Sometimes, consulting’s a bit like life in medieval Europe. It’s feast or famine. One day, you’re rich with projects, too busy to do anything but work. The next, you’re starving for work, with too much time on your hands. What’s a consultant to do?
Set your consulting fees carefully
When you set your consulting fees, you should allow for slow periods. By building in “downtime”, you help keep yourself fed!
Put money aside
When you get paid, put a portion of every payment into savings. You’ve got to pay the bills and keep your head above water (and reward yourself, too), but everything will fall apart if you don’t put some money aside. You’re bound to have slow periods when you don’t have as much money coming in. So make sure you save part of every payment and that you have six to eight months of living expenses on hand.
Manage cash flow
Cash flow is one of the biggest reasons for business failure. Try to project your cash flow so that you don’t run into surprises. Once you’ve been consulting for a while, you’ll know how your clients handle credit, when downtimes occur, and how often people run off without paying. If you have trouble doing this, ask an accountant for help.
Get it in writing
Even though verbal contracts are valid in many jurisdictions, it’s a lot easier if you have everything in writing. When you sign on for a project, you should actually sign on. IN other words, get the details of the job – and the payment terms – in writing.
Ask for consulting money up-front
Many consultants run into cash flow problems even when they’re working 60 billable hours a week. Why? They forget to ask for deposits. It’s perfectly acceptable to ask for a 25- to 50-percent deposit. For long-term projects, consider tying payment dates to milestones and deliverables, so that you don’t have to wait till the end to get paid.
Keep networking and looking for work
When you’re in a “feast” situation, it’s often hard to find time to get out and look for consulting work. After all, why would you need consulting work if you’re already working and have really, truly become a consultant? Well, projects inevitably end and it’s easier to ride out the transition if you have another job already lined up. At the very least, call and email your contacts to let them know you’re still alive, so that they aren’t shocked when you call looking for work later.
Get another job
Deal with downtime by getting another jobs. Many successful consultants have turned to office temp work, part-time jobs, and casual work to get through slow periods. Waiting tables, working in a bookstore, sorting mail during the holidays, doing construction work – they’re all legitimate ways of keeping cash coming in.
Those are just a few tips for managing uneven workflow in your consulting business. In a future article, we’ll look at legitimate ways of supplementing your consulting income.
- Setting consulting fee rates
- Sample consulting invoice
- Finance for consultants
- Consulting Fees: A Guide for Independent Consultants
- Discover Your Inner Consultant
- Discover Your Inner Entrepreneur (for moms)
Surviving feast-or-famine consulting work cycles.