Making the leap to consulting from the comfort of your full-time job

I’ve worked most of my career in the non-profit sector, at organizations and foundations, and when I left to become a consultant in 2014 I didn’t see it as a particularly brave or unusual step. I was willing to trade a steady salary for more flexibility. Consulting let me explore a different variety of projects, subsidize my semi-sabbatical explorations into new fields, and stop commuting. Based on the long hours everyone around me worked, and the number of freelancers they had to bring on to get it done, I could see there was work out there. Also, apparently, we will all be freelancers in twenty years, so I figured I might as well start learning how to do it now.

After I left, I got so many questions from colleagues about “How did you do that? No, really, how did you do that?” that I wrote up this guide. And I do not charge for it, so I might as well put it on Medium. This is primarily for people in the “knowledge” sector, where figuring out what you can do as a consultant is part of the challenge; there’s no simple upwork category for your content and process expertise. You might have to try a few different ways of packaging and delivering your work before you get it right. But, if you’re curious and thinking about going solo, here are some tips to get you started.

1. Start saving money now, before you start consulting

You’ll want a cushion to cover you between jobs and keep you from freaking out. You’ll probably run out of money at some point, so save now to push that off as long as possible. Enough cash to cover 3 months of spending is a good rule of thumb, and by that I mean what you spend now on all the things in your life, plus a little extra for your new website, etc. Be realistic about your expenses. Do a little soul-searching about how much you really need to spend on coffee and beer and life-sized unicorn statues. Some people really like being highly leveraged, but I’m more a fan of this quote:

“The key to eternal happiness is low overhead and no debt.” — Lynda Barry

2. Figure out what your skills are & what you can market

I found StrengthsFinder helpful in talking about what I offer clients and I saw a career coach who talked me through what I wanted to do until it sounded like an actual service. Look at other consultants’ websites to see what words they use and borrow liberally. You need to be able to explain what you can do that will help your clients quickly and effectively. Practice this on friends until they look excited and no longer quizzical.

You may have seen this Bud Caddell diagram about finding the sweet spot between what you’re good at, what you like to do, and what you can get paid for. I agree with Les Jones that, in the beginning, you should give a little on the what you’re good at/what you can get paid for intersection. Maybe you can use that project to refine your skills, to “learn and earn.” Maybe you didn’t like that kind of gig in your old job, but you find you do when you’re running it yourself. You might even be able to do a few of these little gig experiments in addition to your full-time job.

3. Brush up your online presence

You should be findable online. You should look like a business. Even if you’re doing all word-of-mouth, no advertising consulting, eventually someone in contract compliance or HR will search for you and they should find business things. At a minimum, update your LinkedIn profile. Buy a domain and set up a website, even just a basic landing page, and create a work email.

4. Get business cards

Yes, even today, you want a physical artifact, especially if you work outside the tech industry. Both Moo & Minted will do the design for you. If you’ve got a design and you’re in the Bay Area I recommend GreenerPrinter. If you want to get crafty, take a letterpress class and print your own.

5. Set your rates

I wrote a separate post about setting your rates if you work for nonprofits, but the short version is:

• Figure out what you need to make to cover your expenses (see #1). Depending on the kind of work you do, you may have an hourly rate, a day rate, and/or a cost for each specific package of services.
• Find out what your competitors charge. If you work somewhere now that hires consultants, look at all the contracts you ethically can to see what people charge. Ask other consultants. Look at freelance sites.
• If your rate is way above the competition, you’ll have to justify it based on the quality of your work and your general awesomeness. Practice explaining this. Or consider dropping your rate a bit.

6. Figure out your legal risk tolerance

This may involve talking with an actual lawyer, which I am not. Seriously, I am not pretending to provide actual legal advice here. Just food for thought.

Contracts. Some people are comfortable working with handshake deals and others would prefer contracts with every detail spelled out. Even if you don’t feel you need signed contracts, some clients will require them so get familiar with the basic terms. If your current employer has contract boilerplate they make everyone sign, see what you can borrow from that language (do not do this if the lawyers will claim their contract language is IP, but seriously, this stuff is pretty standard and you can find it online). Check out Freelance Union’s Contract Creator.

Insurance. There are two main types of insurance to consider, mainly General Liability and Errors & Omissions (aka E&O). Maybe you think you do not need insurance. It’s not cheap and if you’re pretty much working from home, not using contracts, maybe it will never come up. If you’re going to a client’s office and somebody trips over your markers and sues, that client might pass the buck to you, in which case you will really wish you had insurance. Some clients will require it. Going freelance is a brave enough thing to do, so if having insurance will make you feel more confident go get some. Even if you feel invincible, it’s worth looking into insurance rates in case a client requires you to have it and you have three days to lock down a policy. Hypothetically.

Incorporating. You can start consulting with very little structure. Just use your name as your business name and you’re a sole proprietor. You don’t need to set up a business entity (LLC, S-Corp) or even a business name (aka a DBA or Doing Business As)to get started. But you could. You should talk to your accountant and actual lawyers about this. If you’re already legally entangled with anyone else, you might want to see if they have strong feelings about merging your business assets with their tax returns. Whatever you decide, you’ll need to pay state and federal taxes (and maybe city taxes, too) so try not to change your business name too often.

7. Set up business accounts

Start separating business costs from your other costs as soon as you can, because sorting things out from your personal account (especially if you have joint accounts) is a pain. Having clients send electronic payments to your personal account looks sketchy and some businesses won’t do it. Credit card, checking, savings. Done.

8. Pay your taxes the way you want to do your work

It’s your business now and all those quarterly tax payments and deductions are on you.

I hate all of this and I never want to look at a Schedule C. Go find an accountant now. And a bookkeeper.

I like my privacy. Maybe you don’t want your home address on every document you file with the city and every email. Maybe your mailbox isn’t a secure place to get checks or you need to send and receive lots of packages. You could rent an office to cover most of those issues. Co-working spaces can accept your mail and some will agree to be your legal address. UPS Boxes and P.O. boxes give you secure mailing addresses but you might not be able to use them for your operating address for legal documents like business permits. You can also get an EIN from the IRS so you don’t have to use your social security number for billing and W-9s.

I like my pajamas. Does your home have a space where you can sit and work the way to want to? Sweet, you can take a home office deduction. Do you need noise-cancelling headphones to make that happen? That’s an essential work supply. Will no amount of ear-plugging help you work from home? Will your neighbors complain if you have clients coming over for meetings every week? Or do you just work better when people are around? If that’s you, sure, you can live at a coffee-shop, but maybe you want to sublet a desk in a friend’s office or join a co-working space.

Paying estimated taxes is painful. Yep, instead of having tiny payments you probably didn’t notice withdrawn from your paycheck each period, you now actively have to send the government money in one big chunk. I like to give myself a ‘tax holiday’ on quarterly tax payment days, where I hit ‘make payment’ and then go outside and enjoy all the things I just bought with my taxes: sidewalks, parks, air that doesn’t kill me… Maybe you’d rather celebrate by calling your elected officials or writing essays on tax reform. Reward yourself and the get back to work.

9. Find tools to automate parts of your new consulting life

There’s a wealth of digital tools available for small businesses, including virtual assistants, time tracking software, project management, scheduling, and bookkeeping. New tools crop up (and go bust) every day so I can’t list them all here but I will give a shoutout to two of my favorites: Harvest and Calendly. Your time is valuable and you should outsource or automate as much as you can so you can focus on the things robots can’t do, like helping a shelter get its clients into long-term housing. Get your internal system set up the way you like it before you take your first big job. About six months in, get rid of what’s not working and try something new.

10. Tell everyone you‘re available for work and they should hire you

Ask other consultants to join their list of people they bring in for a few hours when a job is bigger than their firm can handle. Socialize. Bid on jobs all wrong and work way more hours than you thought you would. Deliver an awesome product anyways. Learn to bid on jobs better. Make your clients glad they hired you.

11. Pay yourself in time

Go for a hike in the middle of the day. Work at night because you’re productive then and you like cooking your family breakfast. Work from anywhere you want that has an internet connection — the ferry, Lake Tahoe, Panama. Take vacations. That time in between clients and jobs can be stressful but there is a limit to how much you can hustle more work. When you’re freelancing, you’re valuing your time to all your clients. Pay yourself in time, too.

Even if you have a few steady clients, consulting is inherently an erratic job. Learning to ride out that fluctuation is one of the hardest parts of running the business of you. You may try freelancing and find the unpredictability so maddening you head back into an organization ASAP. If you do, being your own boss, even for a short time, will teach you a lot about being a better employee and managing other people.