Rich Geoffroy Polymer Services Group
POLYSERV@cox.net
Unless you have a few clients before you begin your consulting practice, youÆre going to find that starting a consulting practice from scratch can be a real drain on your savings. When planning to make your entry into consulting, you should first plan to have about 1-2 yearÆs salary in the bank. It generally takes 3-6 months before acquiring your first ôpayingö client (and several more months before you receive payment from your first invoice), and during all this time your bills will need to be paid. Now is not the time to be incurring extra expenses --- college expenses, doctorÆs bills, braces for the kids, etc. YouÆll have to keep all expenses to a minimum.
Once you get your first job, donÆt be confused by ôall the money youÆre makingö. Remember, you really are not making a profit yet --- your cash flow position may be improving, but youÆre still living off your dwindling cash reserves. It takes, on average, three to five years before your business is generating enough revenue to pay for all your business expenses and still be able to pay you the annual salary you were making before you started your consulting business (3-5 years earlier). At this point, youÆre still not making a profit, youÆre at break-even --- but, you are no longer dipping into that small amount of savings you have left. This is a critical stage --- a small downturn in business here can be detrimental.
You must consider your salary as just another business expense. If you donÆt, you will be fooled into a false sense of profitability and your business (as well as your hopes and dreams of financial security) will vanish into the harsh reality that comes with underfinancing a start-up business --- FAILURE.
I donÆt want to discourage you, but it is important that you understand that, as gratifying as it may seem to have your own consulting business, the harsh reality is that most businesses fail in their first three years of operation due to undercapitalization. Having a good idea, and being very good at what you do is not good enough for success. You must have solid financial backing (usually only your savings), you must have a well-thought-out strategy for business entry and marketing, and, probably most important, you need the support from your spouse and family to make it through the ôrough timesö. There will be rough times, but try to postpone them or plan your entry around them, rather than trying to forge ahead with your business in spite of them.
Continued success at your business will require a lot of marketing, sales, as well as overhead time paying bills and collecting receivables to ensure continued success of your business. The technical aspect of consulting is just a piece of the puzzle --- now you're running a business.
