Becoming an independent consultant can be an exciting transition; a wealth of potential career possibilities await you. At the same time, a lack of experience as a consultant can also lead to making some common mistakes. Avoid the growing pains of a start-up consultancy by studying these 5 oft-made errors.
1. Setting the Wrong Bill Rate
As an employee, someone else tells you what you and your time are worth; though you may have had room for negotiation, your employer determined your salary. Now that you work for yourself as an independent consultant, valuing your services is your responsibility, and getting it right is important. If you set your bill rate too high, you may price yourself out of competitiveness, while a billing rate that’s too low makes it hard to bring in revenue. There are a number of factors that go into finding the right bill rate, including project scope and competitors’ rates. MBO Partners’ Bill Rate Calculator can help you calculate a rate that’s right for you.
2. Skipping the Business Plan
It’s important to remember that as an independent consultant, you are also now a small business owner. Don’t make the mistake of trying to embark on this venture without a road map; running a successful business relies on careful planning. Take the time right away to establish an in-depth business plan that covers each step of how you will manage the business and work towards reaching your goals. Don’t be afraid to revisit and revise your plan each year – or even quarterly – in the early stages as you launch and establish your consultancy.
3. Failing to Set Boundaries
Working as an independent consultant means that you have to be willing to dedicate a large amount of time and energy to your clients and your consultancy. However, you must set boundaries and limits, both for your clients and for yourself. As tempting as it may be to do whatever your clients ask of you in order to make them happy, it’s important to stick to the agreed upon (and hopefully contracted) terms of the project and limit scope creep – work above and beyond what you agreed to. Your clients aren’t the only ones who will need firm boundaries; you need to know when to say “no” to yourself when it comes to working. Maintaining a work-life balance is essential to staying healthy and productive – and to continuing to love what you do.
4. Ignoring Taxes
One of the more common mistakes that occur during the transition from W-2 employee to independent consultant is forgetting to consider taxes. Because you no longer receive paychecks from an employer with taxes already deducted, it can be easy to forget that you are responsible for putting aside enough money to pay taxes on what you have earned. How much you should put aside depends on your income bracket as well as where you live, as state income taxes vary.
5. Abandoning Networking Efforts
Many new independent consultants pour a great deal of their energy into networking and marketing in order to secure their first clients. However, once that client is secured, their networking efforts are essentially halted. While it’s important to give your current clients the focus and attention they deserve, abandoning your networking efforts may mean having to start from square one when your current contract ends. Creating and nurturing contacts, as well as continuing marketing efforts, should be an ongoing process in order to keep projects coming in at a steady pace.
Did you make any of these – or other – mistakes when starting out? Tell us in the comments.