It’s been a little over a year since I quit my job to start living the life of a full-time computer consultant. I had been running my business part time on the side for about three years and between changes at work and my growing list of consulting clients, I felt a year ago was a good time to make the transition. I had saved about 6 months worth of living expenses and figured between that and my established list of clients I’d be off to a good start.
Boy was I wrong!
I can say without a doubt this has been one of the toughest years of my life. But it’s also been one of the most rewarding.
I’ll walk you through my first year as a full-time consultant. I urge anyone who is planning on going from part-time to full-time consulting to read through this and learn from my mistakes.
Off To A Great Start
After I quit my job I already had a healthy queue of client work to do. I certainly wasn’t working full-time, but I was off doing client work most days. I was also getting a good amount of referrals from friends and coworkers who I had told about my transition. Finally, I was benefiting from a friend of mine who was sending me old clients of his that he used to do consulting work for but no longer had the time.
I felt I was off to a good start and could build on the momentum of these initial clients. Plus, I was really enjoying the freedom to work when I wanted and how I wanted. I was truly in the honeymoon period with my business.
But the honeymoon would prove to be short-lived.
Things were going well for the first four months or so. Then, slowly, the business started to die down. Most of my initial customers were one-off services and the few clients I had continued work with were in between projects. All of a sudden I had little work.
I had been doing some advertising, but I was only getting a few bites and the expense was eating into my bottom line. Although I was able to make some kind of profit during most of this time, it wasn’t much and certainly not enough to live off of.
Sure, I had the six months of living expenses to fall back on, but I knew that was going to dry up quickly and I really wanted to have a self-sustaining business in place sooner rather than later.
At the Breaking Point
Client work would go up and down for the remainder of the year, but never reached the levels it did at the beginning. I had used all of my cushion money and started withdrawing from my 401K from my previous employer.
Then around the Holidays, when I needed the money the most, no one was willing to pay for computer help. I experienced the biggest drop in work right at the same time I had used the remainder of my 6 months of savings. I kept with drawing from my 401K until finally that too was tapped out.
As 2012 came, I really put the petal to the metal looking for work and I was starting to get more work. Unfortunately it still wasn’t enough and I was at the point where I wasn’t sure if I was going to be able to pay my bills.
I was desperate. I was getting work, and clients seemed to like what I was doing, but the numbers weren’t enough. I felt like I had failed and I wasn’t sure what to do.
Light At The End Of The Tunnel
Luckily, I had one more resource that I hadn’t used. It was a last resort and one I didn’t want to consider until all other options were gone. I’m fortunate to have a very generous and loving family who I was able to turn to for a bit of help in a crisis. I got a small loan that helped me pay my bills the next month and bought me a little bit of time, but not much.
Fortunately that little bit of time was just enough.
With my expenses taken care of I was able to work on getting the kind of clients that I could build a lasting relationship with. I started focusing on small business and freelancers who rely on technology to make a living. These types of folks would continue to seek good quality technology consulting and I because their go-to guy. I also concentrated on recurring services that could be billed on a monthly basis.
Then, at the end of the month last month I landed my first major contract. I’ll go into that more in my next post, but needless to say, it has single-handedly breathed life back into my fledgling little business. Aside from that big contract I also have a few medium-sized projects in-progress and I’m slowly building my portfolio of work which is helping attract more clients that are willing to pay me higher fees. All together, I feel my business is truly back on track.
So things are looking up. I’m still not quite out of the murky waters yet, but my business is growing and my revenue is at an all time high. For the first time since I started my business, my profits are at the levels they need to be to ensure I pay my bills with enough left over to put back into the business.
Here are some of the key lessons learned that many people should heed before they decide to start their own full-time consulting business.
- Don’t Give Up – This, to me, is the most important take-away. I probably should have given up when I had spent all my 6 months cushion money. It was probably stupid of me to cash out all my retirement and savings. But I didn’t give myself the option of turning back. I had only one path I wanted to take and I was going to keep pushing until I made it happen. Stubborn and hard-headed of me? Maybe. But in the end the only thing that mattered was living a life that I wanted to live doing what I love. And it seems to finally be paying off, but anything worth doing is not going to be easy.
- Be As Prepared As Possible – Something I’m glad I did was to establish my business first, while I still had my corporate job. This allowed me to get all of the necessary red tape out-of-the-way like coming up with a business name, registering the business, printing business cards, and building a website. Once I made the move to full-time consulting, I already had all that stuff out-of-the-way so I could concentrate on working and getting customers.
- Have A Years Worth of Living Expenses - I previously recommended that having a 6 month cushion of money is enough to go solo. And in some cases it may be. Yet building up a solid network of clients that provide enough revenue to sustain your life and your business takes a lot of time. Even with a list of clients already on board it still took me almost a year before I had a steady stream of clients built up. It’s better to play it safe than to end up desperate at the end like I did.
- The “Charge What You’re Worth” Myth – When I first got started I heard from countless “business gurus” that the number one mistake most new consultants make is charging too little. “You need to charge what you’re worth”, they’d say. A mistake I made at first was that I thought I was worth the same as someone who had been consulting on their own for years. But the truth is, people aren’t going to pay top dollar for someone who doesn’t have a proven track record. And I lost a few customers at first because my prices were too high. I couldn’t afford to lose customers at first. So I brought my rates down a bit, and more customers started hiring me. However, I’m finding quickly that I’m able to increase my rates again as I start getting more referrals from people who were happy with my work and trust me. That’s the real value, and something that needs to be earned over time.
- Ask for Referrals – About half of my clients now are through referrals. Many times my customer are happy to refer me to their friends and colleagues, but sometimes you need to remind them that referrals are appreciated. This is something that took me a while to get comfortable with, but now before I leave any of my customers I say, “Here are some business cards you can give to your friends and coworkers. If any of them ever have any computer problems ask them to give me a call and I’ll be happy to take a look.” Often, if they haven’t mentioned it already, they’ll say something like, “Oh yeah, my friend John Doe has been looking for a reliable computer guy, I’ll be sure to give him your card.”
- Diversify, Then Focus On What Works - This goes for your service offerings and your advertising methods. I started out only offering basic computer consulting, virus removal and backups. I soon realized that when you’re starting out you really need to be available for all kinds of work. That’s when I started adding web design, SEO, and Data Recovery to my list of services. A majority of my current clients came to me via web design, a service I didn’t even advertise at first, and now I’m pushing that service more than any other and getting more clients as a result.
- Use 3rd Party Service Providers – When times get tough, it’s good to have other sources to turn to for work. That’s why I’ve signed up for many National IT service providers like Field Nation, Barrister, iYogi, Computer Assistant, and a few others. When I have no work of my own there’s usually local work available through one of these providers. Although you normally only get paid a fraction of what you would get from your own clients, it’s still a great way to keep busy, and make some money, while waiting for your own clients to start calling again.
- Advertise for Free as Much as Possible – It’s easy to over-advertise when you’re first starting out, because you need clients. Be sure to watch how much you spend. Not all advertising methods work and it’s expensive to experiment with different paid methods. I recommend trying every possible free advertising method first to get customers. Then move on to some less expensive methods before moving onto the phone book, direct mail, and other more expensive advertising methods.
So there you have it. The honest confessional of a tough first year as a computer consultant. It’s not all sunshine and rainbows and it’s not easy. But I think with the right mindset and proper planning, it’s possible to be successful. I’m going to continue to prove that as I move forward and I hope to have a much more positive second year assessment for you next year.
Even with all the stress and uncertainty, I’m so happy I made the decision I made. I’m enjoying what I’m doing immensely and I wouldn’t have it any other way.
For those of you who have computer businesses, how was your first year? For those who have yet to start a business, how are you going to prepare before you take the plunge? I look forward to your answers in the comments below.