How to Start Product Consulting
How to Start Product Consulting
5 tips to successfully transition into product consulting
After 13 years working in various tech product management roles, I took a leap to build my own consulting and coaching business. Throughout the last year of owning my own business, people have continued to express interest in doing the same. The increased interest, coupled with massive tech layoffs this year (137,000+ in 2022, only 15,000 in 2021), made me keen to share some insights on how best to approach consulting.
With tech companies going lean, they’ll be forced to find creative ways to keep up and improve business performance. Consultants offer a low risk / high reward means for companies to bring in bright product thinkers who can help with product strategy and overall execution.
Below are 5 tips to support your transition into product consulting.
Create Space
First, it is critical to create space. Mental breathing room. I highly recommend you don’t just jump from your job, or if you were just laid off, straight into consulting. If you can afford to allow for a gap, it is paramount to do so.
Creating space like this will allow you to slow down and reflect on your past experiences. This is important because you’re jumping into a new approach to work; one where you are more than ever the author of how your day-to-day looks. Take some time and sit with what you’ve achieved, what you’ve found exciting, and what you’ve found contracting. Conduct an Expansiveness Audit. Reflect on why you’re making this transition. Begin to crystallize what your dream set up looks like, and why. Ask yourself: knowing what excites me, and what contracts me, what would my dream day-to-day look like for my work? Ask the big questions: What’s important to spend my time on? What do I value? What do I want to create in the world?
By creating space and time for reflection, you will build clarity and conviction around what you’re aiming for and why. You are crafting your compass. This will help pull you forward and keep you expansive, in the months and years ahead. Tim Ferriss said it well, “life punishes the vague wish and rewards the specific ask.” Create space and get clear.
Leverage Relationships
To get off the ground with your first clients it is wise to leverage your existing network. This means leveraging friends and past colleagues to explore potential consulting partnerships.
This can be challenging at first because it entails an identity shift. You are taking on a new approach to work. You are shifting your role and how others may utilize your skillset. My advice here is to embrace your new identity, even before you’ve landed your first client. You are a Product Consultant.
Leverage your relationships to create exploratory conversations with past colleagues. In these conversations, practice being curious about what’s going on in their world, and likewise own your new identity. Embrace and share your motivations for pursuing consulting. Share why you’re taking this new step in your career. This will create empathy, support, and encouragement from whom you’re meeting with which will instill personal confidence and potentially unlock new opportunities. During these initial networking explorations don’t worry about landing the client. Focus on having conversations. The clients will come organically if you embrace your identity and practice curiosity.
Reduce Commitment Friction
Commitment friction is the cognitive overhead you create prior to setting a commitment. In order to take these new opportunities and convert them into paid consulting work I recommend you do whatever it takes to reduce commitment friction. This means making the consulting arrangement as easy as possible to start. A fellow product consultant told me that after five years working with top tech companies, she has yet to ever sign a formal contract. Her approach is to keep the conversation and consulting arrangement open-ended and informal. This has worked well for her. I have followed the same philosophy and have experienced the benefits of reduced commitment friction because of it. The approach reduces the overhead of contract negotiations and management which increases customer conversion rates because there’s less to worry about prior to you proving yourself. It also means that you spend less time with admin overhead (which let’s be real, no one loves doing).
To reduce commitment friction, set a clear hourly rate (see next section), and make it as easy as possible for customers to “try your services” without any extra cognitive overhead or business risk. Embrace the low commitment nature that a consulting service provides for employers. Companies can bring in a product manager without much overhead or risk, compared to a full time employee, and this is something that when embraced can maximize your ability to convert clients. Don’t make the partnership overly complicated.
Set Defensible Fees
When you’re getting started it can be hard to know how much to charge for any given client. There is a wide spectrum for Product Consulting rates which depends on both your experience and the client’s company size.
As it relates to your experience, the commonly accepted rule of thumb is to charge 2X your most recent rate. If you last held a salary role, then you need to convert that to an hourly rate. The 2X rate modifier accounts for less job security and having to pay your own way on common benefits (retirement, health insurance, etc). It can be helpful to share this way of setting rates with your potential customers, as it takes the subjectivity out of negotiations. This is an industry norm and thus your rate won’t come across as arbitrary.
If you’re salary, calculating your rate is simple. Imagine your last job paid you $145K per year. At 40 hours a week, that means you made $145,000 over 2,080 hours of work. This puts your hourly rate at about $70 per hour. Knowing this, you should aim to charge 2X that with any consulting client, meaning your rate should be around $140 per hour.
A company’s size is also an important variable to consider when setting your rate. Late-stage companies (Series B through publicly traded) wouldn’t blink an eye at the above methodology, however earlier stage companies may often be more price sensitive. During negotiations with earlier stage companies, they may accept your methodology for pricing as defensible but simply not have enough funds available for the rate you deserve. When these situations arise, and they are suggesting a lower rate, I recommend supplementing your hourly rate with company equity. By receiving equity in the company, you are compensating yourself in a different way and working collaboratively with the client to find a compensation solution that makes sense for both parties. To calculate this, ask for the current stock share price, and then calculate the shares you should be granted that makes up for any reduction in hourly rate.
Foster an Abundant, Agile Mindset
Going through this change can be really confronting. You are in the midst of an identity shift. You are your own boss. You no longer have the security of a steady paycheck. However, you hold the power to create congruence and flexibility in your career. There will be emotional ups and downs. It’s important to be mindful of your mindset through these ups and downs, or else they’ll get the best of you. There are a couple things I have found helpful in fostering and maintaining an abundant and agile mindset. Both are key to managing the ups and downs of consulting.
To foster an abundant mindset it can help to build safety nets for yourself. Converting and maintaining clients will often be top of mind, so allowing yourself to be free of that anxiety and pressure is a big boon for your energy and mental health. It’ll allow you to be in a more abundant, calm, empowered state, knowing you can support yourself and your family during any unpredictable times.
To create a safety net for client generation I recommend joining some consultant marketplaces as a means to always have a faucet to go back to. The way these marketplaces work is you sign up as a consultant and then companies go to these marketplaces to find consultants they need. I myself am part of two consulting marketplaces: Toptal and Huddle (Hi
👋) . It can be helpful to have these pipelines activated in case you reach a lull and are in a pinch.On the maintaining clients side I recommend you do regular check-ins with your clients. These help tremendously to manage emotional ups and downs, and to reduce anxiety which in turns fosters an evergreen abundant mindset. Regular check-ins take the guess work out of wondering whether you’re doing a good job and instead empowers you to continuously be curious and to tease out new ways to improve your services. I call these “humble check-ins” and I aim to do them every 2 weeks with clients. The process is simple. I ask the same 3 questions:
How’re you feeling about my service and contributions?
On a scale of 1-10, how would you grade my contributions?
What would it take to get that to a 10?
In asking these questions you are demonstrating courage and curiosity with the client, and you’re actively seeking to improve your offering. Make sure to not take any feedback you receive as personal, but instead see it as an opportunity to grow and perfect your craft. These regular check-ins will serve you to reduce your anxiety, improve your service, and maximize your potential for long-term client retention.
Finally, consulting can be up and down in the types of work you do and the priorities your clients set. If you’re working with more than one client it’ll surely involve a lot of context switching. If you’re working with earlier stage companies the pace of change can be lightning quick. The same may be true for later stage companies depending on where their product is. All this makes for a relatively chaotic experience as a consultant. You’ll be juggling a lot, and it can be hard to regularly ensure you’re working on whatever is top priority in the midst of managing multiple clients and fluid priorities.
In the face of this, I recommend conducting 2-week sprints to create a sense of structure and boundaries. The process is simple, and mimics software development sprints. Identify your immediate top priority deliverables, ideally in partnership with your clients, and throw them into a Kanban board. Make sure each deliverable is something that can be achieved within a maximum of a couple days. In the Kanban board create 2-week sprints pulling in whatever is top priority at the time. Mindfully work through these priorities as the sprint transpires, and if anything emergent comes up ask yourself whether you are able to disrupt the sprint or not. At the end of the sprint reflect on how you did relative to your goals. Identify and integrate anything that needs to change.
Having this sort of system will help ensure you’re doing top priority work and will also create valuable biweekly feedback loops on your own performance.
Going off on your own can be hard, but it’s been the best choice I’ve made in my professional career. The opportunity to create something highly congruent with my values, and aspirations, has been supremely energetic.
I hope that these tips can help you find your own footing as a consultant. If you have any questions or insights from your own journey into consulting please let me know in the comments section below and if you like what you’ve read, please share with a friend!