[mahmud]

Paul was right when he said not to do side consulting work.

For me it was simple; a 3-month consulting gig will give me a financial runway for the next year. So I am doing it, and nothing else. Come December 1st I will have enough to live comfortably for the next year, probably 2 years if I move to somewhere cheaper and bring my fiancee over.

[tptacek]

Are you sure Paul was right? If you can pay for a years expenses in 3 months, it sure sounds like you're in a good position to hire; pay someone to reduce consulting workload, and pay someone to work product.

'mahmud, this isn't particle surgery. This is every real consultancy. Ever.

[jasonkester]

Presumably you're charging the rate you charge because you're you. You can't simply drop Junior Dev Jimmy onto the project and keep billing away at the same rate.

It doesn't take a very savvy client to notice when throughput drops by a factor of 10. So unless you're a body shop that's already sending out mystery devs, or you're very good at explaining away a huge drop in productivity, hiring is not going to help this situation at all.

[tptacek]

Nothing in life is free. If you hire Jr. Mahmud to take over 80% of your job, and your aggregate productivity drops by 1000%, you will probably lose your client and be forced out of business.

So don't do that.

A steady $200/hr consulting gig offers an awful lot of wiggle room to figure this stuff out. When we hire a new consultant, (a) we're very picky and (b) they tag-team with us on projects, often for months, without being billable. That costs money in the short term, but pays for itself in the long term.

Also, it's wrong to assume that a consulting gig has to be performed by one person. Time and again friends of mine have found that they could hire cheap for 20-40% of their project work (documentation, test harness coding, automation, etc) and then had that person grow quickly into a full-on replacement. And all due respect to 'mahmud's domain knowledge, but the examples I'm thinking of are pretty high end.

At the end of the day, this problem is a fundamental challenge of running a business, and I have to respectfully/tentatively suggest that if you can't figure out how to hire and train a replacement for your own work, you stand very little chance of running a successful software company, where you'll also have to hire QA, ops, marketing, and sales.

Think of this current challenge like a warmup.

[mattm]

Can you explain this? I don't understand it.

"they tag-team with us on projects, often for months, without being billable"

[tptacek]

I hire Joe the Up-And-Coming Vulnerability Researcher (or rather, Cory does, since we hired someone to replace me 2 years ago so I could do more product work; see how this works?)

Joe and I work on projects together for 2 months.

I'm the billable resource on those projects. Joe doesn't bill.

I start out working harder (I have to deliver for clients and ramp Joe up). Pretty soon Joe ramps up and we start delivering the same work a lot faster. Eventually, Joe's so demonstrably capable (in our case, he's finding the same number or more security vulnerabilities in code that I am) that he becomes a billable resource, scheduled just like anyone else.

Depending on who you hire, this process can take months, or it can take weeks. If you hire someone with experience in your field, it may not take more than a week or two. If you hire out of University, it might take 2 months. It's almost always worth it.

I actually think Matasano has a harder time doing this than many other companies would. Our clients are extremely discriminating (we're a high-end firm) and we have to be very careful about hiring. We have clients that pick researchers from our firm by name. Staff bios go on every proposal. I can't imagine that this is the case for, say, iPhone development; most consulting companies are paying for an outcome, while security research contracts are paid in part for the process.

[mahmud]

When I find someone with both that much domain knowledge, and broad peripheral expertise, it will most likely cost me north of $200/hr, leaving me nothing. Not only that, but the hiring and looking is some extra chore I can do without. In the time it takes me to follow up with applicants, I would have gone through 15% of the project.

Somethings are best done by yourself.

And yes, Paul was right; I barely have any mind for our startup anymore. I live and dream the consulting gig; it monopolizes my imagination, and all I can do after a grueling 12 hour day of work is watch Family Guy and drink beer in bed like a bum.

[tptacek]

You're billing $200/hr and you can't hire a developer for your personal project or attract a partner who can share the burden on the consulting side?

Paul was "right" because he thinks about consulting like you do: as a day job without benefits. The difference between a day job and a consultancy is that your day job gets pretty upset when you hire someone to do your grunt work.

You seem dead set on scaling the wall when there's a perfectly good ladder hanging right off it. Stop killing yourself on a contract so you can earn the right to kill yourself on a startup project that will very likely fail (they all do). Engineer a solution to your current problem ("people will pay my company $8000/week to do something and I am currently the only person in my company"). That has to be easier than trying to figure out how get "liftoff" with a "1 year runway". Sheesh.

[exit]

what kind of consulting work did you do?

[mahmud]

I do something tangentially related to data-warehousing.

[lzw]

True Story: One of the first startups I ever joined had a consulting business. I was employee number 12. 4 of the employees were bringing in enough revenue to fund the whole company while we developed the main product.

We started talking to investors, and the first thing they said was "We won't consider you if you keep the consulting business, shut it down."

So the company shut down the consulting business. This meant that we were now on the clock.

The investors then waited until we were just about to go under and offered us a bridge loan....on their terms. No negotiating power.

Then finally, they closed the first round of VC.

Needless to say the company capitulated on all the terms of the term sheet for that first round.

Later, it turned out that we were ahead of the market by about 5 years.

So, the company failed because they listened to investors who gave them bad advice. The advice was useful for getting better terms for the investors.

Now, what would have happened if they had not shut down the consultancy-- they could have negotiated good terms, and wouldn't have needed a bridge loan, and they could have hung on until the market took off. Might have been a delayed payoff for the investors, but 7-8 years is not that long to wait to get a home run, especially compared to the complete loss alternative.

IF the investors had invested what they did without the requirement to shut down the consultancy, then the company could have added the employees they wanted to, and had both the investment and the profits from the consultancy to invest in the primary product.

The end result would have been a better primary product and a better return for the investors.

Blanket advice is generally not good advice. Don't run a SEO consultancy when your primary product is videogames. But if you're primary product is videogames and you can fund much of your overhead with a few employees and a licensing deal for that engine, then it is a good thing. It is easy to tell if it makes sense if the income more than covers the cost of the employees dedicated to the "side" business. And reality is, this side business will often present opportunities or your main business and generally underwrite advancement of the main product on someone else's dime.

If you're a couple college kids and this is your first startup, then maybe you're not able to keep focus on the main business when you have customers for a consultancy.

But when they are aligned and the consultancy covers hiring extra manpower so that more total effort goes into the main business, then giving up the consultancy would be a bad advice.

So, if you can do a similar split with time-- where you spend 4 months consulting to cover expenses for 12 months, then you're in a position analogous to this company. In that case, it makes total sense and the advice to "never do consulting" is bad advice.

You'll be better off in your TC application or any other aspect of your business having those 8 months of free time to just work on the product... because you consulted for 4 months.

The alternative is likely keeping a day job the whole 12 months and not being able to focus on the startup.