Lately I’ve gotten a couple people asking how I got started in consulting. I joke and say it took me “X years, X months, X days to be an overnight success.” Having started Lucrum in 2010, it occurs to me that we’ve lasted longer than some other folks who started on a similar journey. I figured sharing some of the lessons of starting and managing a professional services business might be helpful to other people with aspirations of starting their own business.
I’m not claiming to be an expert, a great business leader, or even a good accountant. But I think I can honestly say that while I may have made a lot of mistakes and done some stupid things, I did less than others. So with that qualification, here are my top six lessons for new entrepreneurs.
Sell vs Work. The biggest issue I faced early on was balancing the amount of time I was selling vs. doing the work. It’s a common theme among rookie business owners; they hang their shingle and sell like mad for a while. Those sales efforts pay off and they get busy, sometimes with more work than they can handle. While fulfilling the services they sold, sales falls to the wayside. Once the consultant works through the backlog, they are left with little to no services, resulting in a rush to sell again. It’s especially bad if you’ve never sold anything before and really don’t enjoy that side of the business. We’ve all seen the feast or famine curve. The key is to never stop selling and only accept the projects you want and can handle. Seasoned salesmen and entrepreneurs know to use scheduling and pricing to manage the backlog; consultants need to do the same.
It’s OK to Say No. When I first started, I was desperate for business. Forget a career or successful business, I was just looking to make enough to pay the mortgage. For those that don’t know my background, I was the CFO of a land development company in 2009 who found himself on unemployment- $550/week buddy! That desperation led to some questionable client decisions on my part.
Once, I took on a land developer who wanted the moon (which I was happy to offer) and talked a good game but had unrealistic time demands and expected to pay next to nothing. The warning signs were there from the beginning, but I ignored them in my haste to prove myself and get a paying (or so I thought) client. I got fired in the second month and had to fight about the invoice for the first month as well as the time I had incurred to date. We ended up settling for half and I bought myself a very nice lesson. Fast forward 10 years and a major part of Lucrum’s client qualification process is actively searching for reasons to say no to accepting a new client.
Hire A Coach. It’s an understatement to say that I was terrible at sales and not much better at taking the lead in a client meeting or running a business, even if that business was a team of one (me). My first coach was Randy Autrey, a long-time insurance and investment advisor I got to know well at my previous employer. Randy’s “fee” for an hour of teaching was a glass of scotch at a bar on his way home; the lessons were invaluable. He taught me the basics of making sales calls, developing referral partners, and how to prepare for prospect meetings. All things I had never done before. After Randy, I met and started working with Lee Richardson. Lee built on what Randy taught me and helped develop a lot of the tools, model, and practices Lucrum still uses to this day despite it being 7 years since Lee changed careers out of coaching. Most recently, I’ve been working with Peter McRae and Tom Bojarski. Peter has helped me tremendously in working with my team, communicating, and having a “culture conversation” with each of Lucrum’s new teammates during their first month. Tom is great at systemizing processes, tweaking business models, and helping folks scale the business.
Having a coach (or coaches) is not a guarantor of success. But it does help shorten the learning curve, avoid mistakes, and make a business owner think. Too often we get caught up in running, fighting, scraping; your business coach can make you sit back and look at strategy or the “why” of your business vs. the “what.”
Hiring your First Employees. It’s 2014 and I have more work than I can handle. Instead of being able to fill myself up with higher rate CFO work, I’m finding myself doing bookkeeping to cover for the contractors I was hiring but kept finding weren’t doing it to the standards I expected. Or fixing the crappy bookkeeping I get from my CFO clients who can’t find quality accounting help. I kept repeating the same mistake of hiring contractors when I had a hot lead because there was comfort in the “only have to pay when I give them work” model. I finally realized that if I wanted to build Lucrum into a real business, I would have to take the plunge into the employee pool.
My hurdle was at the time I was barely making enough to pay for overhead, my salary, and keep some reserves. Any salary I committed to was literally coming out of my take-home; there were no reserves or surplus to speak of. With Lee’s urging, I finally placed an ad for a part-time bookkeeping position (we call them Accounting Specialists now) that would be full-time in 6 months or less, guaranteed. Debbi Silva answered that ad and is still part of the Lucrum team today. If such a wonderful person and strong accountant hadn’t answered that ad, I’m not sure I would have had the courage to try it again. Thank you Debbi.
The first employee is the hardest. I never stressed as much about hiring someone after that. Trust in yourself, be honest with your team, and take the plunge. It’s hard when you’re in the middle of it but looking back I was so frustrated and unhappy with the situation I found myself in that staying the same was worse than failing.
Work/Life Balance. Every entrepreneur deals with this and there is no recipe for a good work/life balance. It all comes down to personal preference, goals, family obligation, and relationships. Around 2014-2015, my Saturday routine was to drop my son off with my Mom and head to the office for 4-6 hours. I didn’t have an administrative assistant so all the Lucrum business fell to me. Monday-Friday was for client work, sales, working with my small team, and meetings. That left Saturday to catch up on all the business I didn’t get to during the week and I was OK with it at that time.
At one point I accepted a special project for a small residential developer to do some projections and feasibility analysis. The money was good and the first few projects were fun. But I remember the one that crossed the line. I had a terribly busy week and had to do his project on Saturday in addition to the Lucrum work. My entire day wasn’t spent with my Mom, wife, or son, it was working. I remember thinking as I ate lunch at my desk for the 6th day that week that the money I was getting for that project wasn’t worth it. I decided right there and then that I was done working regular Saturdays. I wasn’t sure how soon but I made that a goal. To this day, if I do any weekend work (except to make up for mid-week vacations, etc) it’s not client work. That is confined to the weekdays. Refer to Lesson 1- I use scheduling and pricing to manage the workload, or simply turn down an opportunity.
Pricing Services. I sometimes smile when I look at our inactive billing codes in Quickbooks. Early on I was doing bookkeeping work for $45/hr and “CFO” level work for $125. I had no clue how much I was underpricing not only the market but my worth. Until Lee and Peter, I didn’t have the confidence to let alone ask, much less close, a client at higher rates. Lee pushed and pushed me to raise my rates, especially when I had less and less capacity for new clients as business grew. As my confidence grew, so did my rates. Even when I raised them to what I thought was an “absurd” level, I kept getting the “yes”. This finally gave me the confidence to back into our hourly rates by determining what our capacity is, factor in the above-average salaries we pay to get (and keep) good folks, add in all the benefits Lucrum offers, and let that analysis set our pricing. This approach also gave my team and I the confidence to dodge the discount question; we may offer more favorable terms or some other benefit but we don’t play the sales discount game. Ever.
Everyone has heard about the tech billionaires who have a great idea and strike it rich. That’s a tiny minority of the business owners out there. My story isn’t special, I’m sure there are a ton of other lawyers, CPA’s, coaches, consultants, and other professionals who have taken the plunge into entrepreneurship and can relate to some of these lessons. They might even be more successful than me.
Randy helped me for a scotch each Wednesday after work and I will forever owe him a debt for getting me started. If you are thinking about taking the plunge yourself, my preferred spirit is bourbon. Let’s find a spot on my commute home to chat, seriously.