I’ve been an independent consultant (IC) in one way or another for more than a decade. I’ve been fortunate to have had a fabulous assistant and book keeper from day one. I’m married to her. Recently, I’ve come to believe that every full time IC can benefit from a good assistant and bookkeeper and you should hire one very early in the formative stages of your business, even while you think you might be able to get by without one. In fact, I think that many times someone who might otherwise success as an IC (which is pretty popular in the technology space) ends up failing for lack of a good assistant and bookkeeper. Having this help is a business necessity if you want to be as successful as you can be. Here are some reasons I’ve come to believe this is true.
Your time is too valuable to spend on bookkeeping.
Most consultants I know who do their own bookkeeping and invoicing hate it, struggle with it, and do a horrible job at it. A good part time bookkeeper will probably cost you $20-$25/hr. I’ve paid less, but honestly, I’ve found that you get what you pay for. IC’s in the technology space will be making much more than that per hour. Most IC’s in the SQL Server space will make over $100/hr. Better ones will make a lot more, perhaps over $200 or even $300/hr. Let’s assume that you are at the lower end of the scale and are making $100/hr. First, congrats. $100/hr isn’t chump change, is it? You will be worried about cash flow if you’re new. You will want to be frugal. I get that. I was there and am still there in many ways. But, your time as an IC should be spent on billing not sending bills. Your spare time should be spent researching new technology and doing business development, not researching why what your accounts receivable is so how.
Most IC’s are horrible at sending out bills
I know IC’s that will sometimes sit on time they should be billing to customers for weeks, or sometimes a month or more. Heck, I sometimes need 3 reminders from my wife before I actually get around to giving her all of the details she needs to invoice. The best geeks are rarely the best bookkeepers. Most IC’s I know also complain about cash flow. Hmm. Maybe you should bill on a more regular basis. J
Doing bookkeeping and other admin tasks imposes a very high opportunity cost.
Let’s for the sake of argument assume you are new as an IC and are not fully billable. You might be frugal (which is good) and think “I can do this bookkeeping. I have the time since I’m not fully billable”. Here is some good advice. Spend your time finding new customers if you’re not fully billable. Don’t spend your time saving a few dollars to pay someone to invoice the small customer base you have. What if you spend 2 hours a week on basic admin tasks and you devoted that time to business development instead of admin. Paying someone $25/hr for 2 hours a week will cost you about $2,500/year. That sounds like a lot. It can be. But consider the opportunity cost. What would happen to your business is you spent an extra 100 hours a year marketing and selling? What if you got just 1 new customer per quarter that you wouldn’t otherwise have? Those 4 new customers probably add another 20K in revenue to your bottom line and that is conservative. The ROI on a good assistant/bookkeeper is astounding
There are many more reasons why I recommend that all IC’s have an assistant and someone to handle their bookkeeping and invoicing. I don’t have time to list them all now. Feel free to send me an email and I will my assistant send more reasons. :)
Should you consider having your spouse, if you have one, play this role. This model has worked out really well for Penny and I. It keeps ‘the money’ in the family and there are some wonderful tax benefits with having both a husband and wife be active employees in a small business. I suspect it’s not the right fit for all couples and honestly, it has caused some stress in our marriage from time to time. Then again, I get to tell people at dinner parties that I can make love with my executive assistant and my wife knows about it. Sometimes Penny reads my blog and sometimes she doesn’t. I’ll know soon enough if this is one of the ones she reads and how much trouble that last comment got me in. :)