How to Make It Big as a Consultant
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<p>How to</p> <p>Make It Bigas a</p> <p>ConsultantThird Edition</p> <p>COHENS MAXIMScompensation Compensation, whether in the form of prot, salary, or job satisfaction, is the by-product of your contribution to society and is in direct proportion to this contribution. It is an error to make compensation the focus of your lifes work. You will not reach your full potential, and you will have cheated society of the full benets of your talent and ability. duty Whatever your occupation, you have a duty to the society of which you are a member. If you are a soldier, your duty is to protect that society. If you are in business or industry, your duty is to create and manage the jobs, wealth, and products of that society. Therefore, failure will be harmful not only to you but to society, just as success will be benecial not only to you but also to society. individual ability Every individual has the potential to do great things. To reach this potential, you must discover your special abilities and qualications. This means that you should always attempt new tasks and accept responsibility for untried assignments whenever they are offered. leadership A leader accepts responsibility. This means that the welfare of those you lead must always come before your own well-being. Therefore, while your primary duty is the accomplishment of your organizations mission, the welfare of your subordinates comes second, and your own welfare last. planning Successful actions are results not of accidents or luck but rather of an analysis of the situation and the preparation and proper execution of plans. Because of a changing environment and other variables, plans will not always succeed as originally conceived. But planning will maximize your successes and minimize your failures. responsibility If you are assigned a task, you are responsible for its successful completion. There are no acceptable excuses for failing to fulll this responsibility, and this responsibility cannot be shifted to others. risk Never be afraid to take risks. If you work for someone, risks are part of what you are getting paid for. If you work for yourself, taking risks is the only way you can become successful. self-condence Self-condence comes from successfully completing increasingly difcult tasks and assignments. Give your maximum to every project, no matter how insignicant or formidable. success Success does not come from working hard. Success comes from playing hard. Therefore, if you want success, you must position yourself so that the duties you perform, no matter how difcult or challenging, are considered play by you and not work. If you do this, not only will you gain success, you will have fun doing it. 1984 William A. Cohen.</p> <p>How to</p> <p>Make It Bigas a</p> <p>ConsultantThird Edition</p> <p>William A. Cohen, Ph.D.</p> <p>American Management AssociationNew York Atlanta Boston Chicago Kansas City San Francisco Washington, D.C. Brussels Mexico City Tokyo Toronto</p> <p>Special discounts on bulk quantities of AMACOM books are available to corporations, professional associations, and other organizations. For details, contact Special Sales Department, AMACOM, a division of American Management Association, 1601 Broadway, New York, NY 10019. Tel.: 212-903-8316 Fax: 212-903-8083 Web site: www.amacombooks.com This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in redering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.</p> <p>Library of Congress Cataloging-in-Publication Data Cohen, William A., 1937 How to make it big as a consultant / William A. Cohen3rd ed. p. cm. Includes bibliographical references and index. ISBN 0-8144-7073-4 1. Business consultants. I. Title. HD69.C6 C57 2001 001 .023 73dc21 2001 William A. Cohen, Ph. D. All rights reserved. Printed in the United States of America. This publication may not be reproduced, stored in a retrieval system, or transmitted in whole or in part, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of AMACOM, a division of American Management Association, 1601 Broadway, New York, NY 10019. Printing number 10 9 8 7 6 5 4 3 2 1 2001022196</p> <p>This book is dedicated to my mother, who taught me that I could do anything I wanted to do if I worked hard enough and my father, who taught me that the purpose of all work is to contribute to a better society</p> <p>CONTENTSAcknowledgments Preface1 The Business of Consulting What Is Consulting?How Big Is the Consulting Industry?Consulting for BusinessTypes of Consulting FirmsWhy Does Anyone Need a Consultant Anyway?Signals Indicating the Need for a ConsultantHow Potential Clients Analyze Consultants for HireWhat Makes an Outstanding Consultant?How Much Money Can You Make as a Consultant?How Do People Become Consultants? 2 How to Get Clients: Direct Marketing Methods Direct Methods of MarketingDirect MailCold CallsDirect Response Space AdvertisingDirectory ListingsYellow Pages ListingsFormer EmployersBrochures 3 How to Get Clients: Indirect Marketing Methods The Basic Indirect Methods of MarketingSpeaking before GroupsSending Out NewslettersJoining and Being Active in Professional Associations Joining and Being Active in Social Organizations Writing ArticlesWriting a BookWriting Letters to the EditorTeaching a CourseGivingvii</p> <p>xiii xv 1</p> <p>21</p> <p>41</p> <p>viii</p> <p>Contents</p> <p>SeminarsDistributing Publicity Releases Exchanging Information, Leads, and Referrals with Noncompeting Consultants</p> <p>4 Marketing Consultant Services to the Public Sector Different Types of Government Consulting ServicesConsulting for the GovernmentHow to Get on the Government BandwagonThe Buying ProcessThe Importance of Preproposal MarketingThe Marketing Sequence for Government ConsultingLocating Potential ClientsScreeningVisiting and Making the Initial PresentationMaintaining Contact and Gathering IntelligencePreparing the ProposalNegotiating the Contract 5 Making the Initial Interview a Success Looking and Acting Like a ProfessionalBuilding Empathy with Your Potential ClientAsking Seven Essential QuestionsTaking NotesHolding Off on Giving AdviceInterpreting Body LanguageMaking Use of Listening TechniquesIdentifying Emotions from Facial ExpressionsEnding the Interview 6 How to Write a Proposal Why a Written Proposal Is NecessaryHow to Write a Good ProposalThe Structure for a Letter ProposalOpeningBackgroundObjectivesStudy MethodsPotential ProblemsData Flow Charts and Product Development SchedulesThe Finished ProductCost and Payment Information Converting a Proposal into a Contract 7 Pricing Your Services Established Consultants Can Make a BundleThree Price StrategiesA Low-Price StrategyA High-</p> <p>66</p> <p>75</p> <p>85</p> <p>94</p> <p>Contents</p> <p>ix</p> <p>Price StrategyA Meet-the-Competition Price StrategyOther ConsiderationsIndustry PricingClient Price AdjustmentFinally . . . You Must Investigate the MarketplaceMethods of BillingComputing Billings Daily or HourlyWorking on RetainerPerformance BillingFixed-Price BillingDisclosing the Fee</p> <p>8 What You Must Know about Consulting Contracts Why a Contract Is NecessaryDeveloping Your Own ContractIf Your Client Has a Standard ContractMethods of Incurring a Contractual ObligationFormal ContractsLetter ContractsOrder AgreementsPurchase OrdersVerbal ContractsTypes of ContractsThe Fixed-Price ContractThe Cost ContractThe Performance ContractIncentive ContractsElements of a ContractA Sample Contract 9 Planning and Scheduling the Consulting Project The Project Development ScheduleA PERT ChartEarliest Expected DateLatest Allowable DateSlack 10 Negotiating with Your Client Six Steps in Contract Negotiation as Seen by Uncle SamGoals and Objectives of the Party with Whom You Are NegotiatingPreparation: The Key to All Contract NegotiationsTelephone Negotiations (Be Wary)Negotiation PlanNegotiation GamesmanshipMore Negotiation TacticsSome General Negotiation Hints 11 How to Solve Your Clients Problems Easily The Harvard Case Study Method of Problem SolvingDening the Central ProblemListing</p> <p>106</p> <p>117</p> <p>127</p> <p>140</p> <p>x</p> <p>Contents</p> <p>Relevant FactorsListing AlternativesDiscussing and Analyzing the AlternativesListing Conclusions Making RecommendationsThe Charles Benson Problem: A Case StudyA Description of the Charles Benson ProblemSolution to the Charles Benson ProblemPsychological Techniques for Problem SolvingHow to Help Your Subconscious Solve Your Consulting Problems</p> <p>12 How to Research a Consulting Project Two Basic Kinds of ResearchSources of Secondary ResearchThe LibrarySimple Primary Research Projects: How to Do ThemMore Complex Research Projects: How to Do ThemPersonal Interview SurveysMail SurveysTelephone Surveys Electronic SurveysYou Can Research Anything 13 The Importance of Ethics in Consulting Business Ethics: Not Clear-CutEthics vs. Jobs: The Lockheed CaseThe Ethics of Marketing ResearchAn Executive Recruiting StoryA Japanese View of DutyEthics and the Law Are Not the Same ThingTypical Problems Relating to Ethics in ConsultingThe Institute of Management Consultants Code of Ethics 14 Making Professional Presentations Objectives of PresentationsFive Keys to a Successful PresentationProfessionalism EnthusiasmOrganizationPracticeVisual AidsOvercoming Stage FrightAnswering Questions 15 What a Computer Can Do for You in Consulting How I Got My First Computer . . . LateHow the Computer Revolutionized My Writing and Consulting</p> <p>157</p> <p>167</p> <p>183</p> <p>200</p> <p>Contents</p> <p>xi</p> <p>PracticeHow the Computer Can Double or Triple Your ProductivityProposals and Desktop PublishingNeed Overhead Transparencies? No Problem!Managing Your PracticeDirect MarketingCorrecting Your WritingNaming Products and ServicesMaking Forecasts and PlansEvaluating Potential EmployeesSimplifying Marketing ResearchVoice-Activated Word ProcessingGaining Access to Information the World Over from Your OfceWhat You Need to Know about ComputersWhat Kind of Computer Should You Buy?Desktop, Laptop, or Palmtop? What Kind of Printer Should You Buy?</p> <p>16 What the Internet Can Do for You in Consulting What Is the Internet?What Do You Need to Get Online?Researching on the InternetThe Search EnginesHow to Use the Search Engines Evaluating and Using Your ResultsSome Books on Researching on the InternetMarketing on the InternetInternet Freeways for MarketingThe World Wide WebUsenet MarketingE-Mail MarketingBooks on Internet Marketing 17 How to Run Your Consulting Business Selecting the Legal Structure for Your Consulting FirmThe Sole ProprietorshipThe Partnership The CorporationThe S CorporationOther Legal NecessitiesObtaining a Business LicenseThe Resale PermitFictitious Name Registration Clients Use of Credit CardsStationery and Business CardsInsurance and Personal Liability Keeping Overhead LowThe TelephoneFax MachinesAnticipating ExpensesNecessary Records and Their MaintenanceTax Obligations Income TaxesWithholding Income Taxes Withholding Social Security TaxesRemitting Federal TaxesExcise TaxesUnemployment</p> <p>213</p> <p>236</p> <p>xii</p> <p>Contents</p> <p>TaxesObtaining an Employer Identication NumberState and Local TaxesMinimizing Tax PaperworkSources of Additional Information</p> <p>Epilogue Appendix A References Useful to Consultants Appendix B Sample Consultants Brochure Appendix C The Consultants Questionnaire and Audit</p> <p>265 267 275 281 315 337 341</p> <p>Appendix D An Extensive Consulting Proposal Appendix E Associations of Consultants Index</p> <p>ACKNOWLEDGMENTSI want to acknowledge and thank the hundreds of consultants who have worked with me in helping clients and the dozens of other consultants who have contributed their knowledge toward helping my students over the years in learning what it means to consult.</p> <p>xiii</p> <p>PREFACESeveral months ago, a friend and experienced consultant, attended a seminar on consulting. The seminar leader divided the attendees into four groups. Each group was asked to agree on the top three actions that a consultant should take to become successful. My friend was very excited about the results and thats why he called me. Although the book you now have in your hands was never mentioned during the seminar, three out of the four groups independently decided that getting a copy of How to Make It Big as a Consultant was one of the three things every consultant should do to reach success! Thats quite a testimonial. Knowing that the book was having such an impact helped convince me that updating it was akin to a public service, and I accepted the task from my publisher with a great deal of enthusiasm. Before we get into the nitty-gritty of consulting, there is one thing you need to understand. Like most others, I didnt start out in life with a burning desire to become a consultant. I know that I am not alone in this, because I have spoken to hundreds of other full- and part-time consultants and very few started out with that intention. Most of them may have had an early experience like mine. My entrance into the consulting eld was unplanned, and the rst time I performed consulting services I had no one to ask for advice. This is true for perhaps the worlds foremost independent consultant, Peter F. Drucker. He didnt plan on becoming a consultant. I know this because Peter, still my friend, was my professor when I studied for my Ph.D. at Claremont Graduate University. Peter told me that his rst experience in consulting was shortly after arriving in this country. Previously, he had been a newspaper xv</p> <p>xvi</p> <p>Preface</p> <p>correspondent. However, having a doctorate, Peters services were mobilized for World War II and he was placed under the command of an army colonel. Youre going to be a management consultant, stated the colonel. Whats a management consultant? asked Peter Drucker. Dont be impertinent, young man, answered the colonel. By which, Drucker told me, I knew the colonel didnt know what a management consultant was either. Experience in other elds had taught me that whenever I lacked knowledge about something, my rst step should be to nd a book on the subject. So I did just that. I visited several bookstores; I checked with the libraries. But I found no books with the information I needed. The few books on consulting were all about consulting by the large consulting rms. They contained none of the specics I needed. How much should I charge? Was a contract absolutely necessary? Did I need a business license or some other kind of license? What could I do as a part-time consultant without running into a conict of interest with my full-time employer? How much could I make if I decided to work full-time at consulting? Also, if I consulted full-time, how much time would I need to spend marketing my services versus actually consulting, and how should I go about marketing my services, anyway? These and numerous other quest...</p>
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