While it might be taboo in some circles to think about raising funds for your startup by working—the argument being that this isn’t actual funding, but rather investing your own money—with a slight tweak to your method, even the staunchest opponent of the argument will have to concede. Of course, we’re talking about consulting strictly to fund your startup, but more pointedly, building your product into your consulting to further spread awareness, distribution and attract sales.
The Ideal Scenario
Now, this typically works best with products that can actually be transformed into a consulting company such as business software or digital platforms, so if that’s the route you’re going, perfect. Essentially, all you’re doing is getting your clients to cover your development costs during your product refinement process. Start out with a minimum viable product and use your consulting job as an actionable metric based on client feedback as market validation. As you make money, use it to fund your product development, distribution and other avenues of market validation.
Will this Work for You?
The great thing about consulting as a form of startup funding—aside from the built-in growth that comes from having your clients see your product at work—is that it minimizes financial risk. For many people at the helm of startups, working around your 9 to 5 isn’t a choice, it’s a reality. But if you can afford to cut back a few hours and the only reason you haven’t been is because of financial demands, consulting can help you bring in a few extra bucks while working on your product.
Of course, reducing the risk for financial loss can sometimes increase the risk for startup failure, but that’s a fine line to walk and has to be addressed based on individual and company circumstances. Measuring risk and reward is essential to any startup, but it requires a whole extra level of examination when it comes down to hours spent funding versus hours spent working versus hours spent developing.
You’ll also have to deal with the customers you are consulting, something that can cut into your productivity. These clients tend to be needier than typical customers, but that is the nature of the job. Be prepared to answer a lot of phone calls, emails and questions—the key is to not look at them as a distraction, but rather as free data and feedback on your product.
Taking Advantage of Consulting Funding
During your time as a consultant, you should take advantage of every piece of feedback given. Take note of the areas where your product can be improved and create sprints specifically focused on tackling these issues. While there’s no reason why you should make this your only market for approval, since your product is physically being used, it’s a telltale sign of whether or not your product is ready for widespread distribution. Of course, if you only have one or two clients you’re consulting, the data might be a bit skewed, but you can still use this to your advantage—find the similarities between your clients and you have a set of parameters for your startup’s target market.
Depending on your product, you can also use your consulting as a means for growth hacking, offering your clients discounts for signing up other people. While it’d be nice if they recommended you as a consultant to other clients, simply getting the word out there about your startup’s product is enough to justify some type of reward. This doesn’t have to be monetary since you are using the capital as funding, but consider your consulting clients as early adopters and reward them as such.
In the end, consulting to fund your startup with a built-in growth hack won’t work for everybody, but it’s worth thinking about. Lean startup development and marketing is all about thinking outside the box and working smarter, not harder. To take on a more traditional approach to startup funding, click here right now.