Transcript Fee Setting for Consultants

Getting Started In
Consulting
An IEEE-CNNNJ Member Panel Discussion by
The IEEE Consultants’ Network of Northern NJ
January 26, 2006
with
Don Borcherding - Process, Project and Resource Mgmt
Jim Boyd - PIC Microcontroller-based Products
Eric Holme - Power Generation
Frank Middleton - Information Technology
Laurence Nagel - Analog and RF Integrated Circuits
Don Borcherding
NexSummit LLC
Process, Project and Resource Mgmt
NexSummit LLC
The First Year
01/26/06
About NexSummit LLC
 Founded in November 2004
 Specializes in Reducing Development
Time and Cost through
– Strategic Planning and Resource
Management
– Innovation Planning and Risk Management
– Project Planning and Management
What Went Right
 Product Differentiation Well Defined
– Initially
• Process, Project and Resource Management & CMMI
• Lots of competition
• Not much Interest
– Eventually
• Strategic and Innovation Planning and Management
• Very few competitors
• Much more interest
 Product Focus
– Where to start process improvement
– Culture rather than Maturity
What Went Right
 Goal: 3 Clients in 2005
– Used ABC List
– Broke Even in 3Q05
 Got paid within 30 days
 Spoke at several meetings and
conferences
 Got better at asking questions and
listening
What Went Right
 Started getting my mailings through to
prospects
– Post Cards (No Call to Action) (25%)
– Brochures (35%)
– Puffy Letter with White Paper (50%)
– Puffy Letter with Brochure and Flier (55%)
What Went Right
 Developed a Monthly Flier
– Use as a Fallback Strategy
– Use to “Keep in Mind”
– Hopefully useful at some point
What Went Right
 Website
– Invested in a website after…
• I broke even
• Presented nationally at the CMMI Conference
– Redesigned it three times
– Averaging 4 hits a day
• 1-2 hits are legitimate
• Others are most likely robots
– Trying to punch-up the Home Page
• Try to get visitors to stay longer
What Went Right
 Built confidence
– Letters and Brochures
– Positive Feedback to Fliers
– Positive Feedback to Website
– CNNNJ Visits
– Started feeling comfortable
• Networking
• Making Cold Calls
 I can almost handle rejection
What didn’t go according to Plan
 Opportunities are 50% smaller than
expected
 4Q05 Client pushed out 1 quarter
 Long time from verbal commitment to
getting the contract
 Not use to dealing with so many
individuals
– Need for accurate record keeping
What didn’t go according to Plan
 Most of my contacts are still Engineers.
Not decision makers
– ABC List was used to screen accounts and
target the Pitch
– ABC was used to refine Product Focus
methods (15 companies, 5 Industries)
What didn’t go according to Plan
 New to NJ, 85% of my contacts are in
Philadelphia
– Difficult to get Clients in NJ
– A lot of work cold calling
• Initially could only make contact 12% of the time
• Increased it to 35%
– with Puffy Letter
– Tracked Calling Times Closely
– Leads/Information were limited
• Unsure whether they were target accounts
What I am doing Different
 Purchased a Lead List
– Executive
– Company Size
– Organized by County
 Participate in more organizations (IEEE, NJ SPIN,
PMI, NJTC)
 Post Cards with Call to Action
– 0ne hour of free consultation
 Continue Cold Call Campaign
– Letter, Brochure, Phone Cold Calls
– On-site Cold Calls when in the area
 Set Higher Goal: 5 to 10 Clients in 2006
Summary
 2005 was the first time I felt I had real
limitations: Sales and People
 For once, I enjoy working for my boss.
Jim Boyd
XL Research Inc.
PIC Microcontroller-based Products
Jim Boyd, XL Research . . .quick profile
 Early career as “engineering generalist” with background in
switching power supplies, analog and digital design and
microcontrollers.
 Currently heavily associated with Microchip Technology and its
PIC series microcontrollers.
 27 years as a full-time electronics consultant
 Most work performed at XL offices on hourly basis
 “interesting” business twists:
Bid fee charged for fixed fee proposals
Almost all clients are on pre-paid retainer basis
Charge 10% on Materials/expenses
Evolution of XL Research . . .
 Worked 4 “permanent” jobs in first 3 years after college.
 Quit the last 3 jobs in 18 months on ‘principle’
 Consulted (moonlight) with former employer after leaving job #3
 Met former consultants in job#4 who convinced me I could make it
as a consultant despite being young
 First full-time consulting client obtained through a ‘jobshop’;
negotiated a ‘buyout’ at 1 year renewal.
 Since 1979 have had only 1 major client acquired through
jobshops. (It was really major though…)
 Early career focused on 1 full time client at a time, resulting in
some long gaps between assignments.
 Last ~15 years, focus on 2 or more clients at a time. Smaller gaps.
and now for some “Pearls of Wisdom”...
A man walked into a consultant's office and
inquired about the rates for a study.
"Well, we usually structure the project up front,
and charge $1000.00 for three questions", replied
the consultant.
"Isn't that awfully steep?" asked the man.
"Yes," the consultant replied, "and what was your
third question?"
“Know before you go... “
 If you were happy as an employee, you will probably be
unhappy as a consultant and vice versa.
 Your SPOUSE’s (or SO’s) attitude toward consulting is critical
to your long-term consulting experience.
 No matter how much money you make per hour, eventually
you get used to it and other factors will dictate your happiness.
Don’t switch just for $$$.
 Transitioning back to a “permanent” career can be very difficult
after consulting for a few years.
 If you stay in consulting more than 10 years, you may have
done ‘better’ in the corporate world if you don’t mind venturing
into management.
What a new consultant SHOULD do...
Besides the obvious – i.e. separate business phone,
business cards, a company name, an email name,
a company website . . .
The not so obvious…
 Notify your co-workers and friends about your new
career path and contact info. Ask for referrals.
 Start a database of business contacts and leads.
 Join your local IEEE Consultants’ Network
 Develop and practice your business “pitch”, then
get out there and USE IT.
What a consultant SHOULDN’T do...
 Don’t sit back and wait for the phone to ring.
 Don’t let the client tell you what your services are
worth. (But always listen…)
 Don’t accept assignments you are lacking skills for,
UNLESS you make the client aware of it.
 Avoid derogatory comments about the work of others.
 Don’t waste money on legal review of every contract.
 Don’t overextend yourself buying equipment until it’s
actually needed.
“Myths” About Consulting
 If things get slow, I can always go back to
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“permanent” work.
In between contracts, I’ll finally have time to pursue
my research and hobby interests.
I will make MUCH more money as a consultant.
I will be able to afford the best test equipment.
I will finally escape the constant C.Y.A. paranoia that
seems to cripple my workplace.
Once I’m in business for a few years, I’ll have no
problems getting bank loans for expansion.
Once I’m in business for a few years, I’ll have a
constant backlog of new assignments.
“Myths” About Clients
 Clients will promptly pay my invoice because they understand
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that I am an individual contributor.
Clients who are happy with my work will refer me to others
without being prompted by me.
Clients who are happy with my work will send me repeat
business without being prompted by me.
Clients are willing to pay more for a “quality” design.
Clients are willing to wait longer for a “quality” design.
Clients are business-savvy and understand overhead. They
know my rate is not just my salary.
Clients who are friendly and personable during the initial
meeting rarely turn into problem clients. With experience,
problem clients can be spotted easily.
Client/Employee “Myths” About Consultants
 All consultants drive expensive cars.
 If things get tight, the consultants will be the first to go.
 Consultants make MUCH more money than employees.
 Consultants are basically unemployable -- they’re either
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eccentric over-achievers or unwanted under-achievers.
Consultants identify errors and incompetence. They are the
enemy of the employee and should not be helped.
Consultants don’t care about the company’s long-term needs.
Employees should be given the core design work and R&D; it’s
an “investment” in our people. Consultants should be given the
non-essential “grunt work”.
Consultants are always on the phone with their brokers.
“Negotiating” Tips for Consulting
 Use a pre-printed Fee Schedule.
 Send the Fee Schedule with your Promotional
material as early as possible in the inquiry cycle.
 Never negotiate your rate without getting
something in return.
 Enter the negotiation process with a firm concept of
your fee requirements. Be prepared to say “NO”.
 Never give the impression that you need the work,
even if you desperately do.
“Profitability” Tips for Consulting
 Whenever possible, arrange two or more active
clients to avoid work gaps.
 Consider switching to a Pre-Paid Retainer basis -
Not getting paid for work completed is the biggest
profitability drain in consulting.
 Never agree to an unpaid technical proposal - it’s
the second biggest profitability drain in consulting.
 Add 10-15% charge on travel & material expenses.
 Set a Minimum Daily charge for client site work.
“The More Things Change, The More They Stay The Same . . .”
French Proverb
Fee chart originally prepared in 1994 by CNNNJ member, Werner Engelmeier
Eric Holme
M.E.S.A.
Power Generation
Getting Started in Consulting
 Choosing a name for your business
 Business plan
 Work schedule
 The five P’s
 Office equipment
 Test equipment
 Liability insurance
 Office routine
Eric Holme
Frank Middleton
Apogee Communications
Technologies, Inc.,
Information Technology
Apogee Communications Technologies,
Inc.
Frank Middleton, President and Sole Employee
http://www.apogeect.com
973 796 2754
Apogee Communications Technologies, Inc.
 Software Architecture
 Software Development
 Software Standards
 Security
 Communications
 Specialties:
– LAMP
– Solaris
– MDA, MDD
– We don't do Windows
Why I Became a Consultant
– Started in US as consultant
– Predated IRS rules
– Peers were all consultants
– Management not rewarding
– Tech lead roles
– After IRS, had to incorporate
Getting Business
– Alumni
– CNNNJ
– Head Hunters
– Body Shops
– Newsletter
– WebSite
– Publications
Benefits
– Independence
– Work from home
– Tax advantages
– Challenging
– Every assignment is different
– Not boring
Advice/Lessons Learned
 Financial Planning
 Stay Current
– IEEE publications
– ACM publications
– Trade Press (CMP)
•
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Information Week
SD Magazine
VAR Business
EE Times
Save!
Read
them!
Contribut
e!
Staying Current
 ACM Self Education Courses
 Develop products
– XML Swiss Army Knife
– MDA/MDD
– Home Automation
Laurence Nagel
Omega Enterprises
Analog and RF Integrated Circuits
Getting Started in Consulting
Laurence W. Nagel
Omega Enterprises
Randolph, NJ
Outline
 Deciding if consulting is for you
 Startup preliminaries
 Continuing concerns
 Questions
My Background
 Graduated from University of California, Berkeley in
1975
 Worked at Bell Laboratories for 20 years in the areas
of Analog Integrated Circuit Simulation,
Semiconductor Device Modeling, Analog Integrated
Circuit Design
 Worked at Anadigics for 3 years in the area of RF
Circuit Simulation and GaAs device modeling
 Started Omega Enterprises in 1998 to provide
consulting services in the fields of Analog Integrated
Circuit Design, Semiconductor Device Modeling, and
serving as an expert witness in patent litigation cases
Some Pros and Cons of
Consulting
 You get to be your own boss
 You have a demanding boss
 You have a flexible schedule
 Sometimes you work long
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that you can determine
You never know what you’ll
be working on tomorrow
You don’t have to worry
about being laid off in bad
times
You can choose which jobs
you work on
You have full control over the
operation of your company
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hours and sometimes you
don’t
Your job is fairly hard to
schedule
You have to worry about
going broke in bad times
You can lose a client in the
proverbial New York minute
You have to keep books,
send invoices, follow up on
payments, and search for
work
Is Consulting for You?
 In what areas are you an expert? Your reputation is
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your biggest selling point in the consulting business.
Is your resume polished and convincing? Your
resume is your strongest link to potential customers
until you have established clients
Have you constructed an honest and realistic
business plan? Expect to lose money the first two or
three years. The plan should establish what rate you
will be charging,
Do you have the resources to begin this adventure?
Are you ready for a hectic, unpredictable, and
sometimes intense work schedule?
Startup Preliminaries - 1
 Locate an accountant and a lawyer for advice
 Decide if you want to be a corporation, a partnership,
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or a sole proprietorship
Set up your accounting books from day one
Establish a budget from your business plan
Determine what rate you will charge, or what
schedule of rates you will charge. This has to be
consistent with your budget.
Open a bank account and obtain a credit card
Have stationary, envelopes, and business cards
printed
Startup Preliminaries - 2
 Set up an office
-
FAX
Copier
Computer
Extra telephone line / Voice Mail
Web site
Startup Preliminaries - 3
 Get insurance
-
Business Liability Insurance
Professional Liability Insurance
Workmen’s Compensation Insurance
Medical Insurance
Startup Preliminaries - 4
 Advertise
-
Tell your friends that you’re available
- Sign up with AICN (IEEE web site)
- Join a local consulting network (like
CNNNJ)
- Send out one-pagers or postcards to
companies where you have a
connection
- Realistically expect months before you
land
your first contract
You’re on your Way!
 Knock yourself out on every assignment. If you
succeed, your client will use you again and
recommend you to others. If you don’t succeed ...
 Don’t take on work that you aren’t comfortable with,
no matter how hungry you are. On the job training is
not part of consulting. Remember always that you’re
supposed to be the expert.
 Be careful to not overcommit. Taking on too much
work ensures failure (see first bullet).
 Respect confidentiality. Don’t blab about your jobs.
Continuing Concerns
 Every job is an opportunity for another job. If
your client is satisfied, he or she will use you
again and will recommend you.
 At the conclusion of each job, solicit feedback
and ask your client if you can use them as a
reference
 Maintain an up-to-date client list that you can
provide to potential clients
 As in voting in Chicago, invoice early and
often. Expect delays in getting paid.
Conclusions
 Consulting is not for everybody, and
very few consultants actually make a
living from consulting
 Consulting does provide an opportunity
to own your own company, be your own
boss, and work on a variety of jobs
 If you really believe that consulting is for
you, then go for it!
Got Questions???
Consulting Resources & Links
Business
Small Business Admin.
SBA Govt Job registration
US Central Contractor Registration
US Govt Procurement (contracts>$25k)
US Patent Office
Consulting
IEEE Consultants Networks (Links to 30+ CNs)
IEEE Consultants Network of NNJ
Independent Computer Consultants Assoc. (ICCA)
Janet Ruhl - Consulting Rates
Mailing Lists
InfoUSA
CorpTech High tech Companies
Dun & Bradstreet
Thomas’ Regional Directory
Jobs/Assignments
IEEE AICN Job Post
Monster.com
NJ Local Jobs
Independent Contractor Jobs (jobshops)
Freelance Jobs
Entrepreneur Matching
Direct Mail
Postcards
US Post Office
www.sba.gov
http://tech-net.sba.gov/
www.ccr.gov
www.fedbizopps.gov
www.uspto.gov
www.ieeeusa.org/business/consultants
www.TechnologyOnTap.org
www.icca.org
www.realrates.com
www.infousa.com
www.OneSource.com
www.zapdata.com
www.thomasnet.com
www.ieeeusa.org/business/consultants
www.monster.com
www.nj.com/jobs
www.dice.com
www.guru.com www.sologig.com
www.entremate.com
www.postcardpower.com
www.usps.com
About the Panelists…
Don Borcherding, NexSummit LLC - specializes in Reducing Product Development Time
and can be reached at (908) 684-8914, email [email protected]
Jim Boyd, XL Research Inc., [www.PICconsult.com] - designs microcontroller-based
products for consumer and industrial applications since 1978, Jim’s specialty is PICbased applications and he has been an Authorized Consultant for Microchip
Technologies since 1998. Contact: 973-584-0329, [email protected]
Eric Holme, M.E.S.A. - performs power plant electrical equipment, maintenance, problem
analysis, testing, high voltage generator and motor failure analysis and repair,
litigation and forensic investigation. Contact: (201) 568-5717 or
[email protected]
Frank Middleton, Apogee Communications Technologies, Inc., [www.apogeect.com] provides IT services ranging from Model Driven/Systems Oriented Architecture to
developing applications using embedded Linux. Contact: (973) 796 2754,
[email protected]
Larry Nagel, Omega Enterprises - provides consulting services in the areas of analog and
RF integrated circuit design, semiconductor device modeling, analog and RF circuit
simulation, and expert witness work in the areas of patent litigation and trade-secret
litigation. Contact: [email protected], (973) 895-4375