Building a Solo Consulting Business: 6 Months In
Quick thoughts on a calculated bet to go out on my own.
I wasn’t going in completely blind (or without work lined up), but I wasn’t exactly battle-hardened, either.
I was moonlighting for 9 months as a consultant while working full-time before I decided to go off on my own. I had known I would do this for many years, but the time finally had arrived.
A spike in interest rates, a tightening of budgets, and an increased scrutiny on vendor spend seemed to be the right scenario for increased demand for outside expertise.
So far, it’s been an enjoyable ride working with a number of clients on data engineering and data architecture problems, but it’s only been about 6 months.
We don’t hear many people in the space talk about running a solo shop and the dynamics you deal with along the way. That might be because:
Many people do consulting as a side gig, not full-time
There are different approaches to service delivery within consulting/ contract work (ie. design-only, staff augmentation, short-term freelance projects, etc)
They haven’t figured out how to scale predictably, or they may not want to
I certainly have not figured out the predictability component, but I have noticed a few constraints in the market. You can find them below.
If you’re more interested in commentary on project scopes, scaling a solo business, and other topics related to running a consulting business, feel free to jump ahead.
Constraints on a one-person business
Constraint 1: You can only work a certain number of hours in a day.
For the sake of my sanity, and in order to maintain high quality output, it’s not feasible to burn the midnight oil and wake up at 5am to start the day. This puts a natural limit on my billable hours; this applies to everyone. Even the internet gurus.
You have limited leverage. Even with project-based pricing, you are essentially working on a hourly basis. Yes, there is money to be made when you know how to solve a problem, but consulting does not result in paid conversions while you’re sleeping or middle-of-the-night upgrades like you’d find at a self-service SaaS business.
There are way around this - content, communities, courses - but those would be by-and-large more distracting than beneficial for me right now.
Constraint 2: Your clients dictate the market rate of your services
This might be obvious, if you work with startups, you’re going to be a different price point than if you’re working with Fortune 500 organizations. I’ve been keeping up with Twitter, Reddit and other places online in order to stay as plugged in as is reasonable (and beneficial), and it shocks me that some people forget this.
Even the sharpest GTM expert would be hard-pressed selling services to pre-product-market fit companies - they just don’t have money to burn. But people still try to do just that. A fool’s errand if you ask me.
You need to go where the money is - figuratively, of course. This can take many forms, and applies to technology as much as any other specialty.
In the world of data and engineering, going where the money is might mean:
Expanding revenue channels for a customer by productizing some underutilized or underdeveloped component of their platform
Reducing cloud expenses
Working on their core product lines
That last bullet is probably the most important; many consultants in the space focus on the Modern Data Stack, or some flavor of it. In my opinion, that has become a commoditized offer.
If you’re not driving more revenue for clients or reducing their technology expenses, you are also just another expense. You’re fighting an uphill battle.
Set your sights on solving bigger problems.
Constraint 3: The projects dictate your earning potential
Startups may be willing to pay less on an hourly basis than Mega Corps, but the scale of the projects you work on matter. 300+ hour projects for a smaller client will always be more meaningful (both to the client AND to your bank account) than a 20 hour project at Mega Corp. Personally, I will take the longer-term, higher impact work over a single brand name.
But, if you are looking for short duration, high-volume freelance engagements, then the Mega Corp logo might be a prudent thing to add to your portfolio.
It depends on your expertise, your goals, and your ability to actually deliver what you say you’ll deliver.
Naturally, this ties directly with point 3 above. Projects that are core to your client’s product lines will almost always be the longer-term, higher impact work.
Just don’t forget - your ability to deliver on the projects you commit to is perhaps the most important piece of the puzzle.
Especially if you try to scale.
Thoughts on Scope, Scale, and Market Equilibrium
Many consultants present themselves in a coaching or advisory capacity - they provide suggestions, guidance, and general know-how related to a domain. The may sub-contract the hands-on work, or they may not be involved in that capacity at all.
In the world of data engineering, designing the system and building the system are very different skillsets.
But, until you reach a certain scale of business (we’ll talk about this in a bit), you need to be able to do both.
After a few years of running teams, I happen to like working on implementations (aka writing code) again. It’s nice to be hands-on solving problems once more. Will I keep doing this for a long time? Hard to say, but designing systems AND building them has been fun so far.
The real challenge is looming, though. That is how to surpass the point at which your obligations to your book of business exceed your individual capacity to deliver. All while maintaining your standard of quality, of course.
If the market roughly dictates the price a client is willing to pay, and you have reached your serviceable capacity, you could sub-contract. But, like we discussed in Constraint #2, your clients dictate the market rate of your services (at least to some degree). So, if you want to scale via sub-contracting without losing money, you need to play your cards right in terms of target client and pricing.
It takes a fair amount of trial-and-error to find a good balance between the “right” type of customer, the number of simultaneous customer projects, and your rate.
Balancing the growth of your business with your ability to service your clients is not difficult to do well, but it’s incredibly easy to screw up.
And, as a one-person business, screwing it up means there’s only one person to blame.
Miscellaneous thoughts that no one tells you about operating a business of one
Closing projects is not that difficult if you know your area of expertise as well as you think you do. But, finding those projects can be.
You need to deliver quick wins to buy breathing room on longer term projects (this applies to W-2 life just the same as solopreneur life, actually)
Time to business value is arguably more important in a client-contractor relationship than for an employer-employee
The admin work associated with a new client takes a meaningful amount of time, as do invoicing and billing
You’ll think a lot about leverage, efficiency, and what you consider “good enough”
“Niche-ing down” a technology-focused service business is challenging, arguably more so than a product business
Writing/ creating content is incredibly time consuming when you have real deliverables to produce
If you’re building a single person consultancy, or just generally operate in the data and engineering space, I’d love to connect. Give me a shout on LinkedIn or Twitter.
Insightful.
Thanks for sharing!
Beware though, you think you want to do a single person consultancy and then boom, you have 50 employees 😅