By Ian T. Wells, Ian T. Wells & Associates
When I was asked to write this article, the Dow Jones was trading at 28,734 and the United States had one confirmed case of COVID-19. Matters have since changed, and I fear they will change further by the time this article is published. No matter what, may you and your loved ones be safe throughout this ordeal. During these tumultuous times, some researchers may consider working in a consulting capacity for a variety of reasons. While tips for aspiring consultants can and do constitute entire books, this article will quickly address three myths some people may have about working as a freelance prospect researcher.
MYTH #1: Running your own business is the way to Easy Street.
OBSERVATION: Lie. Aspiring consultants may envision giving themselves particularly relaxed schedules. After all, when you’re your own boss, you certainly do make your own hours. You’re more likely, however, to give yourself a 75-hour workweek than to let yourself lounge on the beach day after day. Once the predictable luxury of a defined salary is gone, and you find yourself laboring on an hourly basis, you will be incentivized to work as many hours as is reasonably possible.
Another non-trivial concern that some fully-employed individuals take for granted about running a business is that there is a lot of work that has to be done that cannot be billed to a client. Unless the fledgling entrepreneur in question is already wealthy or takes out a business loan, chances are the founder of a company may initially be its sole employee. In such a scenario, the founder is not only the company’s President, but also its de facto CFO, COO, CTO, CMO, General Counsel, Secretary, HR Director, Senior Manager of Data Integrity, and Executive Director of Waste Management Services. Given the duties for which a company’s executive is responsible, and the time required to fulfill those obligations, there is nothing easy about running a business.
MYTH #2: You can get rich working as a consultant.
OBSERVATION: Lie. While skilled consultants charge respectable rates, much of their revenue will go towards necessary expenses. Taxes are unavoidable, of course, unless you’re running a struggling company like Amazon or ExxonMobil. Subscriptions to online databases and research tools can account for a considerable portion of a company’s revenue. If you rent office space, that may exceed the cost of your online subscriptions. Marketing is another expense, which can add up between direct mailings, email marketing subscriptions, promotional items, and sponsorships. Conference registrations also seem more expensive when you’re paying with your own money instead of using a large employer’s corporate credit card. Travel costs aren’t inconsequential if you have to drive long-distance to visit clients or fly out to conferences. All businesses should have insurance, which will eat into a company’s bottom line. Designing, registering, and maintaining a company website won’t be free either. Office supplies take an additional slice out of the company’s revenue pie. Last but definitely not least, a company’s employees and independent contractors generally expect to be paid.
Many of the expenses listed above are tax deductible, so some items can mitigate a company’s tax burden. Also, proper planning can position an entrepreneur to gross enough revenue to leave a decent net profit after all expenses have been paid. One strategy that can be helpful for determining your fee structure is to start with (A) the after-tax income you need, then add (B) all business expenses that you expect to incur for the upcoming year, including taxes, and then divide that sum by (C) the number of billable hours you expect your company to accrue over the year, which will result in (D) a quotient that equals your hourly billing rate. Such an approach should allow skilled prospect development professionals to earn a decent living, albeit not quite the level of income that would merit the envy of a major gift prospect.
MYTH #3: Anyone experienced in prospect research can work as a consultant.
OBSERVATION: Half-truth. There are a number of reasons for prospect development professionals to consider working as consultants. Working as your own boss provides a remarkable degree of autonomy. It’s also nice to have the flexibility that comes with that autonomy, particularly if you have a demanding personal schedule that involves caring for children or seniors. The perks of consulting aside, not all researchers are necessarily suited for working in such a role.
I’ve long held that the most important attribute in a prospect researcher is curiosity. The insatiable drive to “solve the mystery” of a prospect’s background and philanthropic capacity is often the mark of a talented researcher. Indeed, the drive to devote “just another ten minutes” to try to confirm additional details about a prospect often makes the difference between a good researcher and a great one. But strong research skills are not sufficient in and of themselves to make a talented researcher successful as a consultant.
Any researcher considering this line of work should ask themselves a question: “Would I make a good frontline fundraiser?” This question is essential because the central virtue of frontline fundraising –salesmanship – is the crucial attribute for a prospect development consultant. It does not matter how creative your Boolean search strings are or how quickly you can obtain information from a Form DEF 14A if you can’t get a potential client to hire you in the first place. Needless to say, prospect researchers who enjoy things such as stability and predictability may prefer to work full-time for established organizations rather than wager their livelihoods on their marketing prowess. But for those who enjoy working independently in a dynamic proving ground, consultancy may be an opportunity worth their consideration.