By Andrew Cutler, Minerva Laboratories
As corporate megamergers and downsizing continue, more chemical engineers are going into business for themselves than at any time in the history of the profession. Unfortunately, most wont make it and many will go bankrupt trying.
Often, its not technical skills, IQ or expertise that determines the winners and losers, but something as simple as "attitude." Harder to acquire than anything you ever learned in engineering classes, the right attitude is as critical to successful consulting as the Navier-Stokes equation is to understanding turbulent flow. And youre more likely to acquire it by talking to or reading about successful sales and business people than you are by reading business school textbooks. This article will summarize some of the changes in mindset, and some basic strategies, that can help you succeed.
Before plunging into consulting, be emotionally prepared to face 99 times more pressure and risk than you ever did as a full-time employee. Your personal and professional life will become more closely intertwined than ever. Every time you opt to spend more time with your family, take a vacation, or pursue your interests, you will be losing potential business. Without a clear understanding of what you enjoy doing, and what your motivations are, you will be well on the road to burnout. To prevent misunderstandings, discuss emotional and financial issues openly with your family.
Evaluate your motives for striking out on your own. Are you merely responding to a layoff? Consulting may be the answer to your prayers, but, daily rejection is a major part of any independent agents job. Chances are, after a layoff, your motivation and confidence wont be high enough, and youd be better off working on a fixed contract or temporary basis until you can find a permanent position you like. Then you can test the waters.
Dont quit your day job
Your best bet is to evaluate consulting while you are still employed - particularly if you sense that your unit may be eliminated or sold. Find an area that interests and excites you, and does not pose any conflicts of interests with your employer. Start working on projects during vacation days and weekends, being careful not to use your employers equipment or facilities for your business. If networking opportunities and potential clients arent available where you live, consider relocating or working away from home. Find a fixed contract or permanent job in the target region and gradually start consulting there.
Making the move from employee to free agent gradually allows you to adjust to the huge emotional differences between employment and consulting. On a practical level, it also lets you prepare financially.
Assume that youll have no income for up to one year, and set aside between six months and one years salary in the bank before you sever ties with your employer. Attend to any health-related issues immediately. Have that checkup. Fix those teeth. Get new glasses. And pick up as many new skills as you can. Now is the time, for example, to take the P.E. license exam. Not when youve left your job and need to spend each free hour going after new business.
In addition, while you are still receiving a salary, secure as much credit as you can - preferably one to two years of incomes worth - through credit cards, home-equity lines and the like. It is much more difficult to get credit once you become a free agent, and this credit will not only provide a buffer for your business, but insurance for you and your family.
Guard your credit, and never miss a payment; if you cant make minimum payments to creditors one month, see if terms can be rearranged and pay all of them something. Keep all of your receipts, and read up on quarterly estimated tax payments and self employment tax. You should also count on clients paying late - floating $10,000 to $20,000 for several months is quite common.
Youll need to build up a network of contacts, a process that - if you havent been vigilant about it as an employee - can take years. Technical excellence wont speak for itself in the business world, and the relentless schmoozing and self promotion can be daunting. If its too daunting, chances are, consulting is not right for you.
Time management will be your best ally, but, as a free agent, youll also have to master a seemingly endless list of skills, from learning about taxes, regulations and financial planning, to where to get cheap office supplies. Each of these skills is simple, but collectively, theyre challenging.
Go out and meet people
Prospecting is your first step. Ideally, before you actually start consulting, you should have 500 potential clients and referral sources. Start with people you know - periodically, contact colleagues and others you have just met, find out what they are doing and see if there is anything you can help them with. Then branch out and meet new people. Make it a point to do something every week that will require you to meet others, and keep in touch.
If youve been downsized, keep in touch with all the others who went out the door with you--many will get regular jobs and will come across opportunities that theyll share with you. If youre already employed, even if you hate your job, do it well, be nice to your boss and try to make yourself indispensable. The easiest job to get is the one you already have. Even if all this gains you is a temporary reprieve - getting moved from the second to the third wave of downsizings - it will buy you more time to prepare, and give you more income in the interim.
Little in your engineering education has prepared you for the networking youll need to do when youre in business for yourself. Youll need to go to as many trade shows and technical and professional meetings as possible. Dont worry about "being yourself" at these functions. You are "on stage." Although you wont make sales at these events, you will lay the groundwork for a network through which you will sell later. People arent in your I network until youve talked with them, perhaps, five times. Be patient, find something to like in everyone, and schmooze.
Read widely and have some interesting conversation openers prepared - the more, the better. Take this task seriously, rehearse these icebreakers until you can deliver them confidently and well.
When the time comes, balance the need to make as many contacts as possible with the need for quality contact. Instead of dispensing business cards and quick sound bites to as many people as you can, come early to meetings, select the most interesting people in the group, initiate conversations with them, then listen closely to what they have to say.
As a consultant, you will need to sharpen your listening skills, to determine what potential clients actually need. Often, the technical problems they have are fairly easy to solve. You should also work on your presentation and public speaking skills. Joining a group such as Toastmasters International may help.
Read the fine print!
Once your contacts begin to bear fruit, youll be signing your first project contracts. Read these documents thoroughly and make sure that you understand every word, and dont sign them before youre ready.
Your fees should be twice to three times the hourly rate paid to regular employees. A very quick rule of thumb is to add your age to 40 for a low rate, and your age to 90 for a high rate. Generally, contract rates should be $35 to $85/h, while consulting rates should be $75 to $150/h.
If you are using your own technical facilities, be they a lab or your garage, you should charge substantially more than if you are just selling brainwork and opinions. Reducing your rate wont get you more business. Calling more people will.
If possible, get your jobs paid for on a "level-of-effort" or "time-and-materials," rather than a fixed-price basis. If you must bid fixed price, estimate the time and expense required to get the job done, then triple it. The client is asking you to take all the risk on how long and hard the job is, and such risk deserves a premium.
Also realize that appearances are important - not only in meetings, but on invoices. Dont use round numbers on bids: where figures like $21,986 look like detailed estimates, $22,000 appears to have been picked out of the air. And absorb small expenses (e.g., for photocopies), instead of putting them on an itemized bill.
Selling and networking will be the lifeblood of your business. No matter how busy you get, spend a few hours each week going after new business.
Remember, if consulting is challenging, its also very rewarding, and will bring you personal growth that you may never have thought possible. Just dont take the plunge before youre ready.
Edited by Agnes Shanley
Cohen, H. You Can Negotiate Anything, Citadel Press, Carol Publishing Group, New York, N.Y., 1994.
Hill, N., Think and Grow Rich, Fawcett Crest Publishers, New York, 1960.
Kaye, H., Inside the Technical Consulting Business, John Wiley & Sons, New York, 1997.
Andrew Cutler (Minerva Laboratories, 10 Thunder Run #28C, Irvine, CA 92614-7034; Phone: 949-857-0410; Email: AndyCutler@aol.com) has a Ph.D. in chemistry from Princeton University, a B.S. in physics from the University of California, is a registered P.E. in Colorado and California, and a patent agent. He began consulting in 1984, and has consulted exclusively since 1994. Minerva Laboratories provides expert advice, literature review and evaluation and onsite services to engineers and managers for process and product development and optimization.
Source: Chemical Engineering / June 1999
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