From contractor to consultant to consultancy

[dmoz]

Over the last few years, I made the jump first to SOW based consulting and from there formed a consultancy which has grown to > 100 billable consultants.
With all of the concerns about IR35, I wondered if I could answer any questions or provide any advice on making the jump.
Yes it is hard, particularly to sell directly to bigco, but it is not insurmountable if you can own a niche.
I know this has been discussed a few times and I think people here are too quick to dismiss the idea of contractors coming together to form a small consultancy.
This is a time of significant opportunity for people who do decide to make the jump and execute well.

[Old Greg]

Over the last few years, I made the jump first to SOW based consulting and from there formed a consultancy which has grown to > 100 billable consultants.
With all of the concerns about IR35, I wondered if I could answer any questions or provide any advice on making the jump.
Yes it is hard, particularly to sell directly to bigco, but it is not insurmountable if you can own a niche.
I know this has been discussed a few times and I think people here are too quick to dismiss the idea of contractors coming together to form a small consultancy.
This is a time of significant opportunity for people who do decide to make the jump and execute well.

Interested to hear your experience starting out. Having thought about this for a while, a colleague and I have just set up a niche consultancy, which at the moment is just the two of us contracting to different clients at a daily rate. We'll see what next year brings, but there are a couple of reasonable prospects to expand slightly. And then we'll take it from there.

[NotAllThere]

I know five guys sharing roughly the same technology space who set up a consultancy that's now doing very well, with subsidiaries in Germany and the US. The critical learning for them was to make sure you get a decent sales guy early on. A personable CEO with excellent communication skills is a big plus.

[MonkeysUncle]

How did you find new contracts/pieces of work?
Was it just a matter of networking, who you know etc or did you get a sales person in who went round reaching out to organisations.

[Paralytic]

I know five guys sharing roughly the same technology space who set up a consultancy that's now doing very well, with subsidiaries in Germany and the US. The critical learning for them was to make sure you get a decent sales guy early on. A personable CEO with excellent communication skills is a big plus.

I'd agree with this. I went through this a number of years ago. The software house another software engineer and I were at folded so we set up together - we initially did separate contracts for a couple of clients we picked up from the software house but then formed a Ltd company. We'd identified a niche technology to work in, and hired a sales person (we wen't cash rich at the time, so got him on a commission-only agreement initially) and we grew from there.

How did you find new contracts/pieces of work?
Was it just a matter of networking, who you know etc or did you get a sales person in who went round reaching out to organisations.

We attended network events and just got our name out there. Also wrote a book on the technology, which helped a lot. We built an open source framework and that got used a lot, so we built a bit of a community around it, moderating the mailing lists. We got consulting gigs from that too.

[edison]

I know five guys sharing roughly the same technology space who set up a consultancy that's now doing very well, with subsidiaries in Germany and the US. The critical learning for them was to make sure you get a decent sales guy early on. A personable CEO with excellent communication skills is a big plus.

Absolutely this.

Most techies/consultants/start up entrepreneurs have little idea of selling and marketing. If you don't know what a B2B sales funnel is, understand what yours looks like in your sector/niche and have a good handle on the different stages and decision makers and lead times, you would be well advised to hire a professional.

Developing a successful small consultancy from scratch is very challenging. There are lots of consultancies springing up now as well as an increasing number of associate network consultancies who are making inroads in taking on the big 4 consultancies and their ilk. It's going to get even more competitive from 2020.

[Lance]

From contractor to consultant to consultancy

Over the last few years, I made the jump first to SOW based consulting and from there formed a consultancy which has grown to > 100 billable consultants.
With all of the concerns about IR35, I wondered if I could answer any questions or provide any advice on making the jump.
Yes it is hard, particularly to sell directly to bigco, but it is not insurmountable if you can own a niche.
I know this has been discussed a few times and I think people here are too quick to dismiss the idea of contractors coming together to form a small consultancy.
This is a time of significant opportunity for people who do decide to make the jump and execute well.

I don’t think we’re too quick to dismiss the idea. The problem is usually that the person who wants to do it is asking such basic questions that they’re not going to be able to make it work.
It is a time of great opportunity for precisely this type of work. I have several interesting things right now. But I’m not asking the basic questions because I’ve worked in this space before.
It isn’t easy though.

[Spoiler]

Direct vs Indirect

Interesting thread, as a couple of us are looking at promoting a Subject Matter Expert consultancy, but growing the pipeline is the main concern with none of us being competent salespeople.

Would appreciate any thoughts on getting business direct versus indirect...

Direct to clients would require engaging a sales resource (likely 100% commission as posted previously). This should mean a higher 'day rate', but then factor in the cost of sales, marketing, effort to get new business, etc.

Indirect through partners - building relationships with integrators, MSPs, vendors, big consultancies, etc. Basically let them do the sales/marketing and just engage for consultancy delivery. So more parties taking their commission, and a reliance on them providing engagements (which diversifying partners could mitigate), but they do the effort in generating business

We've currently got a small pipeline indirectly through a couple of 'partners' which didn't take too much effort, but we'd need more of these. And we're locked out of going direct with their end clients.

[eek]

Interesting thread, as a couple of us are looking at promoting a Subject Matter Expert consultancy, but growing the pipeline is the main concern with none of us being competent salespeople.

Would appreciate any thoughts on getting business direct versus indirect...

Direct to clients would require engaging a sales resource (likely 100% commission as posted previously). This should mean a higher 'day rate', but then factor in the cost of sales, marketing, effort to get new business, etc.

Indirect through partners - building relationships with integrators, MSPs, vendors, big consultancies, etc. Basically let them do the sales/marketing and just engage for consultancy delivery. So more parties taking their commission, and a reliance on them providing engagements (which diversifying partners could mitigate), but they do the effort in generating business

We've currently got a small pipeline indirectly through a couple of 'partners' which didn't take too much effort, but we'd need more of these. And we're locked out of going direct with their end clients.

A quick comment based on things I'm working on:-

Marketing - a) what are you doing and b) does it work and do you know if it works. Are you using inbound marketing to show you are experts or nothing at all

Sales - is made up of multiple bits so how are you covering:-

1) Identifying possible customers - just your marketing or are you doing out bound calls, using prospecting firms.
2) Qualifying or disqualifying those possible customers (personally you want to disqualify them quickly as possible as time is limited and time is money)
3) The actual sale itself.


Finally by the sounds of it you don't actually have any customers from your current pipeline - it seems those companies are just subcontracting work to you - You seriously need to change the relationship to at least one where you are the trusted expert in X and completely separate from your partners.

[Spoiler]

A quick comment based on things I'm working on:-

Marketing - a) what are you doing and b) does it work and do you know if it works. Are you using inbound marketing to show you are experts or nothing at all

Sales - is made up of multiple bits so how are you covering:-

1) Identifying possible customers - just your marketing or are you doing out bound calls, using prospecting firms.
2) Qualifying or disqualifying those possible customers (personally you want to disqualify them quickly as possible as time is limited and time is money)
3) The actual sale itself.


Finally by the sounds of it you don't actually have any customers from your current pipeline - it seems those companies are just subcontracting work to you - You seriously need to change the relationship to at least one where you are the trusted expert in X and completely separate from your partners.

Thanks for this. Pretty much we are doing none of this! We're basically subcontractors, and getting work either from existing relationships (with suppliers), or doing some email outreach to other target suppliers with call follow-ups.

The market we're in is the pretty standard product-based stuff, so resellers sell some hardware (or VMs or cloud services) with consultancy work required in to install/migrate/train, etc. Then some ad-hoc consultancy to upgrade/health-check/etc throughout the lifecycle of the product.

I'm sceptical that in our market, we could actually go direct purely based on delivering consultancy - as the majority of customers work with their reseller (VAR or MSP) who provide the consultancy, or back it off to the vendor/someone else. Without becoming a full-blown VAR, I believe it would be difficult to directly grab the consultancy work from the reseller.

And, we're not interested in being a VAR, which for sure will limit the business but the consultancy work can provide a reasonable lifestyle business (hopefully!).


However, we also have a plan B that's in development - still in the IT services world, but would provide the opportunity to 'go direct', and this would need all the appropriate sales techniques including marketing, calling, outreach, etc. And for this, we would need to acquire a sales resource to do this competently.