Despite the relative job insecurity inherent in operating a solo financial practice, going freelance offers flexibility and freedom — to choose the kind of work you do, the people you work with, and the time you spend doing it. Here are 10 things you should know before venturing out on your own:
Unlike the search for a full-time job, don’t look to executive recruiters for assignments. Instead, consider networking the core of your marketing and business development efforts. One of the best ways to network is through active membership in professional associations, with the emphasis on “active,” according to Ken Drossman, who started his Lakeview Business Consulting two years ago and is the incoming president of Financial Executives International’s New Jersey Chapter. “You have to be actively involved so people really get to know you,” says Drossman, who also belongs to the Wharton Business School Club of New Jersey. “Then they’ll pick up the phone and call you when they need an interim CFO or help with an issue.”
Insist on a Retainer
Get your money up front. For example, if you’re paid weekly, require two weeks’ pay when you start. Then invoice the client at the end of week one for that week’s work, with payment presumably received at the end of week two. By the end of week two, the retainer still equates to both the second week of service and the upcoming third week. The pattern then repeats each week. If the client pays promptly, hold onto the retainer and apply it to the final invoices. “Never look at aged receivables,” says Drossman. “Work against money already collected.”
Give Good Value
Freelance CFOs are always auditioning for future work; any assignment is in effect an on-the-job interview. So a CFO must always work at peak performance, to get more work from the same client as well as referrals. To make clients feel they are getting their money’s worth and maybe more, invest some non-billable hours researching information that will help the client or thinking about solutions to the client’s needs. It will pay off in future work.
Don’t Underestimate Unbillable Hours
Build into your fee structure unbillable time like networking and administrative work, because just running your business will take more time than you think. In addition to his full client load, Drossman spends about 10 to 12 hours per week on networking in order to develop new business. He spends four to eight hours on administrative tasks such as sending out bills and keeping his own books. Solo CFOs also must consider the down time between assignments and build it into their fees while remaining competitive.
Line Up That Next Job
Until you’re so successful that you can beat off job offers just for fun, line up future assignments like so many airplanes on a runway. That way you can reduce your downtime between assignments, which should help in pricing yourself competitively. Also, except when working as a full-time, interim CFO, try to work for more than one client at a time. “I build into my practice working with multiple clients simultaneously,” says Drossman. “The more diversified the client base, the more diversified the risk.”
Adjust Your Attitude
Defining your financial consultancy narrowly — that is, simply providing accounting services — limits your value in the marketplace. Instead, think like your entrepreneur-client, advises Fred Haupt, who has worked as a freelance CFO since 1989. “Put yourself in the entrepreneur’s shoes, with the added benefit of your financial background,” he says. “Get involved in as many aspects of the business as you can, not just the financial aspects. Finance is the tool but not the end-all.”
Hone Your People Skills
Clients often talk in code, and they don’t even realize it. Be attuned to their underlying concerns. “A lot of small entrepreneurs are not used to a CFO-level person, a financial person asking about the business,” says Haupt. “You really have to listen to know how fast you can move in terms of giving strategic advice.” Haupt also recommends that freelance CFOs be careful not to come across as arrogant or condescending toward employees at the client company. Additionally, they should understand the company culture and interpersonal dynamics of the owner or CEO and other senior managers.
A lot of project assignments call on CFOs to help draw up a business plan and then arrange debt financing. So cultivate relationships with bankers and other lenders, especially in the current tight-credit environment, to help your client get the deal done. “Clients very often need somebody who can introduce them to lenders,” says Haupt. “You’ll be worth much more to a client if you can facilitate financing.”
Be Honest with Yourself
Critique your own performance on any given job and ask yourself whether you’re really delivering for the client. After a certain amount of time, do you have a genuine grasp of the client’s business and issues? “You can never say you’ve been 100 percent successful,” says Haupt. “There’s always more to do and more to understand.” But despite your best efforts, maybe the relationship is not working out as well as you’d like. Better to make the decision to move on before a client relationship sours.
Get a Real Office
Operating a successful consultancy is not the same thing as bringing work home at night or on weekends. Even if it’s a bedroom converted into an office, make sure that you have a place that physically separates your professional life from your personal life. It’s not that you’ll necessarily meet clients there — you’ll most likely meet them at their offices; it’s about creating a business environment that will help eliminate the many distractions of working from home. If you create a home office, make sure it’s quiet. What will clients think if they hear a barking dog or screaming kids in the background when you’re talking to them on the phone?