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Ask HN: How do you control consulting work and concentrate on startup work?
57 points by milofelipe on Aug 15, 2010 | hide | past | favorite | 42 comments
I'm doing consulting to bootstrap my startup. Business has been great these past years. My problem is it's taking me so long to release my product. I also have a couple of other ideas that I can't find time to work on. The immediate income gained from consulting is very tempting for someone with a wife, a kid, monthly expenses, and mortgages. Consulting became the priority and startup work moved back. For those who experienced something like this, how did you handle it? How did you break free from consulting?



Paul was right when he said not to do side consulting work.

For me it was simple; a 3-month consulting gig will give me a financial runway for the next year. So I am doing it, and nothing else. Come December 1st I will have enough to live comfortably for the next year, probably 2 years if I move to somewhere cheaper and bring my fiancee over.


Are you sure Paul was right? If you can pay for a years expenses in 3 months, it sure sounds like you're in a good position to hire; pay someone to reduce consulting workload, and pay someone to work product.

'mahmud, this isn't particle surgery. This is every real consultancy. Ever.


Presumably you're charging the rate you charge because you're you. You can't simply drop Junior Dev Jimmy onto the project and keep billing away at the same rate.

It doesn't take a very savvy client to notice when throughput drops by a factor of 10. So unless you're a body shop that's already sending out mystery devs, or you're very good at explaining away a huge drop in productivity, hiring is not going to help this situation at all.


Nothing in life is free. If you hire Jr. Mahmud to take over 80% of your job, and your aggregate productivity drops by 1000%, you will probably lose your client and be forced out of business.

So don't do that.

A steady $200/hr consulting gig offers an awful lot of wiggle room to figure this stuff out. When we hire a new consultant, (a) we're very picky and (b) they tag-team with us on projects, often for months, without being billable. That costs money in the short term, but pays for itself in the long term.

Also, it's wrong to assume that a consulting gig has to be performed by one person. Time and again friends of mine have found that they could hire cheap for 20-40% of their project work (documentation, test harness coding, automation, etc) and then had that person grow quickly into a full-on replacement. And all due respect to 'mahmud's domain knowledge, but the examples I'm thinking of are pretty high end.

At the end of the day, this problem is a fundamental challenge of running a business, and I have to respectfully/tentatively suggest that if you can't figure out how to hire and train a replacement for your own work, you stand very little chance of running a successful software company, where you'll also have to hire QA, ops, marketing, and sales.

Think of this current challenge like a warmup.


Can you explain this? I don't understand it.

"they tag-team with us on projects, often for months, without being billable"


I hire Joe the Up-And-Coming Vulnerability Researcher (or rather, Cory does, since we hired someone to replace me 2 years ago so I could do more product work; see how this works?)

Joe and I work on projects together for 2 months.

I'm the billable resource on those projects. Joe doesn't bill.

I start out working harder (I have to deliver for clients and ramp Joe up). Pretty soon Joe ramps up and we start delivering the same work a lot faster. Eventually, Joe's so demonstrably capable (in our case, he's finding the same number or more security vulnerabilities in code that I am) that he becomes a billable resource, scheduled just like anyone else.

Depending on who you hire, this process can take months, or it can take weeks. If you hire someone with experience in your field, it may not take more than a week or two. If you hire out of University, it might take 2 months. It's almost always worth it.

I actually think Matasano has a harder time doing this than many other companies would. Our clients are extremely discriminating (we're a high-end firm) and we have to be very careful about hiring. We have clients that pick researchers from our firm by name. Staff bios go on every proposal. I can't imagine that this is the case for, say, iPhone development; most consulting companies are paying for an outcome, while security research contracts are paid in part for the process.


When I find someone with both that much domain knowledge, and broad peripheral expertise, it will most likely cost me north of $200/hr, leaving me nothing. Not only that, but the hiring and looking is some extra chore I can do without. In the time it takes me to follow up with applicants, I would have gone through 15% of the project.

Somethings are best done by yourself.

And yes, Paul was right; I barely have any mind for our startup anymore. I live and dream the consulting gig; it monopolizes my imagination, and all I can do after a grueling 12 hour day of work is watch Family Guy and drink beer in bed like a bum.


You're billing $200/hr and you can't hire a developer for your personal project or attract a partner who can share the burden on the consulting side?

Paul was "right" because he thinks about consulting like you do: as a day job without benefits. The difference between a day job and a consultancy is that your day job gets pretty upset when you hire someone to do your grunt work.

You seem dead set on scaling the wall when there's a perfectly good ladder hanging right off it. Stop killing yourself on a contract so you can earn the right to kill yourself on a startup project that will very likely fail (they all do). Engineer a solution to your current problem ("people will pay my company $8000/week to do something and I am currently the only person in my company"). That has to be easier than trying to figure out how get "liftoff" with a "1 year runway". Sheesh.


what kind of consulting work did you do?


I do something tangentially related to data-warehousing.


True Story: One of the first startups I ever joined had a consulting business. I was employee number 12. 4 of the employees were bringing in enough revenue to fund the whole company while we developed the main product.

We started talking to investors, and the first thing they said was "We won't consider you if you keep the consulting business, shut it down."

So the company shut down the consulting business. This meant that we were now on the clock.

The investors then waited until we were just about to go under and offered us a bridge loan....on their terms. No negotiating power.

Then finally, they closed the first round of VC.

Needless to say the company capitulated on all the terms of the term sheet for that first round.

Later, it turned out that we were ahead of the market by about 5 years.

So, the company failed because they listened to investors who gave them bad advice. The advice was useful for getting better terms for the investors.

Now, what would have happened if they had not shut down the consultancy-- they could have negotiated good terms, and wouldn't have needed a bridge loan, and they could have hung on until the market took off. Might have been a delayed payoff for the investors, but 7-8 years is not that long to wait to get a home run, especially compared to the complete loss alternative.

IF the investors had invested what they did without the requirement to shut down the consultancy, then the company could have added the employees they wanted to, and had both the investment and the profits from the consultancy to invest in the primary product.

The end result would have been a better primary product and a better return for the investors.

Blanket advice is generally not good advice. Don't run a SEO consultancy when your primary product is videogames. But if you're primary product is videogames and you can fund much of your overhead with a few employees and a licensing deal for that engine, then it is a good thing. It is easy to tell if it makes sense if the income more than covers the cost of the employees dedicated to the "side" business. And reality is, this side business will often present opportunities or your main business and generally underwrite advancement of the main product on someone else's dime.

If you're a couple college kids and this is your first startup, then maybe you're not able to keep focus on the main business when you have customers for a consultancy.

But when they are aligned and the consultancy covers hiring extra manpower so that more total effort goes into the main business, then giving up the consultancy would be a bad advice.

So, if you can do a similar split with time-- where you spend 4 months consulting to cover expenses for 12 months, then you're in a position analogous to this company. In that case, it makes total sense and the advice to "never do consulting" is bad advice.

You'll be better off in your TC application or any other aspect of your business having those 8 months of free time to just work on the product... because you consulted for 4 months.

The alternative is likely keeping a day job the whole 12 months and not being able to focus on the startup.


I'm not free from consulting (and want to continue doing it as well actually!), but a few points:

* I treat each of my own projects just like a regular client

* I consider all the projects like a 'scrum' of 'scrums' (ie: I get to prioritize between projects just like I prioritize inside a given project)

* for billable and non-billable projects, I take great care to ensure I keep a sustainable rhythm (I work a lot periodically when required, but not on the long run)

* I keep track of my 'pulse' with Freckle, very helpful

* for each project (home-made or not) I try hard to limit the amount of time I dedicate to it

* I keep high rates

* we've lowered our expenses quite far (including moving to a very cheap area in France, considering buying a house without a mortgage as a result etc)

In my case and when it's in control, consulting is both a risk-splitter and a great way to keep up to date and financially 'confident'.

As well I get to work in various, real-world situations that give me ideas for my own projects.

Last point: as I consider myself an investor investing in ourselves, where my resources (time/money/energy) are scarce, I find it great and sustainable to work this way, slowly building what I like.


Cross posting but relevant I believe:

http://news.ycombinator.com/item?id=1604820 (techniques to prioritize between projects and inside a project)


I've been doing exactly this transition for the last couple of months -- transitioning from consulting to running a business and working on services (basically, a startup, just under my company's brand).

For me, trying to schedule "startup time" didn't work. There was always too much immediate consulting-type work to take care of.

So about a year ago I ran a Craigslist ad, spent a day wading through applications and making phone calls, and found someone that was willing to work on a part-time, on-call basis, for good wages but less than my consulting fees.

A year later, I've got a couple of people that I work with now -- sort-of employees-on-call -- and I was just able to take my first real vacation in 2.5 years. Everything was handled fine while I was unreachable. So now I've got plenty of time to work on software.

So, one solution is to run your consulting like a business for a while, grow it, get some contract help, stabilize it, and then manage it part-time.


I don't understand... sounds like you still have to schedule startup time around a job. Is it that you're working fewer hours than you were before? Wouldn't it have been easier just to take on fewer consulting hours?


Maybe he has a lot of pre-existing repeat-clients who always come to him for their tech stuff that he doesn't want to send away permanently.


Yes, exactly. And, both the consulting and the startup stuff are part of the same business, just different aspects of it.

I know it depends on the individual, but I find it a lot easier to concentrate on startup work when I'm not developing an ulcer over finances. (And I can't wait to stop developing ulcers over finances. ;-)


Treat the startup like a client. Juggle it into your schedule with the same priority as your other clients.


doesn't work. It fails for almost anyone that tried it. The only solution I can think (and trying now) is to pay someone to do it for you ;)


For me, it's been very important to just "keep moving forward" on my startup. At the end of every day if I'm at least one step closer to my destination, it's a win. Some days I get a huge surge of startup movement, some days my "money maker" zaps all of my energy and maybe I only answer one FAQ in my knowledgebase.

The bottom line is keep moving forward, and eventually you'll exit the workload brackish and emerge on the other end full-time on your startup.

I'm 100% bootstrapped and I'm going full-time on my startup November 1st - until then, babysteps shall continue!


Charge more.


I'd add a bit more to "charge more", although it is a good place to start. The other half, which may be seemingly obvious, is "...for less time".

A higher hourly rate isn't always the best answer. Some clients require more managing than others, have poorly organized projects, or terrible schedule requirements. Any of these will destroy your ability to run a startup just as much as going broke. Pick clients that result in a low overhead for you.

I've cut my client list down from a dozen or so to just 2 big clients. One pays me a high dollar rate and is the sort of client who just shoots me an email saying, "hey can you spend 6 hours on this thing". The other is a long term project which is basically guaranteed work for the next 12 months or more. This is lower paying, but provides 20-40 hours a month of consistent work. Both clients are low maintenance, easy to deal with and flexible.

For me, it doesn't matter how big the hourly rate is if I'm getting hassled every day of the week. It's as much about your time as it about your income.


Not sure why someone down voted this, I think it's a good solution. Each time I had more consulting work than I knew what to do with, I'd raise my rates. Its a good way to throttle incomming work and either earn more money -or- what youre looking for: have more time for your startup.


I think I was too succinct. I'd disagree with "a good way" - it's "the way." Though you don't necessarily raise rates across the board, for every customer or every job. You do marketing. MARKETING.

Good customers, you explain your situation, raise your rates, but offer grandfather clauses if they're willing to guarantee some level of minimum work or pay upfront or with better terms. Bad customers, you double your rates overnight (and then do it again 3 months later). In between customers, you offer different packages that trade off them paying you more with them paying you more reliably, and/or offering you things that help you market your offerings better (referrals, testimonials, etc).

Additionally you specialize. If its something you don't like doing, you charge more. If its something that teaches you a skill that you can use for your nascent startup, you charge less.

Eventually if you're good, your "startup" becomes the R&D department to your burgeoning consulting business, and you've got something that feeds good things back and forth. The startup makes consulting more viable, and the consulting makes the startup more viable. Somewhere along the way you hire people.


Have you tried prioritizing your startup like you do your consulting? I'm sure you meet all your consulting deadlines and requirements. I'm addicted to consulting right now and I've been using it to help bootstrap my startup ideas as well. I don't think I'll be backing off consulting until my startup ventures actually make as much money as my consulting and even then the consulting dollars will give me more options in promoting my startups!

I love the variety of consulting so much that even after my ventures bring success I will still want to do consulting because it gives me that instant achievement satisfaction.

Don't focus on breaking free from consulting and before working on any other ideas get that first product released. Set milestones and treat it like your other work.

I'm still consulting until I get my own projects off the ground, my first launch took 1.5 years to finish, my next launch will be in a fraction of the time.


I can only do one large thing at work at a time, probably because I refuse to give up my leisure activities: I enjoy them and they keep me sane.

So I did a substantial 7-month consulting gig last year, collected the cash and have been working on my startup since.

Incidental details: 1. I blew two months on a startup idea that was going nowhere. 2. I live cheaply.


Launch. Maybe see if you can postpone some of your features until v2 and just get something out there ASAP that people can use and ultimately pay you for. Easier said than done of course, but that's your real answer I think.


1. Can you contract out any elements of consulting work to others to free up time? Perhaps some of the lower-value work? You'll make the spread b/w the rate you get and what you pay them. You'll profit less but gain incremental hours for your venture.

2. Pick or find consulting work that "scales well" meaning it allows you to leverage (sorry for jargon) knowledge/things you've already done or built. This type of work will be more efficient for you, more profitable and you can reinvest saved time into your startup.

3. Regarding multiple startup ideas, I'd pick one to focus on. Diversifying amongst startup ideas esp if unrelated doesn't work in my experience. It leads to doing them all half-baked which ultimately won't get you further from consulting which is where you want to be.

4. As mentioned below, we treated our own company as a client which meant we acted with same sense of urgency as we would with other clients. It is a good way to make your own venture a priority else it always gets back burnered.

5. This one is a bit drastic but exit the mortgage if you can by selling your home and renting. Fixed costs like mortgages can be like anchors for an entrepreneur. Take the money you may make and put some away for a rainy day fund for the wife/kids/you and a portion can be used to give your own venture some additional fuel or runway.

In same boat as you my friend so "feel your pain" although sounds like you have too much consulting biz which is a high class problem IMO.

Good luck. And if you figure out a "solution", pls let me know.


Don't sell your house though. Rent costs money too.


True. Perhaps it's me being in NYC where you can rent for significantly less than carrying cost of mortgage/maintenance on your own condo.

Plus why invest in real estate (highly uncertain and perhaps going nowhere in near future) vs. invest in oneself?


Selling for most people now is not a great idea for a couple reasons.

A) as the other person pointed out, you'll still likely have rent. As for bouncing around looking for cheaper rent, you typically get locked in to a rental agreement for at least 6 months, if not a year. You can't just move every month to save a few bucks.

B) Moving costs money (and time) in and of itself.

C) Selling costs. At least in the US, most housing sales are going to eat up 5-6% of the house price in commissions. On a $150k house sale, it's going to cost you $9k (plus, again, the time and expense of moving).

Unless moving is going to save you significant expenses vs renting, it's probably not that wise to blindly sell and move. Assuming, that is, you even could sell to someone in this market. It's not great in many areas for sellers right now.

If I could rent someplace $800-$1000 less than where I'm at now, I'd consider it, because the cost/expense would be recouped in probably a year, but I wouldn't go through all that hassle/cost/expense to save a couple hundred per month.

YMMV.


In his book The Innovators Dilemma (http://astore.amazon.com/hypernumbersc-20/detail/B001I05ZVK)... makes a throw-away line that rocked me back on my heels.

He said something like "resources are allocated by customers not managers, so choose your first customers carefully".

The point is if your customers are for your consulting business they will allocate your resources in that direction.


As soon as your startup brings in money this is no longer a problem.

Thus the solution is simple, at least in theory: make money. Now.


To break fre, the way i would recommend is to save up enough money that you have a reasonable runway to pick one startup idea and pursue/iterate it intensely. Set a goal for how much money that is and save as rigorously as you can. During this time of earning money, you can at least do some customer development around your ideas. And my advice is that unless your consulting and your product are really tightly tied together, you are better off keeping them entirely separate from a legal perspective. If one or both start growing, keeping them together can get really messy. Obviously there are are exceptions to that.


I'm still struggling with this myself, but these things are the ones I've tried that seem to be working:

1) Confine your contract time. I try to basically do contract work between 8am and 1pm. Other people only work on certain days.

2) Work with your clients to set priorities. Know what are the most important things to them, and tackle those first. This helps with....

3) Work a fixed number of hours. Don't do overtime. If you stay organized, estimate well, and stay on task, you can do your job and then stop.

4) Whoever else said to launch, I second this. You need someone yelling at you to get your startup shit done. Customers are very good at this job.


Thank you for all your replies. I'm learning a lot from them. I think I'd move towards hiring a promising junior dev to help me with my tasks. But I'm not yet sure if I'll have the dev work fully on the consulting side or the startup side. It might depend on the type of consulting work needed.

I guess my problem is also really because I'm a one-man startup. So finding a co-founder or startup team to help me on the startup side could solve my problem. Or it might be another problem too...


Just curious as an outsider: what kind of consulting do you do? How did you get into it?

... guess this might be an "Ask HN"


I do Java consulting (anything Java-related). When I was still an employee, I was freelancing on the side. When I resigned, I continued freelancing. An old client (from my freelancing days) hired me as a full-time consultant during that time and I've been working with them on different projects ever since. The client is aware of and fully supports my startup activities.


If there are at least two people in the company and one consulting can cover their expenses I think that's the way to go. MSFT (Paul Allen and Bill Gates) did consulting in Microsoft.


Hire a junior programmer with potential. Go for cheap and good, not fast. Cash expense should exceed any opportunity cost of waiting if idea is good.


I used to restrict to 4hr/day max and stick to it.


Hire.




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