project based fees, retainers, etc. To begin with, you’ll need to determine an hourly/daily rate, based on your comparative worth in the marketplace. This includes your salary, overhead, and profit. The latter is important, as their is no sense of doing work for the same or less that of an employee.
This is just a starting point, however. Most successful consultants eventually figure out how to get a premium for their services. They may further expand their income opportunities through leveraging, such as classes, books, or other information based products. The current trend is away from hourly rates, and towards project or value-based fees.
Whatever you do, don’t price your services too low. This is a common error made by brand new consultants, or those consulting on a part time basis. My advice — don’t do it! Frankly, the clients you attract with bargain prices are probably not worth having in the first place.
3. How do you decide what to consult about?
This question is personal, and a bit tougher. The challenge is to find something the market values, but that you also enjoy. The latter is really important, for there is no sense starting a business around something you don’t like to do. You also want to look for the chance to leverage your experience, skills, and education.
If you already like what you do, the choices are simple. Maybe you are like me, an engineer who really liked engineering, but who was tired of the big company BS and bureaucracy. Since I already had the technical skills and experience, I just had to work on the business issues. But even here, I had credentials, contacts, and credibility with my future clients.
If you don’t like what you do, it becomes a bit tougher. But don’t overlook a lateral move that let’s you leverage yourself.
An example is a young lawyer I met on an airplane. After getting her law degree, she found she really didn’t like the day to day grind of being a lawyer. She discovered, however, that she really enjoyed the challenge of jury selection, a task most of her colleagues loathed. She turned this interest into a successful consulting and training firm serving the legal profession. As a lawyer herself, she has instant credibility with her clients.
4. How could I get started?
This is usually the last question to come up, and often mildly disguised as “How did YOU get started?” My quick answer is “One step at a time…”
You don’t need to do it all at once. It was nine years from when I began consulting part time until I made the full time Jump to Consulting. During that time, I tried a lot of things that proved useful later on.
For example, as a field sales engineer, I developed and promoted product-focused seminars to bring in leads. Later, I started a couple of newsletters for my customers, both to keep in touch and also to alert customers of new products. To enhance my credibility, I started writing business and technical articles for industry focused publications.
All of the above were techniques I used later in my consulting practice. But thanks to my previous employers, I had already worked out many of the kinks. Not only that, my employers were happy with my initiative and the results they produced.
One boss even gave me a sterling review for the things I tried (even though not everything worked.) You too can start today in your present job. You can even pretend you are a consultant. Eventually, you will be.
But maybe your time frame is shorter. You’re suddenly out of a job, and consulting looks attractive. Yes, it can be done, but it is not easy. Those who I’ve observed that went this route had both their services and their potential clients pretty well defined.
Of course, don’t overlook your present or past employers. While they may not be in a position to hire someone full time (do you really want a full time job anyway?), they may welcome the use of your talents on a temporary basis. And if they are cutting back, they may very well need your help just to get the necessary work done.
Don’t fret — this is just the beginning. We’ll address all of these questions in much more detail in subsequent postings. Until then, keep thinking about these key questions.
© 2011, jumptoconsulting.com. All rights reserved.
Consultants come in may flavors… To add to the confusion, not everyone calls them self a consultant — many refer to themselves as coaches, counselors, or contractors.
So what is the difference, anyway? And do the differences really matter? In a broad sense, all of the above are “consultants,” providing advice and guidance for a fee. All of the above need suitable clients if their business is to be a success. But the approaches and focus may vary, so here is an attempt to clarify these differences.
Coaches… This category has become very popular in recent years. Examples are life coaches and management coaches. Based on the sports model for coaching, the focus is on people, often at the individual level. The emphasis is on motivation and improvements.
Coaches are often generalists rather than specialists. They rely on their past experiences and strong personal skills to help their clients. The field is easy to enter, as there are no regulatory bodies or prescribed fields of study. In the latter case, however, many of the more well known coaches offer brief training programs, which can also confer a certain level of credibility.
Counselors… This category has been around for some time. Examples include marriage counselors or drug counselors. Like coaches, the focus is on people. In this case, however, the emphasis if often on changing negative behavior.
Counselors are often specialists, and may rely on specialized training along with experience. Like coaches, most have strong personal skills. Counselors may be regulated (such as psychologists or psychiatrists) and may require special licensing before offering services to the public.
Consultants… It seems like consultants have been around forever. In fact, it is often referred to as the world’s second oldest profession. Many wags like to point out there is little difference with the world’s oldest profession. After all, both provide services for fees.
But I like to think there is a distinct and important difference. Most consultants focus on identifying/preventing/solving problems or improving the future. Some are technical specialists (such as engineers or doctors), while others deal are business specialists (such as management consultants.)
Technical specialists are often professionals (doctors, lawyers, engineers, architects, accountants, etc.), and typically deal with specific technical problems or issues. Most professionals are licensed by state governments, which may require passing a compressive exam, plus demonstrating appropriate education and experience. Typically, you can not offer professional services to the public without the appropriate licenses.
Business specialists are often have business backgrounds (management, marketing, operations, manufacturing, etc.), and may deal with a wide range of business problems. Unlike technical professionals, business consultants generally do not require any legal credentials. Many business consultants, however, obtain nonlegal credentials such as certifications from various industry organizations.
Contractors… Often confused with consultants, most contractors are “rented employees.” Contractors usually work for a contracting company, who then place them with their customers. Contracting assignments can run from several days to several years. The contracting company handles the marketing (getting the clients) and administration (insurance, taxes, etc.) Consultants, however, usually obtain their own clients and handle their own administration.
This is not meant to be disparaging, as I have known many engineering colleagues who have been contractors. In fact, some have switched among being employees, contractors, and consultants at various times in their careers.
So, the common thread in all of these categories? With the exception of contractors, all are in business for themselves. As such, all need to attract clients, set suitable fees, and run the business in a profitable way. The last point is very important, for if you can’t eventually turn a profit, why do it?
Never forget… this is still about business (even if your practice is small)… not charity!
© 2010, jumptoconsulting.com. All rights reserved.
Welcome to the inaugural entry in my blog!
Let’s start at the beginning — just what is a consultant, anyway? If we asked fifty people this question, we’d probably get fifty or more answers, and they would all be good.
Webster defines a consultant as “an expert who is called on for professional or technical advice or opinions.” This is a traditional view, and encompasses professionals such as doctors, lawyers, accountants, engineers, architects…
This definition can also include business specialties (often considered staff positions) such as marketing, public relations, human resources, advertising, finance, regulations, operations, and more. These business areas are often the realm of “management consulting” firms.
But our focus here is going to be on small independent consultants, and how to become one. Small firms often specialize, and operate in one or more niches. For example:
- A marketing consultant might specialize in market research, web design/implementation, direct mail or writing white papers.
- A financial consultant might specialize in estate planning.
- An engineering consultant might focus on power electronics or analog design.
- A legal consultant might specialize in bankruptcies, divorces, or taxes.
- Et cetera…
Independent consultants also often specialize in markets, such as medical, computers, financial, etc. These specializations makes it easier to both establish credibility, and to target potential clients.
As a small firm, it is very difficult to be everything to everyone. If you are thinking about making a Jump to Consulting, you might begin with two simple questions:
- What special skills and experience can I sell?
- Who might pay for those skills and experience?
Its OK to have more than one niche or serve more than one market. But when you are small, you can’t be everything to everyone. So it is important to focus so you can concentrate you marketing efforts. More on that in future posts…
Finally, remember that consulting is a business! This means providing something of value to a client, and then getting paid for it.
Unfortunately, the term “consultant” has been bastardized. For example, many sales people refer to themselves as “consultants”, when they are really pitching products or services, not offering unbiased advice. And since anyone can call themselves a consultant, one may be neither an expert nor a professional in their field.
By the way, there is nothing wrong with being in sales — I spend several years as a Sales Engineer, and have high regard for sales professionals. But if you are selling something other than your own advice and expertise, you are not a consultant in my book.
Another common use of the term is applied to those between jobs. In the engineering world, we often joke that a “consultant” is just an unemployed engineer. In turns out, however, that unemployment often leads to permanent consulting. I’ve known several consultants who went that route, and have become quite successful at it.
What about variations on consultants, such as “coaches” or “counselors?” Yes, I consider them consultants too — often a special breed with special skills that focus on personal improvement. In a future post, I’ll address what I see as the subtle distinctions in these categories of consulting.
© 2010 – 2011, jumptoconsulting.com. All rights reserved.
Welcome to my blog… This is a blog about how to start, build, and operate a small consulting practice. It is aimed at those who may be considering consulting as a part time or full time venture, although existing consultants may find it useful too. The goal is to share ideas and experiences, and to help demystify this business.
As the co-founder an engineering consulting firm with over 30 years experience, I’m often asked about the “inside secrets of consulting.” Questions come from several directions:
- Clients (Can we go to lunch? I’ve got some questions…)
- Colleagues (I’m curious… How did you do this, anyway?)
- Travelers (Oh, you’re a consultant? I’ve been thinking about that. Can I ask a few questions?)
- Other consultants (Can we compare notes?)
It is always fun to engage in these conversations, and I often learn as much or more than I share.
For the past several years, I’ve been harboring the idea of a book on consulting. The outline is done, and I’ve even gathered a big fat file of notes. But having written or co-written several successful technical books, I’m well aware of how much work this can be. As a result, I keep putting it off. There is a saying among authors, “I like not so much to write, as having written.”
Then the blog idea struck. No need to write everything at once, but the ideas can be doled out in pieces. Furthermore, questions and feedback can even improve things. If all goes well, much of this may still end up in a book, as a small legacy of my many years in this game.
The catalyst for the blog idea was a chance meeting with Pam Slim, a fellow Mesa AZ resident, author, and blogger supreme. Pam was on a book tour, promoting her new book, Escape From Cubicle Nation. Her book and her blog are rich with ideas, particularly for those suffering from the “big business blues.” (Visit her blog atwww.escapefromcubiclenation.com)
Best of all, Pamela has been there, both in big business, and then almost 10 years as a training consultant and subsequently a life coach. If you need to figure out how to escape and what to do next, I highly recommend her book, web site, and services. And if you’re wondering how to make the Jump to Consulting, I invite you to ride along here as well.
A SPECIAL WELCOME to “Geeks and Geezers…”
- If you are a “geek” (aka professional), click here
- If you are a “geezer”(aka boomer), click here
But if you are neither, and are just interested in consulting, you are still ALWAYS WELCOME here! Thanks for visiting…
© 2010, jumptoconsulting.com. All rights reserved.