Avoiding these Consultant Mistakes

This article is designed to help you avoid some of the common mistakes consultants have made.

Some of the most difficult aspects of consulting are related to determining customer requirements, schedules, and people. First, let's dispel some of the myths about consulting.

Some people hear that consultants make a fortune and charge thousands of dollars per day. There are a number of overhead costs that impact your direct profit.

Another myth is that some people believe if they leave their existing job and go into consulting, they will eliminate all the politics and paperwork of their day-to-day job. While you have more control over these issues, there is no shortage of both political issues and tedious paperwork that comes with your consulting business (or any other business, for that matter).

Another myth is that people assume they will be seen as an expert in their field. This is quite often not the case. Although you may be respected by your colleagues and your current boss, you will have to build your own reputation in the consulting world. This may be shown through your ROI after several years under your belt, with your consulting portfolio.

Another myth is that people think if they own their consulting business, it means they have more free time. You may have more flexibility in the way you spend your time, but consultants spend a significant amount of time meeting deadlines for clients, which requires working nights, weekends, or holidays.

Another assumption is that it is easy to break into the consulting field. More often than not, developing a consulting business takes a significant amount of time to market your services and establish your consulting methodology.

Things to do

  • Keep clients aware of status. Let them know what to expect, and when to expect it.

  • Always do a kickoff call or kickoff meeting as your consulting project begins.

  • Update your client, at least weekly, with a brief call on your status.

  • Send your client a monthly summary report of activities you have performed.

  • Send your client a survey to ask how you can improve your client consultant interaction.

  • Always show your client you are worth what they are paying for, by showing them metrics related to your work.

  • Always dress for success. This reflects back to the client and boosts your confidence as well.

  • When your business is doing well, continually try to expand and land more clients. This will help to position yourself when things are not doing well.

  • Outsource work before hiring employees; until you have developed a base large enough, you will not have to cut back employees if work slows.

  • Maintain an inexpensive office.

  • Use a variable compensation plan that is flexible, and employees can be compensated well when business is doing good, and less when it is not doing as well.

  • Meet clients in person, rather than by phone or email communication whenever possible; clients are far more likely to remember you if you deal with them in person.

  • Take opportunities to expand your consulting into other relevant industries.

Things not to do

  • Never tell the client they are wrong outright.

  • Do not fail to have a written contract in place, which explains the scope of work.

  • Do not fail to give your clients advance warning when they are required to provide information or materials to keep the implementation process going. If you need information to proceed on the next steps of your consulting project, provide the client with specific time lines to prevent delays.

  • Never make changes in your stated work processes, or in project scope, without your client's approval.

  • Never act overconfident or arrogant with clients. Always be respectful to the employees, and remember that you are in their workplace. They are not in yours. Be respectful of the culture and the impact that decisions, based on your consulting, will make on the employees.

  • Don't miss the point on your consulting responsibilities. You are to give distinct, timely advice to help the company implement your strategies, as efficiently as possible.

  • Never put yourself in a position where you are unavailable for your client. Maintaining open communication is key to the success of your project. Allow them to leave voice mails, or communicate via e-mail, and let them know you understand how critical response time is.

  • Never work specifically with only one client. If that business fails, you run the risk of being released.

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  • Never make time commitments you cannot keep, or that are unrealistic. This can be a factor that creates tension and mistrust for your clients.

  • Never begin a consulting contract, without being clear on the expectations from the client. If your deliverables are unclear, or the client is unclear of when they need to interact with you -- as a consultant, or with their employees -- it will be difficult to reach the goal.

  • Never provide an unrealistic budget for a consulting project. This may put you in a position where you are unable to produce the desired product for the client, which might necessitate requesting additional funds from the client -- or having to provide this funding yourself.

  • Never fail to establish a payment schedule for your client, and monitored your regular billing.

  • Never engage in inappropriate activity with employees who work for a company for which you are consulting. This includes any form of harassment.

  • Never engage in cultural, political, or religious discussions while consulting.

  • Never comment on another consultant's work; it gives the appearance of being unprofessional.

  • Never act on behalf of the client for any type of financial matter, or make any type of business authorization while conducting your work.

  • Never fail to listen to employees' needs. They can provide great insight into some of the smaller problems that may lead to the larger problems, which you're trying to solve.

  • Never assume that employees of the company will readily accept your advice as a consultant. Employees may often resent the advice from an outsider.

There are also a number of legal aspects to keep in mind. Some consultants have learned the hard way, so we are providing some basic legal ideas to keep in mind.

  • Make sure you incorporate your business through an LLC, if you are the sole owner, to protect your personal assets.

  • Be sure you maintain liability insurance and understand whether your policy is based on "claims made," or "based on occurrence." The type of insurance will determine who pays in the event of a claim.

  • Make sure that you have professional liability insurance, also known as errors and omissions, to protect you from mistakes or errors made with respect to your consulting services.

  • Make sure if you are the holder of intellectual property, such as a copyright, that you hold a license for the use of your property. If you hold a license, you may charge for the use of your products.

  • Be sure to check with your state to see if the fees that you charge clients are subject to a tax; you are responsible for this tax.

  • Always confirm your status, when working with a client, to determine if you are a independent contractor, or if you are an employee. As an independent contractor, you will receive a form 1099 at the end of year for tax purposes. If you are an employee, you will receive a W-2. Most companies will prefer you work as a contractor.

Lessons learned

Following are some lessons learned from other consulting companies that you can use for your own consulting business.

Lesson 1: Conserve cash is much as possible.

  • Use inexpensive furnishings, or perform client meetings at their facility.

  • Provide employees with variable compensation plans to adjust for the flow of business.

  • Always maintain a six- to 12-month cash reserve for emergencies.

  • Be cautious, as you add employees, to keep in pace with your available resources. Outsource resources as necessary.

Lesson 2: Ensure your clients stay with you as long as possible.

  • Let them know what and when to expect information from you.

  • Provide a kickoff meeting, followed by weekly calls, monthly reports, and monthly surveys.

Lesson 3: Operate under the pretense that your client is always right.

  • You were hired for your expertise and are expected to provide the best results for your client.

  • Always prepare data for them to show why the solution you are proposing is best.

Lesson 4: Show the clients return on their investment.

  • Always show clients your value, and use metrics they can relate to, such as revenue, improved efficiency, or productivity.

Lesson 5: Always dress to impress your clients.

  • The manner in which you dress, directly reflects on your level of professionalism, and is an indicator of success to potential clients.

Lesson 6: In general, the more you charge, the less clients complain.

  • Most larger clients understand they need to spend money to grow a company, and therefore, can absorb higher fees.

Lesson 7: Manage your cash flow.

  • Smaller clients typically take longer to pay, than larger clients. Manage your cash flow in between clients.

  • Request advance payments for new clients in the amount of 20 percent to 25 percent. This helps you manage cash flow and ensures they have buy-in, before you begin the project.

  • Set up consulting services so you are paid at a minimum, on a monthly basis. If the project is delayed, this will help you manage cash flow, by invoicing on a regular basis.

  • Include late payment penalties in the contract. Typical verbiage for contract invoices indicate a 30-day payment period. A general stipulation for monthly interest is a rate of 1.5 percent on unpaid invoices, after the 30-day period.

  • If at all possible, have the client pay for large expenses up front, and invoice for the smaller expenses.

Lesson 8: Be cautious not to have a feeling that you can take on the world.

  • Many new consultants with significant experience in their field, solve a wide array of business problems, which equates to initial consulting value; but they often find when they enter the consulting field, they lack knowledge in a number of complementary areas.

Lesson 9: Strive to add long-term value to the relationship with your clients.

  • Many consultants prefer to find one or two large projects to work with, to reduce the amount of unbillable time they spend on a project. Quite often, that is counter-intuitive to what actually occurs. Many times the amount you billed for an entire year, will equate to the same amount for an additional employee's salary, and the company winds up hiring an additional employee to take over some of the problem areas that you would have provided services for.

Lesson 10: Building trust with clients takes time.

  • Choosing a consultant is a risky proposition from the client's perspective, because of the cost, and concerns about not getting the expected value. Many clients prefer to work with relationships that are developed over years, or with a consultant they worked with as an employee, before they started their own consulting business.

You should review the lessons learned of other consultants, either through blogs, or consulting white papers. White papers are a more reliable source of industry expertise. Most of the fundamental issues that consultants come in contact with can be resolved by using the appropriate methodology. Over time, you will have experiences with clients, which may result in awkward or risky situations. Remember to follow the fundamental principles of ethics when performing consultant activities, and rely on your expertise within your competencies. As a business owner, you should have methods for your employees to submit lessons learned during activities they manage. You should have a process for incorporating any of the lessons learned into your practices.

Other activities that tend to cause consultants the most grief, and where they learn the most are poor communication, maintaining a silence when you should've spoken up, not managing scope creep effectively, and a failure to align your consulting business strategy and your short-term goals and objectives. And last but not least is the failure to maintain contingency plans. Contingency planning is important especially when you rely on other employees to complete your consulting project. You should have contingencies for contracting additional employees if needed, contingencies if difficulties arise with the implementation of your recommendations and contingencies that result from a decrease in business. After all, you still have to pay your bills even if money is not coming in.

Summary Reminders and Takeaways

This lesson covered some of the common mistakes consultants have made, and things you should avoid. The most difficult parts of consulting are related to determining customer requirements, schedules, or people. There are a number of myths that people misunderstand related to the consulting business. These myths include that consultants make a fortune, politics are eliminated in the consulting business, that you will be seen as an expert, you will have more free time, ant it is easy to break into the consulting field. These are all myths in the consulting world consulting is a challenging field of work that takes time to build your client base and profits and still has its own issues with stress, workload, and politics. The benefit is that you do have the opportunity to control your destiny and choose the type of consulting you want to do. It's all up to you.

Other lessons consultants have shared that you should be aware of include being sure that you keep clients aware of the status of your work, sending surveys to check satisfaction with work, dress for success, and positioning yourself for economic fluctuations by expanding your business when you have an opportunity, and outsourcing work when you cannot afford to maintain employees.

Other consultants also recommend you maintain an inexpensive office, and show your client what you are worth through the metrics of your return on investment.

The list of things "not to do" appears larger than the list of things "to do." Issues consultants have indicated you should not do include: Never fail to have a written contract in place. Also, never make changes in work processes without the clients approval; never act arrogant with clients; make yourself available for the client; never work with only one client; never make unrealistic time commitments; never provide an unrealistic budget; never fail to establish a payment schedule; never act on behalf of the client for any type of financial matter or business you are not authorized to perform under the contract.

There are several legal aspects you should keep in mind, as well. Always structure your business to protect your personal assets, maintain professional liability insurance, be aware of intellectual property law requirements, and always understand your responsibility for taxes.

The main goal of consultancy is to strive to add long-term value to the client relationship. Building trust with your clients takes time and effort.