Posts tagged: startup
As an employee, consulting seems like a great business model. When you compare the typical hourly rate of a consultant with the annualised hourly rate of a salaried employee it looks like the consultant is doing very well. But the economics of consulting are tricky to get right.
I have been running a small consulting business for about 6 years and whilst the directors and several sub-contractors have been gainfully employed for pretty much the entire time, there’s a fundamental problem with consulting: the only asset you can leverage is your time, and time is finite.
Fighting against this fundamental law of nature is essentially impossible, so consulting firms are left with a very small set of opportunities to scale. There are really only three levers to play with here: 1) bill more hours, 2) charge more to a customer for those billable hours, or 3) pay less to staff and sub-contractors for the hours required to provide the services.
If one was cynical it would be easy to characterise these options as screwing yourself, screwing your customers, or screwing your staff. If you have a skerrick of business ethics, it means you end up screwing yourself. Sometimes, without even being kissed.
But whatever the strategy, and however cynically you look at it, the scalability of a consulting business is always limited to the personal exertion of individuals. This is why I continue to believe that the only way to break free from the shackles of employment - and prepare for a future in which employment as we know it simply does not exist - is to build something.
It doesn’t matter whether what you build is physical or digital, just as long as you can profitably deliver it to a receptive market.
I am trying to do just that with a couple of live products, plus one one more secret squirrel project in development. I’m not entirely convinced that I’m following my own rules for one of the products (which may mean it needs a change of direction soon), but the other definitely does because we’ve got live customers, making (modest) revenue, with a lot of potential for growth.
So what have I learned through this process? The last five years balancing consulting with product development has taught me two things: 1) it’s all about cash flow, and 2) out-of-work hours are no-where near as productive as in-work hours.
Having the ability to work full-time on building product requires cash to pay your bills. Without that, you have to continue to consult and then spend non-consulting time working on your ideas. Ultimately, something has to give - family, study, leisure, friends - because there simply isn’t enough time to nourish everything.
But the cost of working out-of-hours (at least for me) is that time spent backing up is no-where near as productive as dedicated time spent fresh during normal working hours. I have repeatedly found that I am able to get significant work done if I can arrange for a dedicated block of time away from consulting. Chipping away after hours does move the ball forward, but only ever so slightly.
Sadly, I am yet to find a satisfactory solution to the cash flow problem so I remain gainfully employed as a consultant, at least for the remainder of this year. However, should someone want to plonk some coin into one of my start-ups, drop me a line. I’m always keen to chat.
After quite a lot of work behind the scenes over the last three years or so, two of my startup projects have recently launched.
It’s been a very big couple of weeks because we managed to get 7th place (out of about 30 or so very compelling startups) at the recent SydStart pitching contest; TouchPass was recently approved for the App Store (after a rather tortured approval process); and following SaveMail's soft-launch this week, the ActionMail boys @warwicksinclair and @Diamondkanka are currently demoing it at the Australian Mutuals 2012 Conference on the Gold Coast.
I’m really proud of both of these projects and can’t wait to see how they are received.