Home-Based Business Opportunity #2: Consulting
Consulting is an ideal home business for over-50, white-collar professionals. How is it different from freelancing? There are several ways, but the key one is this: Freelancers perform particular jobs or tasks; consultants tell other people how to perform particular jobs or tasks in order to attain desired outcomes.
Let us delve into the reasons why, at this stage in your life, you might decide to become a consultant. Chances are you fall into one of the following three scenarios, or a combination thereof:
•Scenario I. You have voluntarily retired and are looking for a way to remain socially and mentally active, as well as supplement your income.
•Scenario II. You have re-evaluated your life and want to earn a living doing something that is both intellectually and personally satisfying.
•Scenario III. You were laid off or forced into early retirement, leaving you needing money to pay the bills.
The one common factor in each of these scenarios is MONEY. You want or need to earn some money. There is no question that consulting is a way to make money, but you first must establish income goals and a plan for achieving those goals.
At this stage in your life, you probably are not looking to become rich. If unimaginable wealth is a consequence of your consulting endeavors, you probably will not shun it, but it is not your overarching goal. More likely, your goal is to earn enough money to do one or more of the following things:
•Maintain your current lifestyle
•Build an inheritance or college fund for your children and grandchildren
•Finance special projects like kitchen remodeling or a vacation abroad
•Build up your retirement nest egg
•Purchase a second home or new car
SET AN INCOME GOAL
Whatever the reason you want or need money, you should be able to articulate a specific dollar figure as your total annual income goal. A realistic annual income target is one that you can attain within a few years.
In determining your annual income goal, you should start with the amount of money you need to live comfortably for a year. Then, double it. So, if your annual living expenses total about $30,000 per year, your annual income goal should be $60,000.
Does this sound ambitious to you? Well, it is ambitious, but it is also achievable. Many consultants earn $100,000 to $250,000 or more. Also, if you are receiving Social Security or retirement benefits, part of your annual income goal has already been met, reducing the money you need to make from your consulting business.
ESTABLISH YOUR RATES
Knowing your annual income goal is essential to establishing your fees and setting your compensation rates for your consulting services. If you know how much you need to make, it is easier to determine what you need to charge for your services.
Novice and even experienced consultants sometimes find themselves struggling to determine the amount they should charge for their products and services. If you approach this issue believing that you, with all of your business and life experience, add value, then it makes determining your own rates that much easier.
The dilemma arises from the need to strike a balance between charging enough to maximize the demand for your services so you can make this endeavor financially worthwhile and not charging so much that you lose out on jobs to other consultants. Many consultants, especially novices, charge too little at the beginning in the hopes of getting the job, and then they become resentful when they realize they are doing too much work for too little compensation. Yet they are afraid to charge higher prices for fear the potential client will object, saying “Your price is too high.”
There are other factors to consider as well. Unlike when you worked for a company, you will now be footing the bills for all aspects of your business, such as overhead, labor, cost of materials, and profit margin. There are also intangible factors. For instance, if you are the cheapest consultant in town, you may be erroneously viewed as less experienced or less skilled. You may be conveying a message that your expertise is so inexpensive because you are not as good as the more expensive consultants.
HOW BOB DOES IT
A sign on the shop floor of a manufacturing facility showed a triangle. Each corner was labeled: One was GOOD, another was FAST, the third was CHEAP. The caption under the triangle said PICK ANY TWO.
It makes sense to me. If you are cheap and fast, you probably aren’t very good. If you are good and fast, you can and should charge a premium fee. If you are cheap and good, you probably have more customers than you can handle.
If you are all three—cheap, good, fast—you are under constant pressure and probably not making that much money.
Which are you—good, fast, or cheap?
IS THIS FOR ME?
By the time you reach your 50s, you have learned quite a few things through hard work, by chance, and through trial and error. And, while the journey has been mostly splendid, you now stand at a crossroads, either by choice or by circumstance, about your next career move. Ideally, you would like to expend your energy on something worthwhile and lucrative. However, what you do not want—and cannot afford—to do is to spend the next decade trying to figure out what that something is and how to do it. So, the first step is to determine if the consulting profession is a good fit for you.
The standard Webster’s dictionary definition of a consultant is “one who gives professional advice or services; expert.” In practical terms, if you are in the business of consulting, then you are in the business of sharing what you know with others—whether individuals or corporate entities—for the purposes of assisting and facilitating the achievement of some personal or business goal or objective.
You should carefully weigh some basic elements of being a consultant before hanging your shingle on the door. These elements apply regardless of the type of consulting service you decide to offer. This is a very important step, because a careful and honest assessment of the pros and cons of starting a consulting business could have a direct impact on your ultimate success and personal satisfaction.
ENTREPRENEURIAL SPIRIT
An independent consultant is an entrepreneur, and being an entrepreneur involves risks, long hours, independence, self-determination, and, in some cases, isolation. Virtually all successful entrepreneurs possess at least some of the same characteristics. According to an article in SAP Connection, Terri Lonier, author of Working Solo, says that successful solo entrepreneurs are self-starters, outgoing, life-long learners, and optimistic. An article in Volume 8 of the newsletter Creative Business (www.CreativeBusiness.com) describes solo and small-firm practitioners as people who:
•Enjoy working at home
