Even in todays troubled economic times consulting remains one of the best, and easiest, sectors to start a business in. Endemic downsizing, technology innovation and the advance of competition means that there is a permanent niche for competent thinkers and doers who can add value rapidly.
What Downturn?
What downturn anyway? Some people who over-extended on housing finance are being hurt, and I feel sorry for them, but the others who are in trouble are the banks and other financial sector players.
It is poetic justice that those companies who are always on CNBC or Bloomberg telling us how we need to live up to their expectations and heed their sage advice are falling victim to their own greed and lack of prudence. (Unfortunate indeed) Many areas where I consult are booming.
Consultancy is Booming
Consultants in the mining, utilities, petrochemical and the oil & gas sectors (for example) are all suffering with the problems of not having enough available resources. The same goes for cutting edge technology consultancies such as Astadia in the SaaS sector. (Good problem to have)
Another reason why consulting is possibly the best industry to work in is due to the low barriers to entry. Expertise, reputation, good track record and some basic tools. (PC, software etcetera) Is all most people need to launch themselves into their new career as an independent management consultant.
But, there is still a bit of uncertainty. Can you sell? Its easy to sell when someone else is paying your wages, but can you do it when you are footing the bill?
And when will you get paid? What about travel, materials, marketing costs and so on.
And then there is the other side of things. Superstars like Alan Weiss, David Maister or Peter Block have name recognition. That allows them to get their foot in the door easily, and to charge rates that most of us will never be able to charge.
Shortening the time to Growth
So what are the alternatives? if you work hard all year you could probably get around 100 billable days. Maybe a bit more, possibly even close the year with around $200,000 depending on your rates.
Then that's it! No more ability to sell yourself more than once a day. Sure leverage like training will help, as will leveraging rates in specialist areas. But at the end of the day, you earn the amount of days you can sell and work.
If you want to grow then you need to get smart about it, you need to spend money on marketing, you need to get people behind you to support you, and you need to get professional people around you to take care of the "running the business" side of things.
And that takes money...
I have started two businesses now, and I have tested the waters a number of times for my third. Both have involved finding cash and being innovative in raising money.
For me personally, the alternative to raising funds to start a business is only very hard work, and a longer time to get to do the really interesting stuff of selling and trying to surge forward. Wages, expenses, time for sales, development, R&D, or marketing all takes money. Growth through revenue does have its advantages however, but we can look at that another time.
So how can you get money?
When raising capital is mentioned everyones mind seems to turn to the IT phenomena in Silicon valley, Guy Kawasaki and the entire industry dedicated to Venture Capitalists all over the world.
I like VC's and I really hope to get a chance to be one myself one day, they are definitely a good source of generating capital but there are a number of others.
But they generally want more of your company than you are willing to give them, they often want to have a say in driving it forward, and there are other VC type issues that often causes problems with aspiring entrepreneurs.
Invoice factoring is a good alternative to keep the cash flow in the positive. The basic idea is that once you have a contract, then a factoring company will lend you up to a predetermined percentage of that amount for a percentage of the invoice.
So, it costs money, and it can cost more than a standard bank loan. But it is convenient, normally short term and it leaves the element of receiving payments to the factoring company.
Another intriguing alternative, and one I have not yet really investigated fully, is that of obtaining a business grant.
In the US grants are available for a range of reasons. Generally up to limits of around $250,000 or $350,000; grants can be secured from the government for research and development in commercially viable technologies, and as a means of aiding small businesses generally.
Unlike factoring grants don't require you to pay anything back, and both of these options do not require you to surrender any of your equity ion your business. Another distinct advantage of grants is that, if you qualify, you can apply for as many grants as you want.
Even with options like these and VC's around, the vast majority of Entrepreneurs attempt to fund their business through debt before they go for serious funding. This is a variation of the fund through revenue model and has its risks and benefits like all other means.
A last method, which has worked well for me in the past, is to offer what is called a private offering. This is one of those techniques that is off-the beaten track but well worth investigating for generating funds.
The world is filled with brokers in this area, but basically the idea is to sell a small percentage of your company off to members of the public for a predetermined price. Again, a lot of benefits, and one that we will be posting on here in the future.
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