Curious about becoming an executive consultant?
I’ve been doing advisory, fractional, and interim engineering leadership consulting for a couple of years now. People in my network contact me often because they are considering it for themselves. I wrote this up to share what I’ve learned over the years about being a consultant.
You can optimize for money or for schedule flexibility. Optimizing for money requires working a lot harder than at a normal job. If you’re willing to focus on building a business (instead of whatever your specialty skills are), you can have a higher financial upside.
For me the appeal was schedule flexibility rather than money. I enjoy the ability to shape my schedule. And I like that there are downtimes between large contracts. I make less than I would as a full-time engineering executive, but I have a lot more flexibility in my schedule.
A second advantage for me is that I have accelerated certain types of learning. I’ve now worked at almost twenty startups. That gives me a skillset and a perspective I never had previously. I have much more certainty about which of my skills to apply in what situations. In a world where many engineering leaders learn by copying from their environment, this gives me a flexibility that I never had previously.
There are many disadvantages and tradeoffs that you should be aware of before jumping into consulting.
You are running a business, and businesses have overhead
The first thing to be aware of is that there is a lot of overhead in being a consultant. At times, the overhead can be half the work you’re doing in a week.
- Constantly meet with potential clients.
- Write up proposals.
- Lots of correspondence to remind people to make decisions. (You’d be surprised at how many people take the time to meet with you and want to see a proposal, but ghost you after you send the proposal).
- Market yourself to find potential clients.
- Register and renew your business.
- Maintain your books.
- Invoice customers. Track payments, remind people who are late.
- Administer your health insurance.
- Set up your own 401k plan.
- Set up liability insurance.
- Deal with contracts. Negotiate contracts. Hire lawyers to create standard contracts.
- Pay estimated taxes. Pay additional local taxes if you’re a business. Potentially declare yourself as an S-Corporation, so you can save tens of thousands of US dollars a year on taxes. But deal with all the overhead of running a corporation. Sign up for services like Formations or Collective. (Let me know if you want a referral to Formations).
- Network, and be helpful to people. Talk with other contractors to figure all this stuff out.
The amount of time this takes varies depending on the type of contracting you do. And it can vary seasonally or between contracts. But you should expect to spend a significant amount of time on these things.
Note that a lot of these things are flexible. They may depend on your appetite for risk, and your willingness to be less profitable. And you can ease into them. You may decide to not incorporate as a business, or get S-corp tax advantages, just to keep things simple. However, even if you keep it simple, you should expect a lot of overhead.
Finding clients is the major challenge
One of the most important factors for your success is the rate of incoming leads (potential clients). If you have a high rate of leads, you can probably build a sustainable business.
You’ll need a strategy for finding those leads. Here are approaches I see people take:
Your network. If people know you do exceptional work, they are more likely to consider hiring you to do work for them. And they’ll be more likely to refer you to other people. So you need the people that know your work are aware that you’re available to be hired for consulting work. They need to easily pattern-match your skills against problems they hear about.
The stronger your network is, the more this is an option. So if you have a large following on Mastodon, or a lot of former coworkers that are now at companies all around, your network will help a lot. My own assessment of my network wasn’t accurate: I thought I didn’t have an especially strong network until I went into consulting. Then I realized it was actually quite amazing!
Partners or benefactors. It can often be in someone else’s best interest to refer you. If you can come up with people that have good connections with potential clients, and will make introductions for you, then you are getting referrals that are much more likely to use your help.
For this, you would need connections who can see obvious ways you can help them out. Usually this means it’s their business to do so. Venture capitalists, or consultants who need specialized skills and would refer you.
Content marketing. If you can offer content that is useful to people, it can also drive awareness of the work you do.
This requires some skill in writing and a perspective that is unusual or interesting in some way.
Be a subcontractor. If you know someone that could use your help, you can often get work from them.
I’ve used the first three approaches, and get referrals from all three sources.
When you don’t have enough leads coming in, you’ll end up spending all your time finding clients. This can feel like self-promotion, and you’ll be doing it a lot.
If focusing on self-promotion sounds icky, my advice is to focus on being helpful and on finding clients the ways that you enjoy the most. I write my blog because I enjoy it and do it in my free time. Writing has a side benefit of sometimes resulting in people wanting to employ me.
Finding initial clients
I had good results by letting my whole network know I was doing consulting work. I let people know what I was doing, and that I was available to help companies with certain types of problems. I was surprised how many people set up connections with companies that could use my help.
The first time I did consulting, I converted my full-time role into a consulting position as I left the company. If I had wanted to, I could have used this as a bridge into full-time consulting. I’ve seen others do that. This approach won’t always work. But if you have a specialist skill, this can be a route into consulting.
You should either have some savings, or some form of “bridge” work you can do until you have enough work to have a sustainable business. For myself, I gave myself a deadline, and told myself I would try it out and see if it worked. If it didn’t, I would go back to searching for full-time work. To my surprise, I had a sustainable business within a couple of months. I’ve been told that this is unusual, so you probably should expect it to take a lot longer than that.
You need to have skills that are valuable to people
One piece of advice I received early on was to narrow my focus so that it’s easy for others to understand what I do (thanks Mike Dauber!). And be careful what early clients you choose, as they’ll guide how people perceive your work.
People will pigeonhole you. So it’s often better to specialize than to be a generalist. Why? People will only pattern match you against one or two things. You want people to think about you as an option when a problem comes up.
I struggled with specializing, because I’ve been doing this work for a long time, and I’ve been fortunate enough to work in situations where I acquired deep skills in many areas. But nobody is going to pattern-match me into all of those areas. So I chose a couple and focused all of my communication around those areas.
You probably should have a level of experience in your area that is unassailable. If you’re doing leadership consulting, for example, you probably should have gotten a VP title or two. If you’re focused on founder consulting for startups, you should have started a few startups.
This is not to say there isn’t space for less experienced people in consulting. But I think it’s a tougher road to travel. You’d need a deeper network, or better connections. Something else to balance out the lack of depth in your area.
Variability can be a large stress factor
Consulting work is often feast or famine. You’ll have more work than you know what to do with. And then a big contract will end, or a few clients will leave at the same time, and you’ll have less work than you like.
This can be stressful. When you’re busy, you’re not spending time developing new business. And you may take on more work than you should (be careful and avoid this if possible).
When you’re not busy, it can be difficult for many people to enjoy the extra time. After all, you don’t have the income, and you may be stressed about where the next client is going to come from.
I’ve had people tell me this stress is what caused them to leave consulting.
The key is to have a lot of savings, so you can ride out months without income if necessary. And you need to find a way to ensure that enough clients are contacting you about work all the time, that you have some confidence you’ll always find work.
One thing that helped me was to track and model my business. I kept track of the leads coming in and the percent that became customers. And I track the mean and average length of time a customer will use my services.
This has given me a model I have some trust in. I know how many leads I need to see each month for my business to be sustainable. I know that there have been times when I have a lot more or a lot less leads, so I’m used to the variability. Even as the economy worsened in 2022 and 2023, this has given me some ability to feel less anxiety and enjoy my “time off” between larger contracts.
In general, many people that do consulting say they become much more aware of the money they make. When you’re working full-time, you have paychecks come in, and you don’t have to think about it much. With consulting, I notice every invoice that is paid, and am very aware of the work that is bringing in next month’s money.
Disadvantage: lack of long-term work relationships
Humans are a tribal, group-oriented species. When you’re a consultant, you’re usually an outsider to the companies you serve. You’re often a temporary person. So people don’t invest in their relationship with you.
As a result, many consultants feel like they lack a team. This can feed a sense of disconnection with people.
I personally find this varies quite a bit, depending on the work. But if you crave a social circle at work, or like to build long-term relationships, consulting can feel unfulfilling.
This is not to say you don’t have work relationships as a consultant. They’re just different, and they tend to shift more. You might have a broader network of people you know, but interact less deeply with most of them.
Advantage: breadth first learning
When I left my first VP of Engineering role, I had been at that company for almost nine years. I had no idea how applicable the things I had learned were to other companies.
Several years into consulting, I’ve now worked at almost twenty startups. I have a very clear perspective on what works in what contexts.
I like to describe full-time work as depth-focused learning. You’re learning deeply within a certain company context. You’re going deep on a particular company and situation.
In consulting, your learning tends to be more shallow from the places you’re at, but you have more of them to draw from. So it is breadth-focused learning.
Both seem desirable to me, and if you’re focusing on learning, it is probably beneficial to move back and forth between the two.
Disadvantage: not building anything durable
One of the joys of being the person in charge of an organization is that you can make it better and better over time. It can be a thrill to make an organization thrive. And you get to see the compounding interest of all your work.
Consulting is usually less direct. There are moments where you see the impact, like when a client recently took stock of things and said, “six months ago, we were struggling to deliver. And, now we’re really delivering at a new pace.” That can feel amazing. But you don’t truly own things long term.
Advantage: don’t have to care as much about politics
Most consultants have multiple clients at a time. This and the nature of the work insulate you from work politics.
This can be liberating. You are being paid to be objective and do the right thing for the company. As a consultant, it can be easier for you to bring up hard topics, because it’s often something they expect of a consultant. There is a weird dynamic where companies often pay consultants to make changes that an internal person wouldn’t be able to make. I’ve even seen leaders at companies use this approach deliberately: they hire a consultant to roll out changes they know are important. When the outside person is pushing for it, it can be easier to make it happen.
Part of the dynamic is that they’re paying for this advice. A colleague once told me that if you are a consultant, and you want people to make a big change, you have to get them to pay a lot of money for it. This investment helps them to literally “buy in to” the change. While I have no idea if that is good advice or not, it’s always stuck with me as an interesting observation.
Disadvantage: clients don’t always listen
Depending on the contract, you may be advising people, or you may be directly doing the work. When I’m in an advising situation, I find that my effectiveness varies. I’ve had some clients that mostly want to talk about fairly unimportant topics. I try to challenge them to think bigger or redirect, but there can be a limit to how far that will extend.
I also have had clients that don’t act on the discussions we have had. This can be frustrating, because they aren’t truly benefitting from your expertise if they’re not putting it into action. In these cases, I share the observation that things aren’t changing, and attempt to address the fact that they’re not acting upon their environment.
Your effectiveness can be hampered by the focus or topics your client wants to discuss. But it’s your job to provide outsized, highly leveraged value.
About interim roles
I’ve had four interim roles to date, so let me share some observations of what these roles are like.
In my experience, they average about six months in length. The shortest was three months, and the longest was nine months long.
It can be difficult to always be doing interim work. This is for a couple of reasons. The first is that it can be challenging to line up the next interim role when you’re currently doing one. You may not know how long the current role will last, so setting up a second role to start can be fraught.
It’s hard to do multiple interim roles at a time, because they tend to want to be full-time roles. So it compliments other types of work, and can be a good way to start in consulting.
The money for interim roles is fine. In my testing of the market, I’ve found it to be more price sensitive than I would expect. Pay is higher than being full-time, but only a little. Due to gaps between roles, it ends up not being lucrative.
Interim roles also tend to be intense. Some of the most challenging work I’ve ever done has been in interim roles. Why? People usually just want to hire a permanent person into a role. An interim role is best when things are on fire. They can also be useful when there isn’t a competent person to do the hiring for the full time role. But generally I’ve found these roles to involve a lot of firefighting. As a result, I’ve flirted with burnout a couple of times during interim roles.
The flip side of things is that if you enjoy fixing urgent organizational challenges and making situations better for people (as I do), it can be rewarding work. And I’ve learned a great deal from my interim engagements. It’s a way of doing shorter-term engagements as a company but still have the ownership for the organization on your shoulders.
One oddity of interim roles is that you’re not free to make change in the same way you are as a permanent person. You only want to make changes that the next person wouldn’t want to revert. Some of my more innovative practices I don’t roll out, because I mostly want to make changes that are going to be reversed. In a full-time role, I would have more time to institutionalize these things, so that provides more flexibility.
One thing to watch out for is the hatchet job. You’ll sometimes be brought in to do the dirty work, like laying off a bunch of people. My biggest learning doing interim roles is that it is important to understand the situation you’re getting into, and make sure you’re aligned with the people hiring you on the course of action to take.
Another important factor is to assess how many people you can do work through. I’ve had a couple of times I’ve done interim roles only to discover there weren’t any managers to do the work. I ended up doing mostly hiring work. That is fine, but it ended up delaying my impact on the company by months.
About fractional roles
Fractional roles are roles where they’re hiring you for a fraction of your time. These roles tend to come in a couple of varieties:
This is work where the person hiring you points you at a problem, and your job is to make it better. For example, a leader might hire you to uplevel the whole management team. Or to hire up some new teams, and improve their hiring process. Or they might hire you to roll out an incident management process. Or to set up engineering levels. Or to set up a data team for engineering.
These roles make sense when they have confidence in your ability to do this work. And when they don’t have someone internally they can point at that problem. Or alternatively, when you have expertise they don’t have in-house.
Evaluations are when the leaders need information from an objective expert. They want a diagnosis from a trusted party. Why is engineering not delivering, for example? Or can you evaluate our project management practices and give us your recommendations?
Fraction of a leader roles
These are roles similar to a normal full-time role, except you’re doing it on a fractional basis. You might work two days a week, for example.
The challenge with these roles is assessing how much work is actually required of the role, and crafting the role to be effective. Often an experienced executive can accomplish a lot in less time, especially if your job is narrowly focused.
About advisory and coaching work
Advisory work is where you have working sessions together. They’re similar to coaching. I’ve written a whole post on advisory work.
This type of work is enjoyable, but the main challenge is finding enough clients to make the work sustainable. Most people seem to merge this work with other types of work.
Tip: how much should I charge?
When you first start out, you may think you’d like to charge an hourly rate. Generally the rule of thumb is two (or three) times what you would get paid hourly for a full time job. Why that much? Your rates need to include unpaid vacation and sick time, time between gigs, additional risk, insurance, 401k, etc. And consider all of the overhead I mentioned above.
It’s fine if you want to start out hourly. But you’ll probably undercharge. And the psychology of hourly rates is that you’re setting yourself up to be a commodity. Why? When you’re being compared against others, they’ll mostly be thinking about their evaluation, and then they’ll directly compare your hourly rate. This can lead to a race to the bottom and make it harder to make a living.
Instead, you want them to be thinking about the business impact you’ll have. Pricing based on projects or a retainer seem to be the best models to strive for. I typically charge based on a monthly retainer. I’ve had this book recommended to me (let me know if you find it useful or not).
So what is the answer to how much you should charge? You should charge as much as people will pay you for. That’s why it is so important that you have a lot of incoming leads. The busier you are, the more you can test higher rates. The less busy you are, the more you should lower your rates. This is how to set your pricing.
About the economy
The startup and technical markets have been brutal over the last year. Many of my clients have had layoffs, and many have cut back on advisors or contractors. I’ve lost many clients since October 2022 as a result. But I’ve also seen a lot of interest from new leads.
My overall read of the situation is that it’s becoming more competitive. More people are entering fractional, advisory, coaching, and interim work. I’m in a Slack group with 500+ fractional leaders. I’m sure many of those people are curious, but that’s a lot of leaders!
As a result, people are needing to differentiate themselves, and the most experienced people are still making a good living at it. And the rest of the market is becoming less profitable and less desirable. This will probably result in non-differentiated work being paid less well, and overall being less desirable.
It’s possible that every person entering consulting is also making space for additional consultants to fill those roles. And if this trend continues, we might see “contract executives” become a more accepted practice in the future.
Should I try consulting?
It’s up to you whether to try consulting. It’s not a better or worse thing to do. Hopefully, this post illuminates the tradeoffs.
For me, the main benefits have been that I can sometimes work a part-time schedule, and get a decent compensation for that time. And I’ve been able to support people across a many companies. And I’ve learned a great deal from working at so many companies. But there have been a lot of disadvantages as well: cyclical work, less permanent relationships, and a lot of overhead.
If you’re thinking about consulting, my advice is to only do it when you have a nest egg and can live without the income for six months. Give yourself a set amount of time. See if you get the traction you need. And if you don’t, you can always go back to full time work!
Seth Falcon reviewed a draft version of this and made some helpful suggestions.
Darin Swanson is the person that got me into consulting. He suggested some improvements to my conclusion in an earlier draft of this post.
John Hartley reviewed early versions of this post and provided excellent feedback and suggestions. Much of the structure was influenced by his suggestions!
Mike Dauber gave me the advice to focus my offering as a consultant to be narrow enough that people could easily understand what I was doing.
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