Consulting Lessons LearnedBy
Finally I’ve managed to find the time to complete my consulting website to support my freelancing business, and put it under the subdomain
consulting.davidgildeh.com (you can also click ‘Consulting’ above to get to it.) No longer am I a freelance web developer without a website! Since I decided to rent out my brain, I’ve managed to find several start-ups in London interested in my skill set and proposition. Currently I’m developing 2 eCommerce sites and have a few more interesting projects in the pipeline.
I’ve been fortunate enough to manage my own consulting practice in Accenture before I left, managing the ADP Portal & Content Management practice. It taught me a lot about how to manage and grow a successful consulting business and it’s been invaluable to managing my own self-employed consulting business.
For anyone new to freelancing/consulting, the secret to any successful consulting practice (and I guess any business) is maintaining your pipeline! You need to identify potential clients, and manage them through the process to a successful sale (taking them through the pipeline) and always have several clients on your pipeline to mitigate the risk of clients who don’t bite or pull out early, even if you’re already fully booked for the next few months on projects! The moment your pipeline dry’s up, you risk going out of business fast!
The next critical thing to manage is cashflow. Cash is king as they say and for good reason. Just because you have a large project that in theory will pay you thousands of pounds, doesn’t matter until you have the money cleared in your bank account! If you’re living off your income and have limited savings you need to always keep an eye on when you expect your clients to pay, and also contingency for when they pay late, as I find a lot of smaller businesses tend to do. Just because your contract stipulates 30 day payment periods, smaller clients will sometimes take longer to pay up. Here’s a few things I’ve learnt to help manage this critical area:
- Always take an advance payment, especially for new clients. This can be any size, but I usually recommend between 30-40% of the final fee. This ensures client buy-in before you start slogging hours into project, manages your cashflow to ensure you have funds to live off for the next month, and very importantly (but sometimes forgotten) gives you a chance to see what the client will be like during the project. If a client messes you around with the advance payment, chances are you’re in for a rocky road later on. Unreliable clients can kill your cashflow and cause stress and upset trying to get paid! Use the advanced payment to assess how reliable the client is, if they pay straight up with no problems, you know you have a serious, reliable client.
- Get paid monthly. In your contract ensure you are invoicing on a monthly basis, even if the project is just over 1 month and you feel its best just to invoice at the end, using an end date for payment in the contract is risky. Projects inevitably get delayed sometimes, and if it gets pushed another month, you’ll have to wait another month to get paid. The client also needs to plan their cashflow, so make it clear that you are invoicing regularly.
- Put late payment penalties in the contract. Most invoices have a 30 day payment period, and if the client misses this, you should stipulate payment penalties such as interest on the monies owed. I stipulate a monthly interest rate of 1.5% on any unpaid monies paid after the 30 day period. It should be in the client’s best interest to pay you in a timely manner, or you will get cashflow problems down the line.
- Expenses. All large expenses should if possible, be paid directly from the client to avoid you having to fork out large sums of money upfront and potentially kill your cashflow or worse (if the client doesn’t pay) end up losing far more than your time! Most general expenses of a smaller amount can be invoiced in your monthly invoice and paid upfront by you.
If you keep these two in mind, and learn a bit of marketing to manage and build your pipeline, you should be sitting on a successful freelancing/consulting business (subject to the quality of your services!). If you’re a potential client reading this, then the flip side to all this is if you want the best, most committed consultants working for you, pay early (i.e. don’t wait till the last possible day to pay your invoices)! Trust me, you’ll stand out, and you’ll have people fighting to work with you!
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