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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 alone

•Are somewhat motivated by money

•Are not that interested in business details

•Do not want to supervise others

Yet another characteristic of entrepreneurs is that they are self-starters who are fully capable of doing work without being told to do it, supervised, or otherwise having their hand held.

Is this you? Do you have the entrepreneurial spirit? Can you sustain it?

If you have spent the bulk of your career in a corporate or corporate-like environment, transitioning to entrepreneurship can be frightening, even if you currently have no other options. For many of us, working for and reporting to someone else is the natural order of things, and we have no desire to be burdened with the administrative minutia and networking that comes along with running your own shop.

Moreover, in the corporate environment, whether you have some, little, or no work to do, you will still get paid your salary and receive your benefits. This is not the case for the self-employed. A “sick day” can ruin your bottom line. When you are an entrepreneur, if you do not work, you do not get paid.

Even if you never take a sick day in your life, economic downturns can have an adverse effect on your consulting business. When companies are forced to cut costs, the “consultant” is usually the first to go. Growth in some consulting specialties, such as executive search consulting, is directly tied to the health of the industries in which they operate. If the industry in which you have expertise fades, so do your consulting opportunities.

On the other hand, depending upon the service that you offer, a recession may be the ticket to success for your consulting business, as companies consider means to simultaneously cut costs and remain competitive by relying on consultants to handle some of their work. Consultants tend to cost a company less than a full-time employee, and if the company needs to develop a survival strategy during trying economic times, it often will seek the advice of consultants on the best way to do so.

NEED FOR SOCIALIZING

Being a consultant can be a solitary existence. Although you will be working and making decisions for yourself, which is a prime benefit of entrepreneurship, you will also, most likely, be by yourself most of the time. If you are an introvert, with no special desire to be near or around other people, you will love this part of being a consultant. If you are an extrovert, however, this may be difficult.

Some of your best friends may be former workplace colleagues, but do not expect to make such friendships as a consultant. Consulting gigs rarely last forever, and, as such, you will not often have the opportunity to cultivate and nurture meaningful relationships or connections with your colleagues. As esoteric as this may sound, it is actually the largest complaint among long-time consultants. According to an article in the New York Daily News, when asked what they miss most about the corporate world, 68 percent of entrepreneurs interviewed cited office socializing.

SELF-DETERMINATION AND FINANCIAL PROSPERITY

The most compelling upside to being an independent consultant is that you will be able to do work you actually like and enjoy doing most of the time. Imagine that: getting up every morning to perform tasks and jobs that stimulate and excite you. This factor alone can generate a successful consulting endeavor.

Sales trainer Paul Karasik observes, “What motivates people is doing what they love.” Furthermore, in an issue of Words from Woody, David Wood quotes Michael Korda as saying, “Your chances of success are directly proportional to the degree of pleasure you derive from what you do.”

A related and equally compelling benefit of being an independent consultant is the ability to control your own destiny on matters ranging from job assignments to taking care of personal matters, such as caring for children or elderly parents, without the threat of negative performance reviews. Self-determination is a keen motivator, and, for many, it is well worth the risk of starting an entrepreneurial endeavor.

Yet another positive and extremely relevant aspect of being an independent consultant is money. Consulting presents an opportunity to make more money than you probably did as a traditional employee. Many consultants have reported earning two or three times as much money consulting than they did working as a corporate employee. Just remember, this prosperity is strongly influenced by market conditions and your willingness to work hard to promote yourself.

DEMAND AND COMPETITION

You can have confidence in the fact that the market demand for consultants is diverse and ever present. Clients are always searching for the “secret” formula for starting and maintaining a successful and profitable business, and they hope consultants can provide them with that recipe.

For this reason, no matter the industry, start-up and established companies will seek out consultants to provide guidance on drafting business plans and budgets; developing strategy, logistics, security, and information technology (IT); and to keep them updated on municipal, state, and federal laws that may impact the bottom line.

There are, however, two important caveats. So be aware!

First, because there is a demand, the competition can be fierce. Everybody wants a piece of the consulting pie. Moreover, consulting is not a complex concept. In fact, anyone who has specialized knowledge, the ability to communicate clearly, and a willingness to work hard can call themselves a consultant. Many people do just that.

Consulting is the fastest-growing and one of the highest-paying labor sectors in the country. Competition for consulting jobs is keen; only the most educated and experienced workers will have the best job prospects, and only about 21 percent of all consultants are self-employed, so you will need to be prepared to work really hard to succeed. And, if working hard scares you, then this is definitely not the road you want to take.

Second, with the exception of highly specialized consulting services, like chemical engineering, the demand for the consulting services that you offer is driven not only by economic growth, but also by whether the current market trends actually demonstrate a need for your type of expertise and knowledge.

As stated earlier, during an economic boom, most companies will have little use for consulting expertise about surviving a recession. And, for those companies that do require reorganization/survival strategies during an otherwise great economic market, you can expect that you will have to pursue any opportunities for those jobs very aggressively, to stand out from the competition.

Although there is no guaranteed formula for success, it is possible to overcome and defy the obstacles that you encounter, using hard and intelligent work and a healthy dose of tenacity and determination.

So, you need to ask yourself, at this stage in your life, are you ready to work really hard? If the answer is yes, then the possibilities are limitless.

WORD TO THE WISE

You must remember this and never forget it: Your skills, knowledge, and experience are valuable. At your age, you have acquired decades of business and/or life experience that even the most intelligent 20- or 30-something consultant cannot come close to. Unlike younger consultants, you possess the maturity that comes from having lived life; that experience cannot be obtained by doing a search on the Internet.

A SELF-ASSESSMENT TEST

Let’s play a game of 20 Questions. Answer the questions below. The more honest “yes” answers you score, the stronger your aptitude and desire to become an independent consultant (“no” answers suggest the opposite):

•Do you like solving problems?

•Do you enjoy research, study, and learning?

•Are you an “information junkie”—subscribing to newsletters, clipping articles, and collecting tidbits and facts on subjects that interest you?

•Are you a self-starter? Can you work independently without a boss to tell you what to do or without the constant interaction you get in an office environment?

•Do you have specialized skills, knowledge, and/or experience that’s in demand?

•Do businesses or individuals regularly hire consultants in your area of specialty?

•Would businesses or individuals profit or otherwise benefit by engaging your services?

•Can you achieve results for consulting clients that can be measured, documented, and proven?

•Is the service you can offer unique, different, or better than similar services being offered elsewhere?

•If not, is there another compelling reason why clients should hire you instead of your competitors?

•Can you charge an hourly rate that is equivalent to at least twice your current salary as a corporate employee?

•Can you get along with people well enough to sell your services and deal with clients?

•If you are not comfortable with people, can you find someone who can do these things for you, allowing you to concentrate on the technical side of your business?

•Do you have the fortitude to handle crises and other business problems?

•Do you have money in the bank you can live on for a few months if business gets lean?

•Are you flexible and accommodating, and willing to listen to the requirements and opinions of other people—specifically, your customers?

•Are you results oriented?

•Can you commit to and meet deadlines without procrastination or excuses?

•Would you enjoy working at home or alone in a small office?

•Do you have good computer skills and, if not, are you willing to learn them?

IDENTIFY YOUR MARKETABLE SKILLS, KNOWLEDGE, OR EXPERIENCE

So, now that you are of aware of the risks, benefits, and immense satisfaction that comes along with being a consultant, do you believe that this is, indeed, a career move worth exploring? If so, then the next critical step on this journey is to identify that combination of skill, knowledge, and experience you possess that you can base your consulting business on. In other words, it is time to identify exactly what you bring to the table.

When you are 50 or older, this particular step can be far less daunting than it is for people in their 20s, 30s, and even 40s. By this time in your life, you have a full armory of knowledge and skills that you have spent a lifetime acquiring. Unlike your younger counterparts, you can have confidence that you have seen it all and know what works and what does not.

Essentially, you can consult about anything that you have experience doing and/or do well. However, you need to ask yourself this question: Is that knowledge or experience marketable? Is there a need for the type of skills, knowledge, and experience that I have to offer? Will somebody else find what I know or do to be valuable enough to pay me for it?

The range of marketable skills, experience, and knowledge is vast. Some of the most commonly marketed consulting services are described below. This is by no means a comprehensive list, but it does represent the type of expertise most often offered by consultants.

MANAGEMENT CONSULTANT. A management consultant has experience in almost every aspect of corporate operations: marketing, finance, corporate strategy and organization, manufacturing processes, information systems and data processing, e-commerce or business, and human resources, including benefits and compensation. As a general matter, the fundamental skill of a management consultant is the ability to study and analyze business-related problems—typically by synthesizing information from many sources—and then recommend solutions to those problems.

ADMINISTRATIVE CONSULTANT. Administrative consultants possess general and specialized expertise in a broad range of office-related areas. Specifically, an administrative consultant can provide advice and counsel about office management, administrative processes, administrative support needs, requirements and standards, bookkeeping, audits, and accounting.

OCCUPATIONAL SAFETY CONSULTANT. Occupational safety consultants provide expert guidance in identifying workplace safety hazards and ensuring that employers are in compliance with government worker safety regulations. They also have knowledge and experience in planning a safe and healthy environment for workers, identifying hazardous materials or systems that may cause illness or injury, assessing safety risks associated with machinery, investigating accidents, and assessing legal vulnerabilities due to safety code violations.

INFORMATION TECHNOLOGY (IT) CONSULTANTS. IT consultants, who in this information age are always in demand, provide both general and highly specialized services. Some IT consultants provide general computer troubleshooting services or database management, while others have experience and skill in designing and developing new hardware and software systems.

MARKETING AND COMMUNICATIONS CONSULTANTS. A marketing and/or communications consultant provides assistance in areas ranging from product development to public relations and customer service. This type of consultant typically has extensive writing or other media experience, such as graphic design, website content and design, and so on.

SCIENTIFIC AND TECHNICAL CONSULTANTS. Scientific and/or technical consultants possess skills, knowledge, and expertise that is typically highly specialized. As a general matter, these types of consultants advise on issues relating to physical (agriculture, physics, chemistry, biology) and social (law, economics, environment) sciences. In many ways, they are like management consultants. Although their services do not relate to management in the traditional sense, the advice or findings of a scientific or technical consultant can and do impact critical management decisions about operations, organizational structure, and overall operational decisions—typically from the perspective of avoiding liability or boosting profit margins.

SECURITY CONSULTANT. Security consultants provide advice on how to ensure the safety and security of an organization’s physical and human assets that may be threatened by natural or human-made disasters, terrorism, vandalism, and theft. Security consultants also provide guidance on developing emergency evacuation procedures or measures to minimize structural damage done to a building during a hurricane, earthquake or some other catastrophic event.

MIND THE GAPS

The range of consulting possibilities is, quite literally, endless. Today, we live in an age of specialization. More information has been created in the past 30 years than in the previous 5,000. As a result, there is no way any single individual can know all there is to know about everything, so naturally outside help and expertise is sought to fill the knowledge gap. That is why consultants exist—to fill in the gaps. Your task is to figure out (1) what you know and do well and (2) if (and how) you can market your knowledge and skills.

“So,” you ask, scratching your head, “how do I do that?”

A good place to start is to list all the areas in which you feel you have significant and substantive skills, knowledge, and/or expertise. In making this list, do NOT limit yourself to those areas of expertise or skills that are derived from your job. The list should also include those things that you just naturally excel at doing.

For example, if you know everything there is to know about computer systems because that has been the focus of your entire professional career, all the skills associated with that knowledge should definitely be a part of your list. However, if you also possess a talent for developing systems to keep people organized in their daily lives at home and at work, then this skill also deserves to be on your list.

RANK YOUR SKILLS

Once your list is complete, go back through the items and indicate your range of expertise in each of these areas on a scale from 1–10. A 10 indicates that no one can address this task better than you, while a 1 means that you could probably use a consultant yourself to help you hone this skill. Now, go back through the list again and eliminate any item that falls below 7.

If you still have more than 10 items, go back through the list and again numerically rank what is left. Your goal is to narrow down the list to your top five items. Once you have a five-item list, assign a number of 1–5 to indicate which area of expertise gives you the most personal satisfaction. Remember the quote from sales trainer Paul Karasik: “What motivates people is doing what they love.” When you are a consultant, you can make money by practicing your favorite skill or dealing with the subjects that interest you most. Assigning a 5 to an item means that an area satisfies you very much, while a 1 means that you may like working in that area, but you don’t love it.

So, now you have determined not only your top areas of expertise, but also which areas and tasks you most enjoy. Your next step is to assess what you offer in terms of skills, knowledge, and expertise and how, or if, your offering fills a need. Remember, consultants are problem solvers. What problems do organizations and individuals have that you can help them solve? More importantly, who will hire you to solve their problems?

Your potential clients will fall into two broad categories: businesses and individuals. Business clients look to consultants for help with:

•Accumulating capital for a business venture

•Launching a new product

•Entering a new market

•Expanding their share in an existing market

•Computerizing business processes

•Reorganizing the corporation

•Planning or updating employee compensation and benefits programs

•Implementing or upgrading computer systems

•Opening a new office, branch, or division

•Dealing with mergers and acquisitions

•Increasing productivity

•Reducing costs

•Improving quality control

Individuals tend to hire consultants for guidance about more personal issues, such as:

•Writing a résumé

•Finding a job

•Selecting a career

•Learning to use new software

•Learning foreign languages and gaining cultural insights

•Getting motivated

•Improving workplace skills

•Enjoying better relationships

•Feeling better about themselves

•Becoming healthier and more physically fit

If your area of expertise includes a niche or very specific skills, knowledge, or experience, you should consider promoting yourself as a specialist. Clients tend to prefer specialists because specialists can immediately step in, take over, and do the job alone, without supervision—quickly, correctly, and competently.

Consequently, specialists are almost always paid better and are in more demand than generalists. If you cannot identify a specialty right now, you have time to make that determination later. In many cases, consultants seem to drift toward a specialty by accident or circumstance rather than by deliberately choosing it.

PROVIDING SERVICES

Finally, in defining your marketable skills, experience, and knowledge, give some thought to how you will provide services. Consulting services can be grouped into five categories: advisory services, implementation services, training and development, publishing and product development, and contract and temporary consulting.

In a nutshell, these categories describe the various capacities or ways in which you can offer your marketable skills, knowledge, and experience. A more detailed description of each of the consulting services categories is below.

ADVISORY SERVICES. Most consultants act as advisors. They give recommendations and suggestions, but they don’t implement their ideas, and they aren’t the ones who decide which recommendations will be put into action.

IMPLEMENTATION SERVICES. Some consultants implement the solutions they (or others) come up with. An accountant, for example, not only shows you ways to get a tax refund, but also completes your return. A computer consultant, in addition to recommending a computing solution, may assemble the components, install and integrate them at the customer’s site, do the custom programming, train the client to use the system, and even provide ongoing maintenance and support.

TRAINING AND DEVELOPMENT. Many consultants specialize in training the employees of client organizations in various job-related skills. About half of the nation’s annual training budget goes toward basic and “soft” skills (business writing, customer service, teamwork, leadership, management, time management), while the other half is spent training employees in technical and “hard” skills (local area network troubleshooting, Microsoft Office, sales forecasting, compensation management, regulatory compliance).

PUBLISHING AND PRODUCT DEVELOPMENT. The late consultant Howard Shenson said, “Publishing is every consultant’s second job.” Much of the information disseminated through consulting can be packaged and sold as “information products,” including books, audios, workbooks, software, forms, checklists, phone support lines, Internet support, newsletters, and reference guides. Thus, there is an opportunity for almost every consultant to package part of his or her expertise as information products.

CONTRACT AND TEMPORARY CONSULTING. Contractors and temps usually operate somewhat differently than a traditional independent consultant. The contract or temp typically works full-time on the client’s premises, devoting all or most of their week to that client for as long as they are on the assignment. They perform a variety of tasks in addition to just giving advice, often working for the duration of the project as part of a team comprised of both consultants and staff workers.

MAKE THE MOST OF YOUR AGE ADVANTAGES

As a 50+ consultant, you should take into consideration how and if your age will impact your ability to provide consulting services in any or all of the categories listed above. In other words, is the particular service capacity “age appropriate?” Age appropriateness refers to the physical demands, schedule flexibility, and level of social interaction in the context of your own personal circumstance.

As a general matter, what makes consulting such an ideal profession for the older crowd is that the type and amount of work you do is totally up to you. So, when considering how you will be providing your services, you need to think carefully about the physical, mental, and time constraints involved. For example, you can probably safely assume that if your consulting services are limited to an advisory role or to publishing and product development, you will have few if any age-related challenges. A lot of your work can be done from your home, and travel will be limited.

Similarly, contract and temp consulting can be advantageous for older consultants because your services are clearly time-limited, giving you the opportunity to schedule and take care of matters related to your own health needs or caring for older parents.

Implementation consulting, on the other hand, depending upon what type of service you are actually offering, may be more physically challenging and consume more of your precious time. For example, if your computer systems consulting services are to include an implementation component, are you able to meet and sustain the physical challenges of actually installing the hardware associated with the computer system you have developed?

The bottom line is that being able to identify the requirements of each type of consulting category will help you better identify how you want to conduct your consulting business, how you want to promote it, and which potential clients will likely be most interested in what you have to offer.

STRAIGHT TALK FROM BOB

In 1979, my first job out of college was with Westinghouse, working as a junior member of the marketing communications department. My salary was an eye-popping $74 a day—about $9.25 an hour.

Right away, an interesting project came up, and I asked my boss to put me on it.

He thought I was too inexperienced. Instead, he called in a high-priced consultant. The guy did, in my opinion, an extremely mediocre job. Yet amazingly, the product manager seemed reasonably satisfied.

The job took the consultant three days. And, at $1,000 a day—almost 14 times more per day than the company was paying me—he billed the company $3,000.

To this day, I believe I could have done as good a job or better than the consultant did. Even if the job had taken me four days, it would have cost my company only $296 instead of $3,000.

“Hey, how long has this racket been going on?” I asked myself.

If a company was willing to pay an outsider more than 10 times what I was earning for essentially the same work, I reasoned I could make more money as an outside consultant than as an employee.

Not long after that, I quit the corporate world for good and I hung out my shingle as an independent consultant and copywriter.

I’ve never looked back.