Thread by @jamonholmgren

Last week, I got an email from a new consultancy founder asking some really good questions about running a consultancy. I answered her questions in detail in the email, but I'll also share some of the answers here.

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1. How do you manage the drought periods (those periods when no projects come in but you still have to keep the lights on)?

This is one of the toughest parts of having a development shop. Developers are _expensive_. Having them "on the bench" (as we say in this business) is

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...super difficult and can set you back months. Missing one week isn't just replaced by one week. If you have a 20% profit, that means every week missed is 4 weeks to make up the 80% cost, using each week's 20% profit.

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So this means you have to try to stay as busy as possible for as many of the weeks of the year as possible. A 20% weekly profit will not get you 20% profit at the end of the year, because you have all those idle weeks to make up. Far from it. You may not even make a profit.

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So here's some actionable advice:

A) Keeping the schedule full is related to the ratio of your inbound sales pipeline to your team size.

Build your sales pipeline larger than your team so you are turning away work because you don't have the bandwidth.

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It's super tough to turn away work when you get to that point. The good news is that when you have more projects coming in than you can service, you can pick and choose the projects you know your team will excel at. And keep building that pipeline even when it's "too big"!

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B) Fill in the edges with freelancers (and pay them well so they stick around -- you're paying to offload risk!)

I know there's some Twitter discussion around hiring contractors, since they're not full employees with the protections that full employees get.

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This is why you need to be willing to pay them more. You're offloading your schedule risk. You also need to compensate for their lack of benefits, vacation, & more.

Freelancers are not cheap. But they're a great way to round out a team while reducing risk of idle bandwidth.

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C) I mentioned this above, but it bears repeating again: work very hard on the marketing and sales aspects of the business, even when you're busy.

Sales doesn't cure all ills, but lack of sales *will* kill the most robust consultancy. Prioritize this aspect of your business.

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It's tempting to try to get your process dialed in 100% or your tech stack or your hiring or whatever else is your current pain point. Just never lose sight of marketing and sales.

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D) Avoid taking on "whale" clients that take up more than half of your team.

While those projects are super nice while they're going, they can take down a consultancy if they end unexpectedly (and they do!)

Fill them out with freelancers if you must.

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The next question:

2. How do you keep your team members motivated and engaged?

Spend the time to get to know them and understand what drives them. Continue to talk and, more importantly, listen to them.

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Different people like different things -- some like free time to experiment on open source, some like clear direction and structure, others like to feel like they're really contributing and valuable to the company as a whole. Some want to maximize compensation.

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If you're interested in more of this sort of thing, mash that like/retweet button on the first tweet, and I'll be sure to come back with more things that I've learned in my 15 years running consultancies (currently @infinite_red).

Have a wonderful day!

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@infinite_red P.S. We're currently recording season two of building.infinite.red, our podcast about building and running a consultancy -- feel free to catch up on season one now!