Question from a reader:
"Hi Danilo. I've pulled the plug and decided to start my own consulting practice in January, after more than a decade of working in a mid-size IT boutique firm. I have savings that could support me for almost 9 months in the worst case scenario, so feel financially secure. But was wondering if you have any advice on financial performance for new firms - what should I aim for?"
When you're first starting out in the consulting world, it can be tough to know what your endgame should be. You probably want to build a robust and profitable business and earn as much as you can to support your preferred lifestyle. But beyond that, what's the real goal?
After working closely with more than a dozen soloists in the last few years, my advice is simple: The first thing you should aim for is to get your business to a point where it's making $100,000/year in revenue. And there's a good reason for that.
This might seem like an arbitrary number, but that's typically the point you can start investing in the business rather than just working in it. When you're bringing in $100,000/year, you can hire or outsource work. You have a lot more breathing room when it comes to making decisions about the direction of the business.
But the real challenge for any new independent consultant is not reaching $100,000 in revenue - it's getting to $100,000 without becoming a slave to the business.
That's why so many founders choose to come back to the market as employees, giving up their entrepreneurial dreams. They become bogged down with work and lose sight of the bigger picture. Reaching revenue goals matters, but so does how you get there.
Tomorrow I'll write about how this number impacts your offering mix and pricing decisions.