Lessons from the Trenches
I considered consulting back in late 2010 after my first startup exit. At the time, the term "consulting" was used even for what is fractional today (see earlier post for the difference between them), which later gave way to the term "virtual" and eventually "fractional." (As a side note, I wasn't initially fond of the term "fractional" over "virtual," but it has grown on me over time. For fans of behavioral economics, this is the exposure effect at play [similar to how Parisians initially disliked the Eiffel Tower], but I digress.)
The road to success has been long, with many mistakes made and lessons learned along the way. Thirteen years in, I want to share some of those lessons, especially for those who are just starting their fractional journey.
- Competition: In the past, there was very little competition in fractional work. However, now that more people have caught on to its benefits, you'll be competing against many others on things like pricing, expertise, and network. To succeed in a hyper-competitive market, it's important to determine your unique value proposition and positioning to differentiate yourself. Leaning on marketing expertise for this can be helpful.
- Know When to Walk Away: Qualifying opportunities and losing fast is essential. Founders may look for free advise or kick the tires, but it's important to weed them out quickly. Time is precious.
- Pricing: Focusing on daily rates rather than hourly rates can be more effective, as the focus shifts from hourly tasks to key deliverables within a certain time frame (e.g., quarterly or semi-annually). Founders/clients tend to underestimate the time it takes to complete projects and tasks, especially if they've never done it before.
- Ideal Company/Customer Profile: Companies in the $500K to $5M revenue range have worked best. They have already tapped into early adopters in the market and have early indications of product-market fit. They are likely thinking about raising past a seed round and bolstering their management ranks. It's a win-win scenario for startups and fractionals alike, with startups getting a low-risk, high-reward skillset on staff and fractionals getting the opportunity to evaluate a company while delivering value.
- Getting Paid: Invoicing at the beginning of the month with a net-30 can minimize risks, but others may work on a retainer model. It's crucial to ensure you have emergency funds, as recouping money can be a headache, especially with smaller companies that don't manage cash well.
- Always Be Closing: Building a strong pipeline takes time, so it's important to give yourself at least six months of pipeline building before leaving your job for fractional work. Even after landing an anchor client, it's crucial not to rest on your laurels. A-B-C (Always Be Closing).
- Networks Are Gold: Networking is the best way to generate leads and get customers. Communities like Fractionals United have emerged, but referrals and past working relationships have provided the most sustainable opportunities over the last decade for me. (Joining Fractionals United is a great way to start your networking journey.)