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I've been through some pretty brutal experiences recently with venture capitalists and I'm looking into ways I can start a company without VC money.

Has anyone out there used consulting to bootstrap their company? What are some of the pitfalls that I can avoid?

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Could you post a question about VC pitfalls and list some of your own? – JeffO Jun 26 '10 at 1:17
Jeff - will do. Give me a couple of days to collect my thoughts... – Craig Daniel Jul 1 '10 at 22:05

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Giff Constable wrote a fantastic blog post on exactly this subject.

Yes it's possible, but few companies actually make the transition from consulting to products. Read that post for the pitfalls; if you know them and act accordingly I think it's a great way to build a business.

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Awesome blog post. I had missed that one. Thanks! – Craig Daniel Jun 25 '10 at 15:15
up vote 8 down vote

I think vast number of entrepreneurs are doing that, including my own company.

I think the biggest pitfall is the being stuck in consultation hell, get comfortable and forget that building great products to generate recurring revenue is the way out.

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This is what I assumed was the greatest pitfall.. Getting addicted to the cashflow. – Craig Daniel Jun 25 '10 at 14:51
up vote 5 down vote

Not spending enough time on the product because the billable hours are paying the bills.

Clients have different expectations when they are paying you by the hour/project than when they are buying your software. You'll have to say no a lot more when selling software.

Providing support to clients with different hardware, software, levels of ability, and time zone differences. Selling B2B may not be as much of a problem.

Focusing on too many markets/industries. In consulting you can rely on the client providing more of the business/domain knowledge and usually they're more willing offer it.

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Thanks. Good points. – Craig Daniel Jun 25 '10 at 14:40
up vote 2 down vote

Focus your consulting in the same niche as your end product -- then the two worlds will cross-pollinate, you'll be making the right connections with your consulting, etc.

If you have a product idea to start and you know that is the end goal, then you are a lot better off than someone who starts consulting with the general premise of starting some recurring income type products later.

Personally making a business out of consulting sounds somewhat deadly and not much better than having a day job, though I know some people love that kind of work.

My path:

  1. Create web based software in specific niche
  2. Release software with less initial pick-up than I liked
  3. Get a real job
  4. Started making some sales for the service from step #1
  5. Found a big consulting gig (in same niche as product.. got this consulting gig because of the work I was doing on the original product) that allowed me to quit my job
  6. Gradually built sales for my product from step #1 so by the time the consulting gig died out, the sales of my product was enough to pay bills and a little bit left over for me
  7. Keep growing sales of product
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Thanks for the response. In order for me to build a great product, I need to be interacting with customers in the market everyday. I think consulting in the same space is the only way to do this. – Craig Daniel Jun 25 '10 at 14:40
Craig has a point. You may have some ideas, but you need to get with someone who has the domain knowledge and experience as well. – JeffO Jun 26 '10 at 1:16
up vote 0 down vote

Thank you Jason - the bottom line for me is in most cases, it really make sense to keep your consulting work and product work as two separate corporate entities. Pay your bills but don't mix it all up.

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Thanks for the response. I didn't think of the legal/financial ramifications. – Craig Daniel Jun 25 '10 at 15:18
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That's what I'm doing now - I've found it helps me to prioritize tasks and time.

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