Should you consult on the side while launching a startup?

In this episode, Rick seeks Tyler’s advice on how to approach consulting on the side to fund LegUp Ventures. Here are some of the takeaways:

• If you need the money, you’ve got to consult or get a job
  • Ain’t no way around it
• Consulting can be preferable as you have way more flexibility
  • It's way easier to bootstrap with consulting as your source of money versus a full time job
  • You hourly rate as a consultant might be higher also
• Be proactive about consulting.(Don’t want until you need the money)
  • View consulting as protection for your business —> it will help you sustain your startup while you’re searching for a repeatable business model
  • Consulting helps avoid putting negative pressure on your startup to generate cash when you should be focused on learning
• Figure out how much you need to make consulting for the year so you can focus on a specific number
  • This number is totally dependent on your personal goals and constraints
• Then, decide how to approach projects 
  • There are two core approaches: 
    • 1) big project chunks, and 
    • 2) smaller, consistent retainer work
• Consider getting a job or consulting project in an area that will help you learn or hone stuff related to your startup(e.g. skills, know-how, etc.) 
  • I.e. Get paid to learn
  • Note that there's probably an inverse correlation between how much you get paid and how much you're learning
    • If you're learning, it means you're not already an expert at it and they're probably not going to be willing to pay you as much

What else would you add to this list?

Context

Rick: Yeah. So, I think this is a question that a lot of people probably face when they're trying to bootstrap. Obviously, if you're ... maybe not obviously, but if you're trying to build a venture backed business, this may not be an issue because you're going to go raise money so that you have runway to deal with things, but when you set a constraint on, hey, I'm not going to raise money or I'm not going to raise ... I'm not going to raise money ever or I'm not going to raise money until a certain milestone is hit, like I've set, which is, I don't want to raise money until after product-market fit is reached, which I consider to be a pretty high revenue base, hundreds of thousands of recurring dollars per month.

Tyler: Per month?

Rick: Per month, yeah. It's a very high bar for me.

Tyler: So, you're saying like where Less Annoying CRM is right now, you want to bootstrap to that point?

Rick: Yeah. I think you have product market fit.

Tyler: We've had product market fit for like nine years.

Rick: Not by my definition.

Tyler: Okay, I got you.

Rick: Yeah. But, maybe like you've had it for a couple of years, maybe not nine years, somewhere in between there. There was some level where you hit it probably and you've been slowly increasing on top of that. You and I are different, I would probably say, somewhere in the last four or five years I probably would've said, hey, let's go raise some money.

Tyler: What's the reason to wait that long? Well, sorry, why don't you intro it and then I'll get to my questions.

Rick: Yeah. This is a whole mentality. So, this is my weirdness. I'll hold off on why that's the case. So, one constraint is, I'm not going to let myself raise money until I reach a pretty high proof of real business threshold. So, that means that in order to fund things, I've got to have cash available. I also have a constraint on my own personal life where I'm not going cash flow negative on this. So, that's a big thing where it's like, I have a pretty nice life style, I'm not going to let that life ... I'm not going to downgrade the lifestyle and I'm not going to allow that lifestyle to be a negative cash flow, personally. Okay? So, this means a couple of things. One, it means LegUp has to pay me money, right? From the get go. Two, it means that leg up has to make money in order for me to pay that. So, it's not like I can go raise money and then start paying myself money. LegUp's actually got to produce revenue. The quickest way for me to produce money is to sell my time. I have some expertise that allows me to sell time at a pretty high ... the metric I talk about in this case is return on time. I have a pretty good return on time invested, but it comes at a cost to me working on some of the early stage ventures I have going on in terms of focus and energy that I have to go after them. So, when I do take on a consulting project, it's generally a larger project and it takes a good bit of my focus and energy which means a lot of my other initiatives slow down. But, they're very lucrative and they give me a lot of runway when they happen. So, context, when I started Leg Up this year in June, May or June, I actually started it for a couple of consulting clients I had and then added a third and basically those consulting clients have been enough to pay my salary that I've been paying myself from Leg Up for this year and I haven't consulted in a few months and it's allowed me to have pure focus on the ventures that I've created. Now, I've gotten spoiled. Okay? So, I've really enjoyed having basically being able to set my week every week on what I want to focus on, but as I plan ahead, I'm realizing every time I put pressure on a venture to make money faster than it will just naturally happening by just continuous improvement processes, it gets less fun and it also leads to, I think, bad long term decision making. So, while I want to focus on these things and maybe move faster, if I do my constraints, it's going to put pressure on these ventures producing cash faster than maybe that is good for them and could lead to worse longer term outcomes and then on the other side, if I go consult, it takes all the pressure off of cash, but slows down progress and if I had to make a decision today just to give you an idea of where I am, I know I should go probably plan on consulting and then it becomes a question of like, okay, I'm going to go consult, how much do I need to consult? Do I front load it for the year and just work my, pardon me, ass off for like three or four months?

Tyler: How offensive.

Rick: Well, I just wrote a pretty sensitive article on the Church of Jesus Christ of Latter-day Saints, ie Mormons.

Tyler: You're trying not to use naughty words? Okay.

Should I consult?

Rick: Yeah. Bad words. So, anyway, summarizing, should I consult? If not, tell me why. I would love to hear your perspective. If so, how much. I'd love to brainstorm I guess. If we decide yes, I should consult, I'd like to just go into how best to structure that, is it small projects that kind of continue throughout the year? Is it a couple big projects front loaded at the beginning? Like I did this year. I'm interested in your thoughts.

Tyler: Yeah. Okay. So, I'll start...