Consulting has its ups and downs.  Even long-time successful consultants can find themselves with minimal or no work, for an extended period.  There are economic and market shifts we just do not control, and they have a direct effect on us.

To succeed at consulting, you must have some source of back-up capital.  When starting out, I suggest coverage of at least a full year’s expenses for your business (which may have low overhead) and your personal life.  Ongoing, when you have momentum in your market and have established your practice, you may find that six months of coverage is enough.

Less than 6 months’ coverage is scary.  Less than 12 months’ coverage if you are just beginning to consult, and must create your positioning and find your first clients, will not sustain your early practice.

How do you find this back-up capital?

• Perhaps you stay at your job while you get started establishing yourself, beginning to speak at conferences, creating your initial outreach materials.
• Perhaps you establish your first retainer client (this might be your current employer) before you begin on your own.
• Perhaps you have a supportive spouse who will carry you through the first year.
• Once established, you create a strict discipline of saving capital in an investment account that can be liquid within 3 days, despite its return on investment.  This account should cover a minimum of 3 months’ cash needs for you and the business. Then establish a second account (which can be liquidated less quickly and perhaps earn a better return) which should cover another three to nine months of your needs.
• Buy disability insurance.  If you cannot create your revenue, you must be covered somehow.  Investigate the best plans for your circumstances with a knowledgeable agent who understands small business as well as disability insurance.
• Buy long-term care insurance.  Combine this with your disability insurance, as the insurance company can determine the extent of your disability that prevents you from working, and pay a partial amount of your coverage.  Adding long-term care, which covers medical care (in-home or otherwise) when you cannot do for yourself, is the added protection you need to return to your practice.  Get the long-term care coverage even if your partner or spouse is available to care for you if you are injured.

I realize these suggestions are costly.  But then, if you really mean to create wealth from consulting, you are not just “trying it out.”  You are building a sustainable business.  Treating yourself and your business with the respect necessary to protect it, is key to your long-term success.