Consulting is like Selling Crack

This post was originally written in June of 2011 and posted on the Adzerk - we have decided to purge that old content but I wanted to preserve it here.

A number of hot startups in Durham are looking for developers and I wanted to help them out (that’s how it works in the south), so I contacted some awesome rails developers that I know. One of those developers responded that he was only interested in consulting work or founding his own startup. This reminded me of one of the biggest mistakes I made on my path to being a startup founder:

Being an independent consultant in no way prepares you to run a startup.

For years I worked as a software consultant with the premise that by running my own small consulting company (I launched Infozerk in 2004) I was preparing myself to later run a startup. The plan was to gradually work on side-projects between consulting gigs and in my spare time and eventually start to replace my revenue with revenue from those projects. It didn’t work out that way.

Being a consultant delayed me from founding my own startup and also taught me lots of bad lessons I had to forget.

Consulting is like selling crack.

As a developer one day you wake up and realize instead of a boring corporate job you can actually go out and sell yourself for anywhere from $80-$200/hour. If you build up your reputation and manage your time well you can close 200k+ a year as an independent consultant. It’s easy to get used to the type of lifestyle that 200k a year brings – and you learn a ton of bad habits. You get used to spending whatever you want on hardware, furniture, tools, and being fairly loose with your money. (It’s all a tax write off after all!). You also get used to making that much money personally – and when it comes time to try and jump ship you have to be ready to make cut backs in your personal life to adjust going from 250k a year to your founder’s salary (or no salary at all). Even founding the company is totally different – you learn all the rules around LLCs and S-taxation and none of it really applies to running a C corp with shareholders.

Imagine trying to talk an inner-city drug dealer into going back to school and scraping by after living the lifestyle he has become accustomed to – this is the quandary that consultants find themselves in when trying to launch their own startup.

You will build the wrong kind of business

When you are a consultant you look at your monthly revenue and the goal quickly becomes: “How do I replace that with revenue from my startup”.

In 2008 I was running The Lounge and Ruby Row and I worked for over a year while consulting to build them up to the point they replaced about 40% of the revenue I was making as a consultant. In 2009 I realized I wanted to start shifting my focus from the ad networks to Adzerk – but now running the ad networks took up so much of my time that I didn’t have time to work on Adzerk. I had been focused on replacing the income from consulting and didn’t focus on building a company that had real growth potential – I was essentially focusing too much on cash flow and not enough on long-term sustainability and profitability.

As you strive to replace your consulting revenue you will focus on building a company that delivers revenue quickly at the expense of building something with more long-term potential.

The number one thing you can do to prepare yourself to found or start a startup is to work at a startup.

Working at a startup gives you insight into what it takes to make a startup work. You will become familiar with how a startup should be run (or how one shouldn’t be run). If you are serious about building a great company then run away from being an independent consultant or working at a consulting company – go work for a startup already!

The smaller the startup the better.