people in support.
Separate office space, either rented or owned.
Outsourced specialty needs, but most skills onboard.
Shared responsibility and delegation, especially of clerical functions, scheduling, finances, technology, and so forth.
Discrete banking relationship independent of personal credit based on assets, property, goodwill, and so on.
Branding that promotes the company, not the owner, so that an eventual sale will not demand the owner's continuing long‐term involvement.
An exit strategy to sell the company at some finite point and to leave, even if it requires a contractual relationship for some time; this sale may be to employees structured as a buyout over time from profits.
Retention of licensing and royalty rights to increase the firm's value.
The owner's salary would be considered as profit in the business at time of sale.
The danger occurs when a consultant has one foot planted on each side of the gorge, and the chasm begins to widen under the consultant's feet. By this I mean that the so‐called firm is, in reality, a solo consultant supporting an unneeded staff and physical property. Unless highly paid people bring in new business, they are not worth the money. Delivery people are a dime a dozen.
I know that's anathema to many of you, but it's a harsh reality. There are tens of thousands of delivery people who solely implement, teach, and execute because they can't market, and can't be rainmakers. However much they will importune, their work is replaceable and not the reason for the firm's growth. The acquisition of new business is the reason for the firm's growth, and if just the owner is doing that, then he or she is acting as a solo consultant while carrying a very heavy backpack.
I call these murderous hybrids “consulting welfare states.”
The Story of Phil
I mentored Phil for about 18 months some years ago. He was 47 at the time, about 30 pounds overweight, and failing at breaking his smoking habit. He had a staff of eight, all of whom were delivery people. Phil generated, through his rainmaking, about $450,000 a year. That's not bad for an independent consultant, but very poor for a firm of this size (which should be doing at least $2.25 million with that complement of professionals).
Phil and I spoke about once or twice a month, and it wasn't unusual not to hear from him some months when he was heavily booked with appointments. He traveled about 80 percent of the time, which was tough on his wife and two children.
After a two‐month hiatus, I called his office. His wife answered and told me that Phil had passed away two weeks earlier, alone, in a hotel room in Boston. She hadn't been able to contact everyone yet to tell them. Some clients didn't even know.
FIGURE 2.3 Consulting Model
I can always make another dollar, but I can't make another minute.
I have never advocated starting out as a solo consultant and building a firm as a natural extension. I routinely make well over $3 million working out of my home with no staff at all. When I began, I made $67,000 my first year. The revenue has changed, but the structure of my business hasn't. Could I be making $4 million or building a $40 million firm? Perhaps. Maybe it's even probable. But I have no interest in doing so. Remember that wealth is discretionary time.
I would urge you to consider the advantages of a solo practice and the vast disadvantages of building a firm. If you need affiliation, find it in other ways and by other means. Building a company is a very expensive and awkward way to create colleagues.
A very basic model for successful consulting appears in Figure 2.3. There's no reason in the world you can't do it yourself.
And remember: We're all refugees from larger firms, but in launching solo careers sometimes we have a worse boss. Give yourself a break.
Notes
1 1. There are more reasons to list, but I don't want to use too much of my time or yours. One example: To reclaim value‐added tax (VAT) from the United Kingdom when there on business, you have to have an IRS document that proves you are a corporation currently doing business in the United States.
2 2. U.S. Copyright Office: www.copyright.gov/.
3 3. U.S. Patent and Trademark Office: www.uspto.gov/about/offices/trademarks/index.jsp.
4 4. For you and for subcontractors, the IRS has rules about when a subcontractor becomes an employee, including that 80 percent or more of the person's income is derived from that single source. Check with the IRS web site or your financial advisor.
5 5. It went to 65 percent, then got reduced to 40 percent, hovered at 25 percent, and in the past few years has been less than 15 percent when I'm away and my wife is not traveling with me.
6 6. With rare exceptions, and when they do you can welcome them into your home or rent a private conference room in a hotel or club.
Chapter 3 Philosophy: What You Believe Will Inform How You Act
Hydraulics: Raise Fees and Reduce Labor
We've established that wealth is represented by discretionary time, not money in the bank or huge yachts or a dozen homes. Money can be fuel for wealth, but since we're all refugees from large companies, our passion has to be about freedom and agency, not coins.
The Gospel
If you don't believe that wealth is discretionary time, the next time you make another sale try to concurrently make another hour.
To reduce your labor intensity commensurate with raising fees is not oxymoronic but rather synergistic. That's because we know that your presence isn't what's important, and the less presence the less labor.
A good financial advisor will tell you that paying down debt is as important as saving. The parallel is tight: Reducing labor is as important as making money.
What are your corporate friends and acquaintances doing? They're up at dawn, commuting by 7:30, working until 5:30, commuting until 7 and then trying to have dinner, talk to the kids, play with the dog, chat with the spouse, watch some TV,
