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Consulting Firms and Starting a Company

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Certain types of consulting services can be delivered by large organizations that offer a broad base of talent. Information systems, for example, require four or five different sub disciplines in order to provide full services to the client. As employment arrangements go, consulting firms are more formal than strategic alliances, as the consulting firm requires consistent service quality standards, and working together as a team. A portable executive who chooses this type of employment arrangement can satisfy the desire to have multiple assignments while working for one company either as an employee of the firm or being on contract with one. Consulting firms are advantageous in that they handle the marketing aspects of the business, thus freeing to focus more on the technical applications of his or her core skills.

Portable executives who choose this vehicle should be aware that most consulting firms put a good deal of emphasis on business development. If you are hired for your technical skills, longevity often depends on your marketing capability. As Joe Be van put it:

Starting a Company



The primary reason portable executive's start their own companies is that the nature of their product or service requires an organization to deliver it to the customer or client. Marketing executive Ed Sanford created his own company because:

I was pretty successful in both a marketing company and a service company that provided products and services. I concluded that I could handle both sides of the equation, so I raised some money and decided to try to do it on my own.

Such companies often evolve out of successful solo operations. For example, when John Trost reached the limit of his capacity as an individual market researcher, he created a company that eventually consisted of twenty five professionals. Of course, the disadvantages of starting your own company are that it entails a much broader set of skills and includes handling the responsibilities of administration, marketing, finance, and raising capital.

One approach that can reduce the risks of starting your own business is to spin off from an existing business that you have been involved with within a company, such as Manny Elkind did at Polaroid. Former Union Carbide executive Frank Purcell also entered into a somewhat similar arrangement when he was asked to work for a family owned importing business. Purcell's goal was to start his own business, so the offer to work full time did not appeal to him until he and the owner of the business came up with an arrangement that satisfied both their needs. The deal allowed the business owner to get the help he needed in exchange for giving Purcell access to the company's international network. This arrangement offers the advantage of calling on your employer for help either directly or indirectly during the initial phases of start up.

New Ventures

Portable executives often team up with venture capital companies to bring management expertise to start up companies. This is an appealing option for who is an entrepreneur at heart but lacks capital, as there are many venture companies that start with a good idea but need the type of business expertise a portable executive can provide to make it successful. Most of these arrangements offer a modest current compensation schedule and a big success package in the form of stock options and bonuses.

At Xerox Technology Ventures in California, GEO Bob Adams uses interim executives during the start up period when no one knows whether an enterprise will live or die. Using portable executives allows him the best of both worlds. He attracts top management for the short term and many will stay on if the venture takes off.

Acquiring a Company

This option is often pursued by executives who have "run companies" for larger organizations and seek the challenges and rewards for themselves. Who chooses this option must recognize that the forms of support, such as capital and marketing that he enjoyed while working for a large organization become his responsibility. Portable executive Mike Hostage, who today runs four businesses in partnership with his children and other family members, had considerable experience running companies for ITT, the Howard Johnson Company, and Marriott, but even he was surprised by some of the aspects of running his own companies:

It took me a year to learn what "profit" really means. Profit in a big company is what the accounting department tells you you've made at the end of the period. Profit in small business is how much is left in the till after you've paid your bills. I may be in the minority but that was not an easy lesson for me to learn.

A lower risk way to go about acquiring a company is to go to work for the organization, and then acquire it. This gives time to assess the pros and cons of running a company while still not being 100 percent responsible for it.

Franchises

Owning a franchise has the trappings of ownership while really functions as an agent or an arm of a larger organization. In exchange for administrative and product support, the larger organization dictates how you are going to do business. While the franchise relationship is presented in terms of ownership, it usually depends on the franchisor, who can adjust the cost of the product or service and support, and thus control the franchisee's earnings. For this reason, the franchise option requires meticulous due diligence and considerable thought, investigation, and research.

In an article published in the Harvard Business Review entitled "The Reluctant Entrepreneur" (1992) Ken Veit wrote a cautionary tale about his own experiences as a franchisee. Initially, Veit, who had bought and sold a number of insurance businesses, chose franchising over buying an existing business, because he knew that "buying someone else's problems is extremely risky. In franchising," wrote Veit, "I could benefit from-rather than pay for-the earlier mistakes of others. But when he learned that Cartoon Corner had negotiated his lease on such favorable terms that the leaseholder was paying for 100 percent of the leasehold improvements, Veit said "every red light in my internal warning system went on." Eventually, Veit watched Cartoon Corner announce it was going into liquidation, and in the end, said Veit, "My sunk costs were more than $100,000." Though Veit's story only portrays his own experience as a franchisee, it serves to underscore the necessity of knowing what you are getting into in choosing franchising as a vehicle.

Going Back to Work for a Large Organization

While this is the alternative many executives pursue, the key to returning to a large organization is to reenter that atmosphere with a portable state of mind. Thus, electing this option does not approach the organization with the hope for lifetime security, but with the attitude that this is simply the next step on one's career path. It is important to keep this distinction in mind, as in many instances, what you do in a large organization is dictated by being a part of it. Some portable executives, like Lawrence Smith, move back and forth between consulting and working for large organizations. Citibank had already been a client of Smith's for four years when it offered him a full time position:

Creating a Job with Your Client

Regardless of which employment option a portable executive elects, he or she must be able to develop an assignment in concert with an employer or client. From a practical point of view, a number of elements are involved in this task.
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