Isn’t Consulting Risky?

Small Business Ownership. It’s one of the Great American Dreams. Our forefathers, the founders of the country that I call home, were entrepreneurs. They were merchants, farmers, and woodworkers. Many, such as the blacksmiths and cobblers, were in the high tech industries of their times. And like those forefathers, the call of self-employment persists in many of us today. We long to “hang a shingle out” and see if we have what it takes to make it as a small business owner.

And the desire is not limited to Americans, either. No, people from around the world want to join the ranks of the self-employed. It seems to be a common trait in most everyone.

So, what’s stopping us? Why don’t more of us break away from the employee-employer relationship and go to work for ourselves?

Risky Business

As I’ve talked with developers, database administrators, project managers, and others in the IT field, a recurring theme continues to surface when I asked that question: RISK! It may not be expressed so concisely, but that’s what it frequently comes down to. Risk.

Many would-be consultants are concerned that launching a career in consulting would be like setting a course straight into stormy weather. And that understandably gives them cause for concern. There’s just too much on the line in many people’s lives: a mortgage payment to make, mouths to feed, and a certain level of creature comforts to maintain. If a career in consulting doesn’t pan out, we stand to loose much of that. Nobody wants to risk their livelihood.

And there’s nothing inherently wrong with risk aversion. We all, at some level, want to minimize our exposure to risk. That’s why we buy insurance, to help protect us from uncertainty. We invest in a diverse portfolio to help protect us from a volatile free market. (Although both of those are probably not the best examples given what’s happened in the world’s economy of the past couple of years.)

We all have different tolerance levels for the amount of risk we find acceptable. And for many of us, that line is drawn before what we reach the self-employment point.

The Risk of Staying Employed

But to be fair, let’s consider the alternative; it’s not risk-free either.

The employer-employee relationship has been described by some as a sort of marriage where there is a bit of give and take on both sides for the good of the overall relationship. It’s full of compromise and trust. The employer trusts that you’ll work hard and you trust that they’ll pay you for working there.

But employment really isn’t like a marriage at all. There’s no commitment. There’s no loyalty. There’s not a “till death do us part” clause in an employment contact. When you receive an offer to go work for another company, you can. If the organization believes they can outsource your job and save money, they will. The employer’s priority is maximizing returns for its shareholders. The employee’s priority is making a good living for himself. If anything, it’s more of a marriage of convenience than a life long commitment.

I don’t mean to sound cynical about employment. I’m not really. There are a lot of really good companies out there to work for, a lot of good managers to have as a boss. And finding one can mean many years of contentment in the workplace.

However, you must realize that employment is not a safe harbor from risk. On the contrary, I’d even say in some ways it’s even more risky than consulting.

No matter how hard we work, no matter how well we do our jobs, we are only one downsize, one merger or acquisition away from the unemployment lines. And it really doesn’t have anything to do with us as employees. It’s completely out of our hands. If a decision is made to sell off our division, to close this factory, to off-shore our department, we’re out of a job. Even though we were best in our job, we’ve lost it because of something that had nothing to do with us as employees.

You Have the Power

On the contrary, in consulting our success depends solely on our performance. Our jobs cannot be out-sourced or taken off shore. We cannot be downsized or re-organized out of a job. Our livelihood depends solely on how well we perform our role as a consultant.

Oh sure, some of our clients will no longer need our services. But if we’re actively engaging multiple clients at one time or we have other clients in the pipeline, our livelihood is not affected. We simply move from helping one client to assisting another client with little disruption to our streams of income. And I’ve found that if I do a good job for a client that generally leads to either more work from them or glowing recommendations to others.

It’s No Cake Walk

But consulting does require effort, not just in areas where we consider ourselves strong either. To be successful, we must nurture our client relationships; we must arrange to have another engagement lined up after this one winds down; and we must be willing to talk about money and negotiate agreements.

In short, consulting requires that we expand our skill set beyond our technical abilities. We must learn to become project managers, bookkeepers, salespeople, executives, and janitors. Our success in consulting relies not only on our technical prowess, but on the skills that will get us to a point where we can exercise our technical skills to help clients.

And can be a scary proposition. One that we should not enter into lightly. But more about that in another post.

Now it’s your turn

I’d like to hear your thoughts.

1. What lessons have you learned about employment? About consulting?
2. Do you want to start consulting? What’s holding you back?
3. Is consulting really as risky as it sounds? Why?
4. How can remove some of the risk associated with consulting? Employment?

And finally, I’m thinking of doing a series of blog postings on consulting. Interested?