During the last two months, I’ve been receiving a few e-mails asking about my consultancy business and whether it is replicable, what are the costs, etc. I figured it would be helpful to write a post on it, showing you the nuts and bolts of my business so that we clear the field here. My blog is getting known for being totally transparent and I would like it to continue like that.
If you checked my online income report from April, you’ll see that I’ve made about $1000 on consulting. I actually turned down a lot of work because I can’t fulfill, due to my part time research position. Should I have more time, I would have made at least $3000. I received all kinds of messages regarding how I set up the business, how clients get to find me, etc.
Just so you know, I actually went through all consulting opportunities I had from January until the beginning of April, and those would sum up to over $10k. I turned down all that work, but I honestly didn’t realize it would sum up to more than $10k. If we set taxes aside for a while, this calculates into the nice sum of $40k/year. Needless to say, this income is declared and I pay taxes on it. I explain how in the following.
Note that consulting itself is not where the pretty bucks are. Some of my clients ask me for products that cost thousands of dollars. This is made through my Real Estate company.
…wait, so what is the difference to the Real Estate company?
My consultancy business operates under a small consulting company, which is a different entity than my Real Estate company (which again is different from the entity that holds my Real Estate). My Real Estate company only sells Real Estate and looks for properties to investors, on a 1:1 basis. This service costs thousands of dollars, and can also be sold to the people that consult with me. I have a partner in this Real Estate company.
In essence, none of the money I make through these businesses goes directly into my pocket. They go to the checking accounts of their respective LLCs, into the books, and distributed at the end of the year, as dividends, or kept in the company to grow the company. I cannot keep detailed reports on the checking accounts of the companies in my net worth updates; However, I will keep you guys posted regarding how they do.
The bottom line is that I have 3 businesses, all of them hosted on different entities. My consultancy business, whose income is reported in my online income updates because I find my clients through From Cents To Retirement, is separated from everything else. As I write on the income reports, the figures I present there don’t represent the actual net profit as I have logistic costs to keep the company going. I do most consulting work out of my living room:
In case you wonder, I’ve gotten people contacting me through From Cents To Retirement that could have been served directly by my Real Estate company (although I have turned the work down because I didn’t have the time to fulfill). However, most leads I have from From Cents To Retirement are served by my consultancy business. Either way, this is transparent to the clients, as the only difference is really the bank account they transfer the money to, and the company that issues the receipt.
Licenses
I always get questions about licences upfront, because to consult on finance you usually need to be a licensed advisor. Well, not exactly accurate because… that highly depends on where you’re located. Being (now) located in Portugal, I could leverage the local legislation and get away as a financial consultant who doesn’t have any license. I could charge $200/h and still get clients. I’d make so much money I could actually set up a real company (by real I mean with offices and stuff :-P) and hire people at $8/h to do most of the work.
Yet, I prefer to go a much more honest (I am not as much profitable!) way: 1) I am not a licensed financial advisor and although I promise to provide tons of value, I will charge affordable rates and 2) you should see my “consultancy” as mere “sharing of experience and knowledge”. This is a much more honest way to portray my services, and people appreciate my honesty. I am not the ultimate investing guru. I simply acquired so much knowledge (both by reading and practicing what I learned) over the last years that I can put people way ahead of where they are. From my experience, this is in fact what people are looking for.
If you want to have a better idea of what you’d learn from me… Just ask yourself what you could learn from a guy who bought 10 units in less than 2 years and is able to generate great returns on those investments. Or a guy who needed a few months to hit 65k monthly views on his blog. Or a guy who read over 100 books on personal finances and investing. I am not bragging at all – I am writing this so that you could think of you could learn from me.
Services of my consulting business and pricing
As I said, in my consulting business, my work revolves around sharing my experience. That may mean:
- structuring personal finances,
- investing in different asset classes,
- general things about investing,
- starting an online business
- and much more.
I’ve had people paying me exclusively to learn from me how to negotiate real estate or buy and manage real estate abroad. I’ve had people paying me to successfully negotiate a 30-year fixed rate mortgage in Portugal, when “the bank told them they couldn’t”. And the list goes on and on.
As for pricing, I started low. My partner in crime (just so I don’t get problems, I must say that I mean business) charges €30/h. I learned a lot from him, so I figured that at most, I’d charge as much as he does. He has already achieved financial independence, so he does it exclusively for fun. I am still trying to retire in my early 30s, so I did start at €30h and slowly moved the needle up.
Currently, I don’t consult for less than €50/h (= $60/h) and if I continue to have this volume of clients, I will soon set the price to $100/h. I’ve seen other bloggers charging between $500/h and $5000/h – so please don’t think that I am stretching the game like nobody… For example, John from Simple Programmer charges a minimum (and “minimum” is actually in bold) of $500/h but if you want 1:1 consultations, it can cost you $2000/h.
I hate translating my time into dollars. I think that my time is worth way more than $100/h, but I am taking clients at $60/h and I spend hours and hours writing posts for From Cents To Retirement that are not returning anywhere near what I invest in them (time-wise). However, I will make From Cents To Retirement a reference in the context of Early Retirement and if this is what it takes (or part of it), then heck – let it be!
Why do people contact me?
I’ve been approached by many people lately. Should I have a perfectly working firm with a few employees and I’d turn all those contacts into revenue. Sadly, I can’t do that because I would be overwhelmed pretty fast.
The channels I get most of the contacts from are my blog (people usually shoot me an e-mail directly, at fromcentstoretirement [at] gmail [dot] com), Quora and a few other sources. Ever since advertised on Quora that I started to consult on REI, I’ve got many requests for consulting services.
Right now, I think that I have a pretty good idea of what it takes to start your an online consulting business. I would also promote it in similar ways to what I am promoting it now, but it would essentially happen much faster are more effectively.
Philosophy
My philosophy revolves around keeping my clients as happy as possible, regardless what problem they have. The key idea is to provide tons of value. I always put myself in my client’s shoes and think “do I think this was a good investment?” and obviously think that the answer is yes.
The obvious benefit is to have a lot of referrals, but this is also who Ben Davis is. I believe in creating standing out value in any business. That is for example what I do through my Real Estate business: have above-average homes renting for below-average prices. Same thing on my consultancy business. Yes, at some point I may charge more (especially with demand going higher and higher) but I will probably be able to help my clients (or at least some topics) in a much more effective manner. Either way, I’ll be above-average charging below-average, regarding my market is the $40/h range or the $400/h.
But why consultancy?
I always loved to coach people, as I said. Consulting was sort of a natural step: I am working part time for a university, and I need to make extra bucks. The blog is growing (although I projected way more) but I felt I needed more money to execute my plan to retire in my 30s. To be quite honest, my third rental property sucked way more money than I thought, as I said over the last months, and I felt that I needed to feed the beast. At the same time, my relatively big pay from Germany was about to finish and I had to reason to believe I would get a contract so fast.
If you’ve been following my blog since the beginning, you know that coaching people is something I like because I actually plan to do it after my retirement. We all love certain things and seeing others succeeding by following my advice is something I love. In fact, I think this is why my consulting business is being successful. At the end of the day, I love doing it and I try my best so that my clients succeed.
My advice for you, regardless you’re planning to retire early, is to do what you love and enjoy life. Always chase your dreams – there is nothing to stop you. I decided to consult because it was a way to make some extra buck, but also because I love it. If I could, I would definitely escalate it and turn it into my full-time job until retirement. In fact, I can see myself becoming a self-employed blogger, who makes most of his money consulting. Let’s see what the future holds!
Toodles!
Ben