Posted by: kenwbudd | January 7, 2011

Five tips for being a profitable IT consultant

The last thing you want to do is get caught up in a consulting engagement that costs you lots of time and effort and makes you very little money. It’s frustrating, counterproductive, and almost certainly ensures that you won’t have return business with that customer.

To safeguard the profitability of the engagement, you need to keep several things in mind when you’re discussing the project with the customer, scoping and pricing the project, and executing on the project. Here are some tips that will help make sure a job will be worthwhile.

1: Have a spine

You need to be able to do the following:

* Say no to the customer when necessary.
* Stand firm for what you believe to be the necessary tasks.
* Be confident and unwavering when directing the activities of others.
* Stand firm to prices quoted.
* Stand behind your estimate and the work involved.

2: Know the cost of doing business

To be a profitable IT consultant, you absolutely must know your cost of doing business. You should figure in your overhead expenses, travel expenses (air travel and driving), supplies, phone time, and more. You should also build some wiggle room in the scope that you know you may need to give away without putting up a fight. Once you calculate your cost of doing business, you’ll know what you need to bring in per hour to make a consulting engagement profitable.

3: Understand your Pricing Principle

This Principle applies to IT consultants as well. We have to understand what the ceiling is in terms of rate, price, or contract. We also need to understand our earnings limitations within our main client base and work with those limitations. If we fail to understand all that, we risk alienating current and new clients and decreasing our earning potential and profitability.

4: Don’t let the customer change the scope

Scope management is always an issue when managing a customer and a consulting engagement. You document the work with one estimate (perhaps even in the signed contract). Yet throughout the project, the customer may try to insert new “must haves.” Analyze these requirements changes carefully. If the changes are outside the original scope, let the customer decide whether it’s something they need and they will pay for it, or if it’s something they can do without.

5: Advertise strategically

No-cost advertising that actually works equals increased profitability. These advertising strategies can be huge boosts to your consulting business and likely won’t cost you a penny:

* Get testimonials from satisfied customers and post those prominently on your Web site.
* Write press releases about your offerings and post them to free press release sites on a regular basis.
* Become a subject matter expert and write articles for industry sites.
* Ask satisfied clients to recommend your work to other local businesses.

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