A year ago, Errol Alexander got laid off from his job as head of market research at Amex Life Assurance in San Rafael, Calif. Despite degrees from West Point and Harvard business school and a solid working background, the 50-year-old Alexander found employment pickings quite slim. So he chose a path well trodden these days by execs from the corporate world: He became an independent management consultant. Now, after what he admits has been a tough year, his one-man firm, Alexander & Associates, "is on the verge of turning the corner" to profitability.
Like other newcomers to the growing ranks of consultants, Alexander is betting there's an upside to the business downturn. He is counting on companies to use consultants on projects that would normally have been handled by in-house staff. But such people have often been dropped from the payroll. "The combination of downsizing and corporate budget-watching is producing what I think will be the trend for the `90s--contract employment," says Kent Black, group vice-president at Drake Beam Morin, a leading outplacement firm.
DROPOUTS GALORE. The field is becoming increasingly crowded. By one estimate, 450,000 Americans call themselves independent consultants. Still, if you believe that your job is endangered or if you feel constricted in the corporate milieu, joining the ranks may be a gamble worth taking. Successful consultants often charge lawyer-like fees of $150 to $400 an hour or $1,000 to $2,000 a day--though you'll probably have to start out charging considerably less.
Don't assume that just hanging out a consultant's shingle is a ticket to success. Three out of four newcomers to the field give up after one year, and 90% seek a regular job after two, according to industry newsletter Consultants News. Why the high dropout rate? "In every recession, lots of people who get laid off think all you need to become a consultant is $15 for business cards and an office in the basement," says the newsletter's publisher, James Kennedy.
A first step in beating the odds is making a realistic self-evaluation that lets you identify a niche where you can apply your skills: market research, economics, personnel training, or whatever. Says Alexander: "The least credible approach to a client is to say: `I can do anything. What do you need?' "
FEET OF CLAY. If the evaluation is honest, it will pinpoint weaknesses. "Not every corporate exec is likely to be good at everything that a consultant should be good at," explains Ted Moline, who formed Janus Consulting in Reston, Va., last year, after Saatchi & Saatchi sold a consulting subsidiary where he worked. "If you're good at taxes, you might not be good at dealing with clients. If you have technical skills, you might not have a solid understanding of how business works."
When he's not working on staff-trainingprojects for outplacement firms, Moline hands out advice in a seminar series, Fundamentals of Management Consulting. Offered by the Council of Consulting Organizations (CCO) in New York and taught by pros in various cities (box), the seminars point out some of the many things fledgling consultants have to learn before they can even think about business cards.
One avid student was Joan Beavin, a former vice-president at Amex Life Assurance who had brought Alexander into the company. Increasingly unhappy with the corporate culture, she resigned last year to head Beavin & Murphy Associates, a two-person consulting firm in Mill Valley, Calif. One skill she found she lacked: sales. "I never had to sell myself before," says Beavin, who took the Fundamentals course to learn to write proposals and make presentations.
Before you spend time and money to outfit an office and develop new abilities, make sure you're really consultant material, advises Scott Halliday, CCO's director of member services. "Can you cope with the big cultural and environmental change, working without all the things you took for granted at the corporation?" he asks. "There's no support staff. No benefits. No office camaraderie to help relieve the pressure." Attempting to sell your services over and over means a lot ef rejection. Halliday asks: "Are you thick-skinned enough to keep from getting discouraged?" Adds Sharon Epstein, who joined the Agency for International Development in Washington after leaving the U. N. Population Fund to take a fling at consulting: "The hardest thing about being a consultant was returning every few weeks from an overseas project and having to say: `Well, I'm back again. Do you have any work?' "
If you have doubts about selling yourself, the pros have a suggestion. Rather than go it on your own, offer your expertise to an established consulting firm. Often, this can be done on a split-fee, part-time arrangement, where the firm calls on your talents as needed for specific projects. "Once you've proved yourself to the client, you may get called in directly next time," says Kennedy.
OFFICE MATES. Or hook up with a partner whose strengths complement your own. Working with professional service firms in the $1 million to $5 million range, Beavin, for example, consults on operations and organizational development, while her partner, Kim Murphy, handles marketing and planning assignments. "In the first year, just having someone to talk to is a big boost," says Beavin.
To minimize taxes and avoid personal liability, you'll want to ask a lawyer how best to structure your business: sole proprietorship, S-corporation, or partnership. If an assignment requires you to buy input from another consultant (one who specializes in, say, employee compensation or public relations), it's a good idea to have the lawyer draw up a contract for the client to sign. It should make sure you won't owe the sub-consultant money. But the pros add that the majority of projects are undertaken with a handshake or verbal agreement on the phone.
"Even the biggest companies usually say: `Just send your invoice for so many hours,' " says David Horwitz, a former producer on the CBS Evening News, who left eight years ago to form MediaPrompt, in Stamford, Conn. The consulting firm has trained execs of Perrier, Union Carbide, and a General Motors division for media appearances and crisis management. Some projects, Horwitz says, are so loosely stated that a lawyer would find it hard to detail in a contract exactly what might or might not be done.
Once you decide to take the step, don't make a halfhearted commitment. It's too often true, complains Kennedy, that a consultant is "someone who's really looking for a job." Alexander acknowledges that his firm got off to a slow start because he hedged his bets, "trying to do a job search and line up clients at the same time."
Eventually, Alexander landed a contractual assignment from his former employer. The task: to brief department heads and staffers on the value of the market profiles he had done before he received his pink slip. "Funny, but when you're at a company, your work can be underappreciated," he muses. "Then, you come in from outside and show someone what an incredible resource the work represents, and you get an enthusiastic reception."
'ON TRACK.' The chance of doing consulting work for a former employer is a good reason not to burn any bridges. Another consideration: Have a startup business plan that looks ahead at least a year. Beavin and Murphy budgeted living expenses against projected income for two years, "but saw we were on track after nine months," Beavin says. "So we hung in and even made some money by the end of the year." Noting that in the early months, he had "maxed out my credit cards" and confronted a heavy negative cash flow, Alexander says he took the "& Associates" route to help land assignments. He agreed to lend his expertise to a half-dozen other consultants who specialize in different areas.
For the man or woman who works alone, a major concern is finding time to prospect for new clients while busy on assignments. "We try to devote at least 10% of our time to networking and making personal sales calls," says Beavin. When a project ends, some consultants find it difficult to shift gears and don a salesperson's hat. After all, a major attraction of the consultant's life is the freedom to set your own schedule. To complete an assignment on deadline, you might choose to work 14 hours a day. But once you complete a job, it takes willpower to resist the temptation to head for the beach.