Becoming an IT consultant: Do's, don'ts and disasters to avoid

Thinking of striking out on your own? Ex-CIOs who have made the jump share their hard-won advice.

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You cannot assume that family and friends will automatically respect your work space and honor the working hours or the structure you've set up for yourself.

"You have to talk about your schedule. Lay out your ground rules. It's got to be clear that the computer in dad's office, for instance, is for business and not for watching YouTube," says Mathis.

For help with printing, presentations and administrative support, get to know your local copy shop. "They'll let you send them stuff online," says Rodgers.

To elaborate: many local and national office supply chains offer services whereby customers can send electronic documents via e-mail in the morning and pick up completed PowerPoint or paper-based presentations hours later.

Mind your finances

Over and over, consultants say what scared them most about striking out on their own was the absence of a regular paycheck and company-provided health benefits.

"I was scared to death," says Mathis. "I liked direct deposit."

The best thing that newly minted consultants can do is educate themselves about the sales cycle of consulting services. It may take 12 to 18 months between an initial meeting and the time a contract for services is actually signed. For this reason, most consultants recommend having the equivalent of two years' worth of expenses socked away in the bank.

"Chances are you won't see a return for a good 12 to 18 months," says My CIO's Chaabouni. "You need willpower and reserves to sustain the lack of income for 12 to 18 months. You need to stick it out at least 18 months and maybe even longer given this economy."

As for setting fees, Rodgers' strategy is to charge what the market will bear, which means different rates depending on the location of an assignment. Even within Arizona, for example, she charges less in Tucson than in Phoenix.

Another pricing strategy is to make sure your fees are less than those of Accenture and the other big, national consulting firms, Rodgers says. If I can price myself equal to or less than them, it's still excellent money" and makes her services attractive to clients, she says. To find out what the big firms are charging, Rodgers says she asks consultants with whom she networks. She also often partners on projects with other consultants or firms and can see what others are charging that way.

Money coming in needs to be managed. Chaabouni's advice: "Get yourself a good accountant, and pay your taxes before you pay yourself." Because consultants get paid in large chunks on an irregular basis, "it's so easy to get intoxicated by a big check that you may go on a spending spree," he says. "If I get a check and I don't make an immediate payment to the IRS, I may be hurting downstream. A good accountant will educate you and help you and keep you true."

In addition to your own books, mind your potential clients' finances as well. "If the client is a start-up and hasn't been in business all that long or if their business model is shaky or there is some other red flag, demand prepayment or demand a retainer," Chaabouni advises. "Make sure they have some skin in the game."

Finally, as an independent consultant, health care insurance is bound to be one of your bigger expenses. There are several options. If you're married, check to see if you can participate in your spouse's health care plan. Otherwise, various professional associations, such as the Independent Computer Consultants Association, a national nonprofit based in St. Louis, offer group health insurance plans for independents. A third option is teaching part-time at a local university as a way to become eligible for employer-based health care benefits at a reduced cost.

Navigating the cultural changes

As much as he hates to admit it, one of the biggest culture shocks for Mathis was learning to function without a support staff. "As embarrassing as it is, one of the most difficult parts for me of going from executive to consultant was I had to take care of myself," Mathis says. "I was so used to someone taking care of my schedule and reminding me of appointments, and when all of a sudden they're not there, it's a culture shock. You're your own salesperson and secretary."

Changing your professional lifestyle can also be tough on your family, Mathis says. He spends a lot of time on the road, staying in hotel rooms. He books his own travel through an agency that charges him a flat fee of $20 per trip.

"When you've been traveling first class and the limo picks you up and someone is there to make sure all the arrangements are flawless and then you don't have that level of support, it's a shock," agrees Computerworld columnist Bart Perkins, a former CIO and now managing partner at Louisville, Ky.-based Leverage Partners Inc.

"It's a little bit intoxicating that people will pay me for what I know, but I travel a lot," says Mathis. "People don't buy services over the Internet. They'll read your proposal, but they want you to come to them and present it. My wife will tell you there are times she wishes I was still a CIO," he says.

On the upside, however, Mathis is able to schedule three- and four-week family vacations and get to more of his children's ballgames. "I have seen 100% more of my kids' games than when I was a CIO," Mathis says.

"But in the middle of dinner if the phone rings and it's a prospective client, I take the call," he says. "When you're only eating what you kill, and something comes across your path, you chase it."

Copyright © 2009 IDG Communications, Inc.

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