Ask HN: How do I start my own consulting firm?

I recently started freelancing after moving out from Bay Area to a different continent. I used to network a lot in Bay Area and thus I have had good luck finding people who would be interested in my services. However, I have needed to turn down potential clients because they have essentially said that they would like to hire me as an employee. I am young and it seems like most companies are looking to hire me in order to comb me into something useful for them.

Most people here tend to be parallel entrepreneurs rather than serial ones -- they have a half of a dozen projects going on at the same time. For this reason, I would not want to commit to a project to which even the CEO does not seem to have much time for. Some companies also seem to lack the much-spoken thing in Bay Area of product and/or market focus, which would make my role ubiquitous, which is not what I want. Although, because of my young age and mainly software expertise, I don't want to directly say that I think their way of running the business is bad. I do think that most of the companies are able to make it into a profitable business, but for me to engage into payroll positions, I would want something riskier than that.

Have you found the same kind of struggles early into your service firm? Would you have any tips on how to pitch these companies into buying what they want as contract work instead of hiring me as an employee? Any nice way to tell these people that I don't believe in the way they are running the business?

What's the gist of it?

If you've been successfully freelancing for 7 years, then it's likely that you already know much of what I'm about to write. I'd say scrap partnerships and salespeople, and focus on what sales channels are best for you, online or local, whatever works. The two most important lessons I've learned in consulting so far are:

(1) It's really all about trust. The client wants someone who can reliably solve their problem, and tooting your own horn has a very limited effectiveness in building that credibility. Trust heavily impacts what projects people will give you, and how much you can charge. It's common that a company will somehow find 2-3x budget to hire a partner who they know will get the job done.

(2) Referrals and good deeds are the fastest way to build trust. When you come well-recommended by a prospect's trusted friend or partner, then a good amount of that trust gets instantly transferred to you. This transitivity of trust is key to building a good referral network that will consistently send work your way. If you don't have this, then you have somewhat of a cold start problem. In this case, providing value to people on a regular basis could really help with establishing your credibility. I don't mean doing projects for free, but more like offering people free 30-minute consultations about how to build their things, or sending them resources (articles or books) on a consistent basis that would really benefit them. This demonstrates that you can already deliver value, and makes it more convincing that you would do much more of that if you actually got paid for it.

Here are some more resources that could help someone get a start:

[1] Getting Started in Consulting by Alan Weiss is a little antiquated, but talks about what's important in getting your firm going and how to think about your work's impact on your client. (https://www.amazon.com/Getting-Started-Consulting-Alan-Weiss...)

[2] Book Yourself Solid by Micheal Port talks about the best ways to build these client relationships that will result in trust. (https://www.amazon.com/Book-Yourself-Solid-Reliable-Marketin...)

[3] Double Your Freelancing by Brennan Dunn actually has very good information about the tactics of pricing and the business side of project management. It's pricey. The accompanying podcast has good information for free. (https://doubleyourfreelancing.com/)

There are thousands of different info products online about this stuff, but this bundle should give you the most core knowledge for your money.

I encounter this situation constantly. The economics of outsourcing doesn't always work out for every project. As a consultant, you'll be charging 2-3x the hourly rate of an employee, and the company is giving up the benefit of having in-house expertise on their own product.

If you're okay with working for one client full time for the duration of a contract, my advice would be to work with a few recruiters. They'll take a 30% cut, but as they know about some of the best contracts it is often worth your while. Their clients are using contractors to deal with spikes in their workload, or for projects where they don't expect to need you in 6 months.

Another route is in finding clients who want you to manage the full project. Things like building MVPs or building Version 1 of an app. Usually they have a limited budget and aren't looking to take on the risk of an employee. These clients don't generally have any in-house technical expertise. In order to bag this type of client, I have found that having a solid project template to work from and speed up development is a must. It took me almost 2 months to fully set up my build pipeline and get a start project up and running just the way I like it (don't hate my just because I'm a perfectionist.) But now I can kick off projects with a running start. Deliver a fully functioning app in under a week, albeit with only the first couple features, and your client will be happy to pay your rate for the duration of the project.

Finally, the last route I know of is to specialize in a hot technology. AngularJS seems to be popular in my area. A lot projects were started with the thinking that Angular would do all the hard work for them, and now they are neck deep in spaghetti written by a junior. If you can market yourself as an Angular expert, they will be willing to pay higher rates as well as put up with the fact you aren't sticking around. But you need to have a hard-to-find talent for this power dynamic to exist. A friend of mine is a Haskell freelancer and finds it gives him good leverage.

Lets say that you're a small start up past the MVP stage. What would be the types of tasks that you would outsource to a consulting firm? Isn't it much more likely that you would try to hire full time and build a team / culture? Does consulting even work for this market segment?