I wrote a response to a similar question on an email list and turned it into a blog post:<p>If you are thinking about making the move from being an employee to consulting, I have some thoughts. First, there is a difference between contracting and consulting. Contractors are paid for what they do, consultants are paid for what (and who) they know. I have found it’s a lot easier to get contracting work than consulting work. (Of course, sometimes they blur together.)<p>If you are focusing on consulting, think about:<p>What is your source of work? Finding work is a big part of consulting. Options include:<p><pre><code> your network (it’s fine to hit folks up and say “I’m doing X, do you know anyone who needs it?”)
past client
courses
a community presence
books
blog/writing
advertising (though this can be easy to waste money on if you aren’t targeted)
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I’m sure there are others. Think about and nurture this pipeline. Always ask happy clients for referrals. This is something you typically don’t think about as an employee (it’s someone else’s job). It’s part of your job as a consultant.<p>How will you get paid? This is the other piece of consulting that people jumping from employment don’t consider enough.<p>What will your terms be? Have a standard contract. Have buffer in the bank because there will be lean months; prepare for “feast or famine”. You’ll also need to be prepared to chase down payment. Doesn’t happen often and you can prioritize companies that pay promptly, but with what feels like an economic rough period ahead, companies will be stretching payment terms, esp to outside consultants.<p>Don’t expect to be paid when you do the work, 30 days net is typical. Use a solution like freshbooks (what I used, years ago, there may be better ones) to automate your invoices and possibly invoice nagging.<p>Sometimes you will be paid to do things that seem dumb and/or below your pay grade. Raise your concerns, but if you are told to continue, smile and do it. One of the joys of consulting is you are not really “one of the team” which can give you healthy separation from org problems you aren’t trying to solve.<p>You are not really “one of the team” with any of your clients. Esp if you are a one person show, this can be lonely sometimes if you are used to socializing with your coworkers. Not that they won’t invite you to lunch, etc, but there’s always an awareness that you are a hired gun rather than someone who is on the team. (They might try to recruit you, though. Be prepared for that.)<p>Taxes/ownership structure/insurance become a bigger thing. Find a CPA, preferably through a referral, and understand and set up the proper ownership structure and tax payments. Typically your tax burden will be higher, but you can write off more stuff as a business expense. You may need some kind of business insurance depending on who your clients are (Oracle made me get e&o, I carried general liability for a while). The nolo books are good on this if you want to get smart on your own, but you’ll really want a CPA in your court.<p>Think about if you want to be a one-person show or build a team? I personally never got past the one person show stage (though tried subcontractors a few times) because I didn’t want to manage and I wanted to do the work. If you are building a team, you will need to focus even more on bringing in work rather than doing it.<p>Consulting can be fun because you have control of your work and you get to work in different environments without switching jobs. It’s also more stable to have a few purchasers for your labor than just one (an employer). Think about what kind of work you want to specialize in, because the temptation (esp if cash flow is low) will be to take anything you can do (or maybe things you think you can do).<p>Spend time on professional development. That could be during the work day or after hours. Sometimes clients that know you will pay for you to learn something, but that is not typical in my experience.<p>If you have the time, create a course or ebook in the domain you are planning to consult in. This can give you some income, but the real benefit is to say “I wrote the book on X” or “I did a course on X”.<p>Think about passiveish income options. Courses or ebooks (as above) can offer that. So can productized services, web hosting, or access to a tool that codifies your knowledge. Don’t focus on this when you start, but having something like this will help buffer your cash flow.<p>Prepare to raise your rates yearly and with every new client. No one is going to give you a raise, you have to ask for one. I usually said something like “my new rate for next year is going to be X/hr, please let me know if you have any questions” in an email around this time every year. Be prepared for some clients to not be able to afford you, and to part ways.<p>Finally, some book recommendations:<p><pre><code> The Secrets of Consulting is required reading, covers about the people side of consulting which is really critical.
Value Based Fees: How to charge value based fees rather than time and materials/hourly/daily. I never had the guts to do this, but it was eye opening to read about.
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