How to Use Consulting as a Bridge Between Corporate and Startup

stepping

I had a great lunch meeting today with a very talented friend who’s been working in corporate for nearly two decades already. During that span, he’s built impressive credentials and has worked on different projects in his chosen corporate function.

“I’m at that point Peter where I’m at a crossroads in my corporate career. If I leave my company now, I can apply for department head in another firm, but then what? I’ll be looking at a future of just jumping as department head from one company to the other?”

(I was at that same crossroads before, so I could really relate to what he was saying.)

A common friend of ours who was managing her own lucrative consulting practice was asking him if he wanted to pursue the same. It was something my talented friend could establish easily. He then thought of talking to me to get more feedback on making the leap.

I said:

 “Ah. I think one point to consider is the decision to go into consulting or pursue a startup. They are different things.”

Consulting vs Startups

Having been involved in both consulting and startups, I know first-hand how different they are.

A consulting practice centers around the skills and reputation of the Consultant. The ensuing organization is built to extend the reach of the consultant.

For example, from time to time, I still agree to HR Consulting engagements with some firms. They pay me for my HR expertise. If I were to build an organization around this “service,” it would involve creating a support structure around me so I can maximize my contribution – admin people to ensure I don’t get bogged down, a junior consultant to help on the ground with projects, etc…

This is of course, a GREAT thing. I know numerous people who have created either solo consulting practices or consulting firms who have employed 2-3 people, even more. These people are immensely satisfied and do not worry about money anymore.

If you wish to scale though, and make a splashy startup, it probably would not be through a consulting practice, as a consulting practice does not scale. The consulting practice organization is built around the consultant’s particular skill. Since there are only 24 hours in a day, there is only so much that you can do to extend your reach.

While a consulting practice is built around the consultant, a startup’s goal, on the other hand,  is usually create a repeatable, sustainable business – or in other words, to make itself operationally independent of the founder.

If you take me out of the equation in STORM, for example, STORM would still exist. It would still make operate. Of course, a lengthy separation would have ramifications on long-term strategy and growth (I hope), but unlike in a consulting practice, taking the founder from a working startup doesn’t mean it tumbles like a house of cards. (independence is the goal, obviously – taking a founder out of an early-stage startup is a wholly different matter).

In a startup, the product or service offered is SEPARATE from the founder, the founder BUILD the product. In a consulting practice, the product IS the consultant.

So, for those who are interested in doing a startup, and have garnered a signifiant amount of skills and experience in a particular corporate field – here’s one strategy you can do:

Do the Karen Yao

Use the financial stream and flexible hours of your consulting practice to build your scaleable startup idea on the side. Then, as your startup makes revenue, you can spend less and less time on your practice and more and more time on your startup.

Screen Shot 2013-04-18 at 10.57.41 AMTake my good friend Karen Yao, who was one of the entrepreneurs in Startups Unplugged. Like me, she built for herself a corporate career in HR. Then she jumped into a consulting career. During this time, she built Congruent Partnerships – first as a vehicle to extend her consulting practice, but then recently pivoting towards a more scaleable startup idea: HR outsourcing services for SME’s.

The thing is, the jump from corporate to consulting isn’t such a HUGE leap as jumping headlong into a startup. For one thing, you will be using the same expertise you were using in corporate – so work-wise, it will be a very comfortable shift.  The only difference is that the payment just isn’t through salary anymore, it shall be though project-based contracts. Moreover, it’s a good transition – you are already getting exposed to some of the elements of managing a startup: client work, accountability, finances, managing your own time, etc.

Since you manage your own time, you CAN NOW allot some time during the week to work on your startup without giving the startup the whole burden of paying for your expenses. This is crucial. One of the big challenges of doing a startup is running out of money. Running out of money basically means you run out of time to work on your startup.

Leaning on your consulting practice is a way fund your startup product development. You can extend your startup runway significantly.

Have your cake and eat it, too

If you choose to work on a startup which is RELATED to your consulting practice, then that’s a HUGE win-win scenario. Your consulting meetings are not only monetary opportunities, but now also double as pertinent data-gathering and validation activities for your would-be startup.

If your consulting clients are your target customers for your eventual startup? That will be super! You can ask them crucial questions like, “What do you think of this product?” or “Would you buy this product?”

Execute the consulting leap within the same entity

If you make a quick visit to Karen’s site, you’d find that congruent has three product lines: consulting, outsourcing, and solutions. I remember when Karen first started Congruent – most, if not all of her clients were in the consulting business. Gradually though, as the consulting line paid the bills, she began building her outsourcing and solutions lines. Nowadays, she is less dependent on her consulting line. Pretty soon, I’m wagering she will have to make a decision: do I let go of the consulting line? 

We started STORM  pretty the same way. When we started back in 2005, we had no actual product and an undeveloped market. We only had a product idea – flexible benefits.

For us to buy time to both develop the product and educate the market, we made money by going into consulting – we started offering organizational diagnosis to corporate clients. This actually became a profitable business line, which kept us afloat for a few years while we were developing our scaleable product. After some time, our flexible benefits line started making money. Soon, it made more money than our consulting line. Recently, we changed our name from STORM Consulting to STORM Rewards, fully making the transition by dropping our consulting business and offering a pure product.

This is one strategy you can do – you can create a consulting company immediately and course your consulting revenues through this entity. Then when you’ve developed your product, you can easily do a quick pivot.

Your financial books will look better, too.

Do Prepare For Your Consulting Leap as Well

If you are planning this sort of stepping-stone strategy, one mistake is to focus too much on the startup leap, forgetting that the consulting leap needs to be taken very seriously.

It is far from automatic that you can transition from corporate to consulting. You have to have led a great career in your function. You have to be REALLY GOOD at what you do. If not, then no one will pay you. You have to have distinguishable expertise in your craft and you have to have the knack of selling yourself well. You have to consciously develop yourself as a consultant.

Also, plan it out. 

If you already know, for example, that it will be your last year in corporate before you take the consulting leap, THEN BY ALL MEANS USE THE YEAR TO TRY TO FIND A MARKET ALREADY. Send feelers to other consultants in the same field if they have extra work you can do. Do free projects on the side to build a credible portfolio. Network and announce your plans to possible clients. Hustle.

So, if you find the startup leap daunting, perhaps you can do an easier leap onto consulting first, before taking on your ultimate startup leap. It’s a very very viable stepping-stone option. I’ve seen HR practitioners build HR firms, brand managers create marketing consulting startups, finance guys doing finance firms, and so on.

Might as well as be you.

Comments

  1. Awesome article, Peter! You are a blessing to the Start-up community! Keep it up, bro! 🙂

  2. Great article. I like it very much. I’m in the real estate sales industry, can you give me ideas on how to build a consulting firm? What type of service/s can I provide? I’m looking forward to go freelance someday. Thanks.

    • Hmmm… before you build a consulting firm, i think the more primary question is, can become a consultant? Two essential things about being a consultant: a) possessing a skill at a level people will pay for, b) having enough people skills to be able to apply those skills with different organizations.

      I don’t profess to be an expert in real estate, but you have to think: what is the industry skill you possess which people will pay for? I know a couple of people who have transitioned from being employed by real estate firms into being a freelancer (for the same firms – no salary, but higher commissions). Perhaps you could look into that.

      Jose makes great points below as well!

  3. I will sound like a wisecrack, and I am not even in real estate but @benj, In general, don’t limit yourself to the industry you’re in. Be general – don’t what do real estate people do? they sell property. can you sell other high-end stuff? Can you sell medical equipment, nutrition products, etcetera? Those are things you can consider as a side business. Learn to market yourself and market yourself well – keep in touch with your current customers and clients. Read up! Read books on marketing,sales, and others. Start with Rich Dad Poor Dad. After all, when you do go the consulting route, you will need some cash to sustain you in your lean months, and the book basically helps you understand how rich people think and keep their money.

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