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.