"The First Three Years of Starting-up a Geological Consulting Practice"
George D. Klein
SED-STRAT Geoscience Consultants, Inc., P.O. Box 42188, Houston, TX, 77242-2188.
(281) 937-9483; Fax: (281) 937-9456; E-mail: gdklein@sedstrat.com
(NB. This is text version of a paper presented at the SIPES-DPA Career Transition Workshop, Monday, April 12, 1999, San Antonio, TX)
INTRODUCTION
Nearly four years ago, I worked as an Executive Director of a Marine Science Consortium in New Jersey with a left to the end of my contract. As the job continued, I realized that this position was a very bad match, so I met with the Board of Trustees, and asked not to have my contract renewed in exchange for certain considerations that were given.
Having consulted part-time during my earlier career as a Research Professor, I decided to become a full-time petroleum geology consultant. This article covers many of the things I learned during the first three years of operations and reviews both the excellent advice and guidance I received from many people, all listed in the acknowledgments. Some included a large network of former classroom students as well as MS and PhD students who I supervised.
The first person I met for advice was my accountant who explained to me that it if I was still in business in three years, likely I would make it (hence the title of this paper). Nearly 75 percent of businesses fail within two years. Thus the first three years are critical. When he opened his accounting firm, he did some part-time work like teaching community college accounting, while getting his practice underway. In three years he develop a core repeat client group with plenty to do.
Next, I met with the Consortium banker who had become a good friend. He provided solid advice about rearranging my finances so I could get started. I also gave him my resume because his bank financed petroleum projects and asked him to forward it to their asset branch for possible work. He did and I got work from that contact.
Perhaps the most critical step was to attend the 1996 Annual meeting of AAPG in San Diego. There, I met with many people, and started marketing my services. The advice I received there was invaluable and most turned out to be true. Since working as a Consultant, additional things were added, which I include below. That AAPG meeting was an energizer because of the support and encouragement I received, and in retrospect, I noticed many of the "new" consultants at the recent annual meeting in San Antonio were similarly energized.
CRITICAL THINGS TO GET STARTED
1). New consultants MUST buy a PC (if they don’t have one) and open a personal e-mail account IMMEDIATELY. Literally, you cannot do without it. 90 percent of my correspondence is by e-mail!. Bill Gates, in a recent Time magazine interview, considered this to be the number one megatrend in business in the next century.
2). If you are going to be a consultant, you will have to undergo a CHANGE IN MINDSET REGARDING WHO YOU ARE AND WHAT YOU DO. You are now an individual entrepreneur responsible for every facet of your activities. You are in control and Accountable to yourself and your clients.
3). Your CAREER OBJECTIVES will change now that you are a consultant. What is it?:
To Serve the NEEDS of a client by finding them new and by-passed oil and gas
reserves to ADD VALUE to their Corporate or Personal Assets.
CONSULTANTS ECONOMICS 101!!!!!
Before reading further, please be advised I am NOT a financial planner. Everything I write in this section should be checked with your accountant and your financial planner. It is for guidance only and represents what I experienced.
1). Personal reserves. A prominent hydrogeological consultant told me that it is essential that one has funds on hand totaling six months living expenses in reserve, if possible, to survive as a consultant. He explained he just finished a large two-year contract and now had to start all over marketing for new clients and did not know when the next project would start. This is part of a consultants’ life and to make it between contracts, this reserve is critical.
2). Savings rule. When I taught at the University of Illinois, I did an exit interview with graduate students I supervised. One item I reviewed was finances, knowing they were getting the largest pay checks at age 24 or 28, that they had ever seen. I advised them to set aside an emergency savings fund of 10 % of their take-home pay, bank it, leave it alone and build it up to their annual salary base. Keep increasing the ceiling as salary went up. Never touch it. Keep saving. Additional savings should be used to buy a house, car or invest more assertively. Were you so advised? If so, you have added reserves.
One of these students was let go by his company after four years in 1992. He survived on his emergency funds for 18 months and had money left over when he found a new job. He is now doing very well with his new employer and rebuilt his reserves.
3). During your first year as a consultant, you can expect to finance your business operations before seeing income. Luckily it will be sooner. In most cases it will, but one needs to plan for a year of front-ending business expenses.
4). While Executive Director of the New Jersey Marine Sciences Consortium, our Chairman of the Board was the late Frank H. Wheaton, President of Wheaton Glass, the largest glass manufacturer in the world. At lunch before a board meeting one day, he was asked by a Board member who had known him a long time: "Frank, What is the Secret to your Business Success"?
FRANK’S REPSONSE: "NEVER SPEND MORE THAN YOU MAKE".
(and that’s all he said).
5). How to implement Frank Wheaton’s Advice?
As a consultant, you will have to make a variety of decisions about expenditures to follow that advice. Do you rent an office or work from your house? Will you pay as you go to meet expenses or get corporate credit cards or charge accounts? Do you buy or lease equipment?
There is no right or wrong answer that is universal. You decide with the answer to the following BOTTOM LINE Question:
How Much Expense Can YOU Handle, and How Quickly Can You Pay For it?
6). Banks.
As a consultant, I recommend opening business accounts with local banks rather than a supersized megabank. Local banks tend to be more accommodating and helpful and it is easier to meet key people there.
Nevertheless, no matter where you bank, you must watch them like a hawk! This is particularly true with fees.
It is also critical to learn to negotiate with a bank from strength (remember they really don’t want your house, car, computer, or pets). If you foresee problems, take the initiative. Don’t wait until it is too late. Propose solutions that are doable up front so it makes it easier for them to help you if problems arise, and reach a successful outcome.
When I taught in universities, I always told students up front that they were likely to see problems in handling their course work load before any faculty member does. By the time the faculty became aware of it, it is too late. If they had classroom problems, I encouraged them to take the initiative to see me so they can be addressed quickly. It works the same when dealing with banks!
One key thing I learned is NEVER to be afraid to contact the head office to get involvement if you find your banker lacks critical knowledge or ski