Introduction
Consultant rates vary significantly and are influenced by a wide range of factors. Set out below is a summary of some of the key considerations and influences.
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Currency
In this section I will illustrate my points using £ Sterling (UK) as the reference currency, but the relative fees apply equally to all geographies whether you are billing clients in the Americas, Asia Pacific or mainland Europe – simply apply an approximate currency conversion and the figures in whichever local currency will be broadly representative.
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Context
Consultant rates vary widely from the £400 per day contract Project Manager, to a Partner in a Global consulting firm commanding £6,000 per day in the city of London advising a global banking operation, or even higher for particularly specialist and scarce expertise.
A large number of factors influence the consultant rates that a client will be willing to pay.
If the requirement is simply for a very smart project manager who has practical experience and a good track record, and there is no such resource available currently employed within the client’s business, then a good option would be to buy in this resource on a short term contract basis.
The assignment is likely to be relatively easy to define and scope, not particularly complex to deliver and relatively low risk when viewed in the wider context of the client business.
Contrast this with a large, established, high-end consulting firm contracting with a banking client to deliver, by which we really mean ‘underwrite the success of’, the Systems Integration aspects of a major and business critical IT Programme where the Programme budget is say £270m over three years.
In this situation the client is looking not just to buy the time, track record and expertise of some very smart people, but is looking to pay a premium consulting fee, one element of which is in lieu of the transfer of some risk to the third party consulting firm. Effectively, in paying the premium fees of a big five firm the client is buying insurance that will give some redress should there be a problem with the delivery.
Within these premium consultant rates the client is also paying for the credentials and track record of a major consulting firm along with the intellectual property, global infrastructure and pool of consulting resources that can be rapidly mobilized across multiple geographies to the scale required to meet the requirements of the assignment.
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Pricing models
Daily equivalent consultant rates will vary depending on the pricing method selected. Set out below is a summary of the main pricing structures and approaches.
a) Simple daily rate
The consultant rate is agreed to be for example £1,000 per day. The assignment is scoped and an estimated total number of days for completion are agreed. For example it may be a thirteen week commitment which would imply 65 working days and therefore a total fee of £65,000. Typically the client will pay reasonable expenses, reimbursed at cost in addition to the basic daily rate.
The consulting contract would specify the key deliverables and there would be regular progress reviews with the client to ensure that the consulting inputs are as required in order that at the end of the contract the key requirements will be met.
b) Retainer
The professional services of the consultant would be retained through the course of a specified period of time, typically one year. The client would agree to pay a fixed fee, for example £30,000 in order that at any time during the year he can call on the expertise of the consultant in providing expert input and guidance.
The advantage to the client is that he knows he has expert resource available at very short notice. Also, there is a fixed ceiling to the cost.
Typically the consulting contract for a retainer arrangement would include a cap or ceiling on the number of days that the client can draw down, for example, twenty days which would equate to an average daily consultant rate of £1,500. Clearly if the client only has a need for ten days during the course of that year than the average daily equivalent consultant rate increases to £3,000. The client is likely to be happy to pay this premium in lieu of the flexibility that the arrangement provides.
c) Fixed price
The client agrees with the consultant a fixed price for successful completion of clearly specified deliverables. The consulting contract makes no reference to the number of consulting days that will be invested in ensuring that the objectives are met, but typically an end date is agreed by which the assignment must be completed. For example £80,000 to complete all aspects of the planning and mobilization phases of a complex change Programme, with the assignment starting 1 January and completing 31st March.
This type of arrangement is higher risk for the consultant and introduces both a downside and upside risk. If the assignment is successfully completed in a shorter time period than was initially anticipated then the equivalent daily consultant rate will be higher.
Conversely, if there are problems with the assignment and the dates begin to slip, then the equivalent daily consultant rate will begin to be eroded. Also, there is an increased probability that the client will not be required to pay for the assignment if the final delivery cannot be achieved before the end date that is recorded in consulting contract.
Clearly fixed price contracts should only be undertaken by very experienced practitioners i.e. consultants who are confident that they can estimate with a relatively high degree of accuracy what will be required to deliver the outputs or outcomes that the client is expecting.
d) Contingency / success fee
Contingency fees are potentially very lucrative and are the ultimate manifestation of the client saying to the consultant, ‘OK, put your money where your mouth is: if together we deliver the required outcome for the business then we will share that success with you’.
For example, the assignment might be to undertake a cost reduction exercise for a major financial institution where the total operational cost base is currently £300m. The client may set a target of 20% steady state cost reduction (i.e. a reduced run rate of operating cost on an annualized basis of £240m) which would imply annualized savings of £60m.
The consulting firm would be incentivized through a fee structure based on the consultant receiving a percentage of the cost savings achieved for example 5% of savings achieved which would equate to £3m. Clearly in this situation the consultants would like to receive 5% of £60m rather than 5% of a lower figure.
The challenge with this type of arrangement is reaching agreement with the client at the end of the assignment as to the amount of benefit that has been delivered. In order for this to be determined with any degree of certainty the consulting contract will need to contain detailed schedules of the definitions and bases of calculation of cost reductions. The final delivery will be assessed against these pre-agreed measures. The absence of these definitions up front is likely to result in disagreement between the client and the consultant at the end of the assignment.
e) Time and Materials basis
The client pays the consultant an agreed rate (usually time-based i.e. hourly or daily) for input provided by the consultant. Any related expenses incurred or supplies purchased are charged to the client at cost. The time and material billing page contains more information.
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Know the Ropes
As you work through the process of determining appropriate consultant rates for your services there are a number of key considerations to keep in mind.
The ‘Know the Ropes’ series of pages provide guidance and cautionary tales drawn straight from the ‘School of Hard Knocks’ – i.e. what I’ve learned the hard way from my mistakes.
First, beware the over-zealous salesman acting on your behalf – do not allow an intermediary to oversell an assignment to a client and thereby put your professional reputation on the line. Have a look at my page on how to avoid Overselling.
Second, don’t be afraid to Price for Value. Your consulting fees should be broadly reflective of the risks, effort and challenge associated with the proposed consulting project. Be hard-nosed and objective in identifying the true nature of the project and forming your own assessment of the value to the client of you undertaking the work.
Your price should fully reflect the value to the client. Put simply, if you anticipate that there will be significant pain or risk associated with delivering the assignment then accordingly you should price it high. Check out my page on Pricing for Pain.
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Differentiators
The following factors drive differentiation and divergence in basic consultant rates. In simple terms these factors are the manifestation of market forces i.e. demand and supply determining price.
a) Experience
A consultant who is very experienced in his or her field will command a higher daily rate than someone who is less experienced. It sounds obvious but is useful to state nonetheless.
A more experienced consultant will have stronger credentials that can be readily evidenced by a successful track record of delivery, including reference sites and testimonials from satisfied clients who are likely to be repeat buyers of consulting services from that individual or firm.
b) Qualifications
Similarly, a consultant who has relevant professional qualifications combined with excellent practical experience will command premium consultant rates.
c) Scarcity of talent
Market forces dictate that if there is a very strong demand for consultants who have a relatively scarce professional skill set then prices will be high. It is worth providing a couple of examples from financial sector consulting to illustrate the point.
In the past few years there have been a number of high profile floatations of life and pensions companies that were previously owned by policyholders – the process of demutualization and IPO. During the period running up to floatations of this type, these client companies typically require the skills and experience of large numbers of accountants and actuaries with particular technical expertise in fund valuation and reporting. As a consequence premium consultant rates are available to individual contractors or consulting firms who possess the necessary skills and experience.
A second example would be the premium consultant rates paid to specialist consultants operating in the financial sector during the implementation of the Basel II capital adequacy requirements. Consultants with skills and experience in disciplines such as advanced credit risk management and the upgrade of credit risk management systems were able to command premium consultant rates.
A third example would be corporations listed in the United States being required to comply with the requirements of Sarbanes Oxley. Management consulting rates for firms specialising in these niche areas were and continue to be higher than average as a consequence of the focus of the regulatory authorities on key disciplines that include corporate governance, risk management and the accuracy of financial reporting.
d) Intellectual property
Consultant rates available to contractors will be lower on average compared with consultant rates available to specialist consultants who also bring a body of proven proprietary intellectual property.
For example a specialist risk management framework or business model which has been applied successfully elsewhere with clients in multiple instances. New clients will be willing to pay a premium to secure the same commercial advantage that competitors are likely to have enjoyed as a consequence of adopting such proven models, processes, frameworks or systems.
e) Sector
Some sectors command premium consultant rates.
In general terms consultants working in financial services can expect to receive higher average management consulting rates compared with consultants operating in other sectors that perhaps are by definition less profitable.
For example consultants engaged by clients in a public sector entity such as a health authority may receive lower rates. Another example of a client environment where budgets for consulting spend would be significantly lower would be the charities sector – by definition these clients operate on a ‘not for profit’ basis.
Consultants operating in the oil and gas industry can typically command a premium depending on the nature of the assignment.
f) Geography
Geography will influence consultant rates. For example, within financial sector consulting rates are higher in London than in other provincial cities within the UK such as Glasgow.
Comparisons between countries will also yield material differences in consultant rates. For example, daily rates available in Australia are substantially lower than those available to consultants with equivalent experience in the UK.
g) Duration of the assignment
If a client is able to offer a consultant an assignment that will last for a relatively long period of time for example twelve months, then it is quite reasonable for the client to expect a reduced average daily equivalent consultant rate compared with a three month assignment. This is to reflect the value to the consultant in absolute terms of the twelve month contract and the certainty that this will bring.
Deploying Lean Principles to ERP Implementation Projects
The competitive environment that both Manufacturers and Distributors alike have experienced in recent years in the era of Globalization, Currency Fluctuation, and Market Pressures has given rise to the business impetus to run a leaner operation to remain competitive. These issues have trickled down to the IT department. IT Professionals are at times facing an enormous obstacle. They are expected to align the organization’s IT infrastructure with the strategic and operational components of the Business to improve upon Service Delivery. The other part of the issue is to reach those goals with fewer resources. Many IT Managers have had to adopt techniques to run a lean IT shop and extend that to the principles of the IT projects that are under development.
An ERP project is an ideal area to utilize lean concepts to further understand how this can be achieved, but we must first understand the basic principles of lean and how they relate to an ERP project implementation.
Lean Definition
Lean Principles have evolved from the Lean Production Philosophy which has its origin in the set of business philosophies developed in post-war Japan known as T.P.S. (Toyota Production Systems)— which has as its core philosophy cost reduction through elimination of waste (muda Japanese).The principles deployed in Lean made Toyota the pre-eminent auto-manufacturer in the world and by extension helped shape Japan into an economic power.
The concepts outlined in Lean Manufacturing evolved into a series of principles which evolved into a business concept known simply as Lean which can be applied across several disciplines i.e. Project Management, IT Deployment, etc.
The Organization known as APICS (American Production Inventory Control Society) has defined Lean as “A Philosophy of Manufacturing based on planned elimination of waste and continuous improvement of productivity.”
How ERP and LEAN Work Together
One of the ways in which ERP & Lean complement one another is in areas such as: Machine Setup Time, labor costs, and materials handling.
During Machine setup, time is lost due to the time the machine operator must setup or take down and change tooling. At other times the employee must spend valuable time looking for tools or preparing for many delays related to machine setups as a result of constant changes to the production schedule at the same work station. One of the core values of Lean Manufacturing is known as the “5S Method.”
• Sort - Eliminate all unnecessary tools, parts, instructions
• Simplify - A place for everything and everything in its place
• Shine - Maintain a tidy and organized work environment
• Standardize - Document the rules for maintaining the first 3S instructions
• Sustain - Operations carried out in sequence, eliminating waste
Execution of the” 5S Principles” meant that resources were planned in ahead, tools were in place and readily accessible, and (where possible) production jobs were scheduled to run in a sequence that minimized machine set-up. When the “5 S Principles” were applied to an ERP environment they looked like this:
• Sort - Use only parts of the ERP system which benefit the company
• Simplify - Use ERP to enable integrated business processes i.e. inventory control
• Shine - Ensure that you work with accurate and timely data
• Standardize - Document and standardize, business processes
• Sustain - Business Processes executed by ERP executed on a consistent and timely basis
The results achieved by the ERP system deployment have resulted in cost reductions and improvements in efficiency meant that work in process has to be managed closely to ensure that no bottlenecks in production occur, The tools within ERP such as Capacity Planning and Costing Modules to define direct vs. indirect labor now mean that only the time the job runs in production are calculated as direct labor.
The efficiencies gained by the ERP implementation produced reduction in set-ups, and other shop floor time management processes, means direct labor costs are also maximized. Through the use of data collection devices, you can account for time spent “on the clock” and nonproductive time spent while a work-order is in queue. This way, non-productive time no longer figures as a basis for calculating direct labor. Finally, as ERP itself evolves with the use of BI tools, along with lean techniques and philosophies such as lean pull-production principles, you will achieve business gains as you introduce JIT (just-in-time), resulting in greater capacity to monitor inventories, manage more efficiently, and align your suppliers to lean-pull production techniques. In the lean ERP model, especially where cellular production techniques in manufacturing are introduced, there is going to be less handling of materials. Once a production job begins on the shop floor, production raw materials flow through the plant rather then sitting idle waiting to be used in Production.
As a result of lean ERP being used in the organization, inventory moves from work station to work station in a continuous flow through the plant—and as a result, return on investment is accomplished through the use of improvement in efficiencies and reduction in inventory investments.
An ERP project is an ideal area to utilize lean concepts to further understand how this can be achieved, but we must first understand the basic principles of lean and how they relate to an ERP project implementation.
Lean Definition
Lean Principles have evolved from the Lean Production Philosophy which has its origin in the set of business philosophies developed in post-war Japan known as T.P.S. (Toyota Production Systems)— which has as its core philosophy cost reduction through elimination of waste (muda Japanese).The principles deployed in Lean made Toyota the pre-eminent auto-manufacturer in the world and by extension helped shape Japan into an economic power.
The concepts outlined in Lean Manufacturing evolved into a series of principles which evolved into a business concept known simply as Lean which can be applied across several disciplines i.e. Project Management, IT Deployment, etc.
The Organization known as APICS (American Production Inventory Control Society) has defined Lean as “A Philosophy of Manufacturing based on planned elimination of waste and continuous improvement of productivity.”
How ERP and LEAN Work Together
One of the ways in which ERP & Lean complement one another is in areas such as: Machine Setup Time, labor costs, and materials handling.
During Machine setup, time is lost due to the time the machine operator must setup or take down and change tooling. At other times the employee must spend valuable time looking for tools or preparing for many delays related to machine setups as a result of constant changes to the production schedule at the same work station. One of the core values of Lean Manufacturing is known as the “5S Method.”
• Sort - Eliminate all unnecessary tools, parts, instructions
• Simplify - A place for everything and everything in its place
• Shine - Maintain a tidy and organized work environment
• Standardize - Document the rules for maintaining the first 3S instructions
• Sustain - Operations carried out in sequence, eliminating waste
Execution of the” 5S Principles” meant that resources were planned in ahead, tools were in place and readily accessible, and (where possible) production jobs were scheduled to run in a sequence that minimized machine set-up. When the “5 S Principles” were applied to an ERP environment they looked like this:
• Sort - Use only parts of the ERP system which benefit the company
• Simplify - Use ERP to enable integrated business processes i.e. inventory control
• Shine - Ensure that you work with accurate and timely data
• Standardize - Document and standardize, business processes
• Sustain - Business Processes executed by ERP executed on a consistent and timely basis
The results achieved by the ERP system deployment have resulted in cost reductions and improvements in efficiency meant that work in process has to be managed closely to ensure that no bottlenecks in production occur, The tools within ERP such as Capacity Planning and Costing Modules to define direct vs. indirect labor now mean that only the time the job runs in production are calculated as direct labor.
The efficiencies gained by the ERP implementation produced reduction in set-ups, and other shop floor time management processes, means direct labor costs are also maximized. Through the use of data collection devices, you can account for time spent “on the clock” and nonproductive time spent while a work-order is in queue. This way, non-productive time no longer figures as a basis for calculating direct labor. Finally, as ERP itself evolves with the use of BI tools, along with lean techniques and philosophies such as lean pull-production principles, you will achieve business gains as you introduce JIT (just-in-time), resulting in greater capacity to monitor inventories, manage more efficiently, and align your suppliers to lean-pull production techniques. In the lean ERP model, especially where cellular production techniques in manufacturing are introduced, there is going to be less handling of materials. Once a production job begins on the shop floor, production raw materials flow through the plant rather then sitting idle waiting to be used in Production.
As a result of lean ERP being used in the organization, inventory moves from work station to work station in a continuous flow through the plant—and as a result, return on investment is accomplished through the use of improvement in efficiencies and reduction in inventory investments.
Efforts in starting a Consultancy Firm!
This is where the Rubber Hits the Road
- Welcome to Bootcamp DAY1…
There is a significant amount of work to do in starting a consulting business and you should not underestimate the challenges involved. It is quite likely that you will need to do much of the planning and preparation alongside your day job i.e. in the evenings and at weekends.
You might think that some of my suggestions are odd and maybe radical. I make no apology for this. My intention is to challenge You to work through a decision process that has the potential to change your working life and financial future fundamentally. You will NOT do this from the comfort of your arm chair – you need to Get Up, Get Out There and Make It Happen.
If you’re going to successfully complete the preparation required to make the transition to working as an Independent Consultant you’ll need to Review, Challenge and probably Change your priorities and particularly how you spend your time. In my experience people who achieve their goals in life actually get on and do the things that others do not like to do and choose not to do. For example, get fit and sell your television. Just two examples of life changes that made a fundamental difference to my perspective and my probability of success in making the transition that I made six years ago. But more of that later…
Given that you are browsing this website you are likely to be at a crossroads or key decision point in your career. If after working through the material on this site and progressing your own investigations and preparations you make the decision that starting a consulting business is NOT for you, then that too will have been a success. The objective of the independent consulting bootcamp site is to assist you in making the right decision and that decision may well be to maintain the status quo and continue in your current employment.
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Maintaining Momentum
In my experience at least half the challenge in starting a consulting business is in maintaining momentum. One tip that I found useful and still use today when undertaking a project that is not my full time focus is simply to ensure that you Do at least one thing every day to move you towards your goal, even if it is just to make one phone call or send one letter. If you take this approach you will be amazed at how quickly you will complete tasks and these positive experiences will be like the wind at your heels – they will carry you forward closer and closer towards your goal.
You will need to be structured and organized in your approach and this site will help you with that. I would also suggest that you find a Mentor; someone with experience beyond your own who will agree to meet with you regularly to discuss challenges, monitor progress against your plan and help with overcoming obstacles. There is little more motivating when undertaking a challenge than involving others who have a genuine interest in your success.
Another proven idea that delivers tremendous results is to grant ‘Nagging Rights’ to someone. This simply means that you agree with someone that they will contact you at regular intervals - usually monthly, to follow up with you, discuss progress and refocus on priorities for the month ahead.
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Activities to start ASAP
There are a number of areas that you need to start to work on as soon as possible:
Understand your basic proposition or offering as an Independent Consultant
Review your skills and experience
Update your CV or Resume
Investigate your marketability and the current market value of your skills
Identify and plan any training or professional development activities that you need to undertake prior to establishing your consulting business
The answer to the question - When to quit your job partly lies in your honest assessment of whether you currently have the skills and experience to operate effectively as an Independent Consultant
Intellectual Property
Collect together and organize your intellectual property
Identify all of the papers, materials, reports, business models, ideas, insights, and methodologies that you have created that together comprise the practical output of the application of your professional skills and experience most likely over a period of many years
Start to build a repository of material that represents the body of knowledge that you will use in winning and delivering consulting assignments going forward
Financial Planning
Understand your current financial situation including your insurance and pension requirements
Determine your financial goals – what will your personal balance sheet look like in say five years and then ten years?
Understand the cash flow implications of starting a consulting business and making the transition from employment to self employment
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Seek a mentor
Identify and approach a small number of people who would potentially be willing and able to act as a mentor as you work through the process of starting a consulting business
These will need to be high integrity individuals who can be trusted to maintain confidentiality, have experience beyond your own and a good understanding of the profession or industry that you intend to target as an Independent Consultant
Contact these individuals, discuss your ideas in outline and ask for their assistance, making it clear that you are looking for them to provide input as a mentor or coach and to challenge you as you work through this planning process
Make an arrangement to meet and prepare yourself for that first discussion
Improve your Physical Fitness
Take a long hard look at your current lifestyle, health and general level of fitness
Success in the planning process will be partly determined by your success in quite fundamentally changing the way you operate and how you currently spend your time
Take a look at your waistline! Do you smoke? How many hours of physical exercise or activity to you undertake each week? Do you eat healthily? Do you get enough sleep to allow you to be effective during the day? Do you drink enough water through the working day? How many hours a week do you spend watching television?...
I recommend that you look on this planning and transition process as a true bootcamp experience – if you are physically fit you will find that you have much more energy & focus and the right mental attitude to apply yourself successfully to the tasks that need to be completed
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Build and Manage your Network - an essential activity when starting a consulting business
Identify and start to effectively manage your network of contacts, colleagues, general associates, fellow professionals, professional advisers, mentors, future suppliers and clients
Start to apply some rigour in your approach to this task – you’ll need to be structured and disciplined to wring the most benefit out of this, but if you do it right it will pay you back tenfold
Start to make full use of the power of Microsoft Outlook to manage your Contacts
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Starting a Consulting Business: T-12 months
In this first month we cover Business Planning -- it is important to invest time in the creation of a straightforward and robust business plan. The document does not need to be particularly lengthy or overly complicated, but it will provide structure for your thinking and allow you to capture the key information about your proposed consulting business.
Fast-track the preparation of your Consulting Business Plan using the free templates, resources, ideas and information available from one of our trusted partners at Business Plan Master.
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Starting a Consulting Business: T-11 months
This month I share with you my experience of how to get organized and minimize the percentage of your time that you spend on activities that will distract you from your main objective.
There is a lot to do to enable the effective planning and set up of any business. Furthermore, it is likely that you will be doing this work in addition to your current day job and other family and social responsibilities. Therefore, it is essential that you are disciplined and well organized and that you have in place a number of basic tools and approaches that will enable you to make best use of your time.
I guarantee that if you follow my advice in this respect you’ll be amazed at the increase in your effectiveness and the number of hours per month you are able to win back to invest in planning your new consulting business.
To reinforce the importance of effective organization you should think ahead to when you actually start working as an independent consultant. Every hour you spend chasing your tail and dealing with administration will be an hour of lost chargeable time. The foundations that you put in place during your planning phase will enable you to build a business that runs like a well oiled machine and will allow you to focus your effort and energy on delivering for your clients.
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Starting a Consulting Business: T-10 months
In month T-10 we plan the technology requirements of your consulting business considering both hardware and software. It is likely that you will require a reliable laptop computer and a range of other hardware and software to enable you to work effectively both during the planning phase and when you are working with your clients.
I describe the equipment that I use, the reasons for my choices and experiences that I have, both good and bad.
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Starting a Consulting Business: T-9 months
Following on from our consideration of technology requirements in the previous month, this month we work through whether there is value in creating and maintaining a Website for your consulting business.
Is a quality business Website essential to have OR simply unnecessary vanity and therefore an avoidable overhead?
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Starting a Consulting Business: T-8 months
Next up we carefully consider the Professional advice that is required both during the setup and operation of a consulting business. By now it will come as no surprise to you that in my opinion it is of critical importance that you seek professional advice from qualified and experienced advisers across a range of disciplines.
I will assist by giving you insight into my experience of identifying, engaging and taking advice from accountants, tax advisers, lawyers, insurance advisers and financial planning consultants.
Whilst we're on the subject of lawyers... Another key area to understand and get right is the Consulting Contract.
Whether you are contracting direct with the end client, working indirectly through an intermediary or engaging subcontractors, there is a lot to consider. Take a look at Contract Basics and Sample Contracts for a solid grounding.
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Starting a Consulting Business: T-7 months
Now its time to consider explicitly When to make the move i.e. When to quit your job.
In this section we work through the main considerations that will influence the timing of your resignation from your current employment; this will help you identify the potential start date for your new venture!
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Starting a Consulting Business: T-6 months
Here I share with you my experience of the practical steps required to give you the best chance of securing chargeable and profitable client work as soon as possible after you commence trading.
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Starting a Consulting Business: T-5 months
In this section we consider personal insurance requirements . When you resign from an employment it is likely that you will lose a number of important employee benefits including health and dental insurance.
This cover will be lost for you personally but possibly also for your family. Therefore it is important to take steps to replace the insurance cover that you will lose when you start to work independently.
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Starting a Consulting Business: T-4 months
A key part of your planning will be the identification and assessment of the risks that you will face in operating your consulting business.
You will need to determine which risks you are willing and able to bear and which will require insurance cover.
An All Risks policy is just that; it provides cover for the main risks that a Professional working independently will typically face.
Alternatively, separate policies can be purchased to cover the range of exposures including Professional Indemnity , Public Liability , Product Liability , Slander and Libel.
In addition, if you intend to employ staff you will require Employers' Liability Insurance.
The related pages provide detailed information to enable you to more fully understand the risks that you will face when starting a consulting business and the importance of Insurance as part of your Risk Management Strategy.
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Starting a Consulting Business: T-3 months
In this section we consider a range of finance related matters including:
Business banking requirements including borrowing if appropriate
Invoicing your clients
Managing your cash flow
Accounting and financial control
Business charge cards
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Starting a Consulting Business: T-2 months
As an independent consultant you will find that for certain clients in some industry sectors perceptions can be of critical importance. Therefore it is important to anticipate clients’ expectations and maintain an appropriate professional image.
I’m not suggesting that you need to engage an image consultant or anything as radical as that, however depending on your profession and the clients you will be targeting there will be an expectation that you will dress and generally present yourself in a particular way.
When you’re working independently it could be said that you are the product i.e. the client is paying for your skills and experience and they come delivered in a wrapper which is simply you and the way you dress, behave and present yourself.
Therefore, whether you like it or not you will be on display when you are working with client staff and you need to think carefully about your image and also that of your business including subcontractors, staff, company vehicles, business stationery and business website.
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Starting a Consulting Business: T-1 month
In this final step we consider the main issues and actions associated with leaving your current employment.
This includes much more than merely drafting and presenting a letter of resignation, and working your notice period. You need to consider a significantly longer time period that begins when you make a firm decision that you will be leaving the organization and extends well into your first few years of operating independently.
It is important to ‘leave the door open’ and do all that is possible to maintain a positive working relationship and open communications with your current employer. It could well be to your commercial advantage if this can be achieved...
- Welcome to Bootcamp DAY1…
There is a significant amount of work to do in starting a consulting business and you should not underestimate the challenges involved. It is quite likely that you will need to do much of the planning and preparation alongside your day job i.e. in the evenings and at weekends.
You might think that some of my suggestions are odd and maybe radical. I make no apology for this. My intention is to challenge You to work through a decision process that has the potential to change your working life and financial future fundamentally. You will NOT do this from the comfort of your arm chair – you need to Get Up, Get Out There and Make It Happen.
If you’re going to successfully complete the preparation required to make the transition to working as an Independent Consultant you’ll need to Review, Challenge and probably Change your priorities and particularly how you spend your time. In my experience people who achieve their goals in life actually get on and do the things that others do not like to do and choose not to do. For example, get fit and sell your television. Just two examples of life changes that made a fundamental difference to my perspective and my probability of success in making the transition that I made six years ago. But more of that later…
Given that you are browsing this website you are likely to be at a crossroads or key decision point in your career. If after working through the material on this site and progressing your own investigations and preparations you make the decision that starting a consulting business is NOT for you, then that too will have been a success. The objective of the independent consulting bootcamp site is to assist you in making the right decision and that decision may well be to maintain the status quo and continue in your current employment.
--------------------------------------------------------------------------------
Maintaining Momentum
In my experience at least half the challenge in starting a consulting business is in maintaining momentum. One tip that I found useful and still use today when undertaking a project that is not my full time focus is simply to ensure that you Do at least one thing every day to move you towards your goal, even if it is just to make one phone call or send one letter. If you take this approach you will be amazed at how quickly you will complete tasks and these positive experiences will be like the wind at your heels – they will carry you forward closer and closer towards your goal.
You will need to be structured and organized in your approach and this site will help you with that. I would also suggest that you find a Mentor; someone with experience beyond your own who will agree to meet with you regularly to discuss challenges, monitor progress against your plan and help with overcoming obstacles. There is little more motivating when undertaking a challenge than involving others who have a genuine interest in your success.
Another proven idea that delivers tremendous results is to grant ‘Nagging Rights’ to someone. This simply means that you agree with someone that they will contact you at regular intervals - usually monthly, to follow up with you, discuss progress and refocus on priorities for the month ahead.
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Activities to start ASAP
There are a number of areas that you need to start to work on as soon as possible:
Understand your basic proposition or offering as an Independent Consultant
Review your skills and experience
Update your CV or Resume
Investigate your marketability and the current market value of your skills
Identify and plan any training or professional development activities that you need to undertake prior to establishing your consulting business
The answer to the question - When to quit your job partly lies in your honest assessment of whether you currently have the skills and experience to operate effectively as an Independent Consultant
Intellectual Property
Collect together and organize your intellectual property
Identify all of the papers, materials, reports, business models, ideas, insights, and methodologies that you have created that together comprise the practical output of the application of your professional skills and experience most likely over a period of many years
Start to build a repository of material that represents the body of knowledge that you will use in winning and delivering consulting assignments going forward
Financial Planning
Understand your current financial situation including your insurance and pension requirements
Determine your financial goals – what will your personal balance sheet look like in say five years and then ten years?
Understand the cash flow implications of starting a consulting business and making the transition from employment to self employment
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Seek a mentor
Identify and approach a small number of people who would potentially be willing and able to act as a mentor as you work through the process of starting a consulting business
These will need to be high integrity individuals who can be trusted to maintain confidentiality, have experience beyond your own and a good understanding of the profession or industry that you intend to target as an Independent Consultant
Contact these individuals, discuss your ideas in outline and ask for their assistance, making it clear that you are looking for them to provide input as a mentor or coach and to challenge you as you work through this planning process
Make an arrangement to meet and prepare yourself for that first discussion
Improve your Physical Fitness
Take a long hard look at your current lifestyle, health and general level of fitness
Success in the planning process will be partly determined by your success in quite fundamentally changing the way you operate and how you currently spend your time
Take a look at your waistline! Do you smoke? How many hours of physical exercise or activity to you undertake each week? Do you eat healthily? Do you get enough sleep to allow you to be effective during the day? Do you drink enough water through the working day? How many hours a week do you spend watching television?...
I recommend that you look on this planning and transition process as a true bootcamp experience – if you are physically fit you will find that you have much more energy & focus and the right mental attitude to apply yourself successfully to the tasks that need to be completed
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Build and Manage your Network - an essential activity when starting a consulting business
Identify and start to effectively manage your network of contacts, colleagues, general associates, fellow professionals, professional advisers, mentors, future suppliers and clients
Start to apply some rigour in your approach to this task – you’ll need to be structured and disciplined to wring the most benefit out of this, but if you do it right it will pay you back tenfold
Start to make full use of the power of Microsoft Outlook to manage your Contacts
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Starting a Consulting Business: T-12 months
In this first month we cover Business Planning -- it is important to invest time in the creation of a straightforward and robust business plan. The document does not need to be particularly lengthy or overly complicated, but it will provide structure for your thinking and allow you to capture the key information about your proposed consulting business.
Fast-track the preparation of your Consulting Business Plan using the free templates, resources, ideas and information available from one of our trusted partners at Business Plan Master.
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Starting a Consulting Business: T-11 months
This month I share with you my experience of how to get organized and minimize the percentage of your time that you spend on activities that will distract you from your main objective.
There is a lot to do to enable the effective planning and set up of any business. Furthermore, it is likely that you will be doing this work in addition to your current day job and other family and social responsibilities. Therefore, it is essential that you are disciplined and well organized and that you have in place a number of basic tools and approaches that will enable you to make best use of your time.
I guarantee that if you follow my advice in this respect you’ll be amazed at the increase in your effectiveness and the number of hours per month you are able to win back to invest in planning your new consulting business.
To reinforce the importance of effective organization you should think ahead to when you actually start working as an independent consultant. Every hour you spend chasing your tail and dealing with administration will be an hour of lost chargeable time. The foundations that you put in place during your planning phase will enable you to build a business that runs like a well oiled machine and will allow you to focus your effort and energy on delivering for your clients.
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Starting a Consulting Business: T-10 months
In month T-10 we plan the technology requirements of your consulting business considering both hardware and software. It is likely that you will require a reliable laptop computer and a range of other hardware and software to enable you to work effectively both during the planning phase and when you are working with your clients.
I describe the equipment that I use, the reasons for my choices and experiences that I have, both good and bad.
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Starting a Consulting Business: T-9 months
Following on from our consideration of technology requirements in the previous month, this month we work through whether there is value in creating and maintaining a Website for your consulting business.
Is a quality business Website essential to have OR simply unnecessary vanity and therefore an avoidable overhead?
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Starting a Consulting Business: T-8 months
Next up we carefully consider the Professional advice that is required both during the setup and operation of a consulting business. By now it will come as no surprise to you that in my opinion it is of critical importance that you seek professional advice from qualified and experienced advisers across a range of disciplines.
I will assist by giving you insight into my experience of identifying, engaging and taking advice from accountants, tax advisers, lawyers, insurance advisers and financial planning consultants.
Whilst we're on the subject of lawyers... Another key area to understand and get right is the Consulting Contract.
Whether you are contracting direct with the end client, working indirectly through an intermediary or engaging subcontractors, there is a lot to consider. Take a look at Contract Basics and Sample Contracts for a solid grounding.
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Starting a Consulting Business: T-7 months
Now its time to consider explicitly When to make the move i.e. When to quit your job.
In this section we work through the main considerations that will influence the timing of your resignation from your current employment; this will help you identify the potential start date for your new venture!
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Starting a Consulting Business: T-6 months
Here I share with you my experience of the practical steps required to give you the best chance of securing chargeable and profitable client work as soon as possible after you commence trading.
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Starting a Consulting Business: T-5 months
In this section we consider personal insurance requirements . When you resign from an employment it is likely that you will lose a number of important employee benefits including health and dental insurance.
This cover will be lost for you personally but possibly also for your family. Therefore it is important to take steps to replace the insurance cover that you will lose when you start to work independently.
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Starting a Consulting Business: T-4 months
A key part of your planning will be the identification and assessment of the risks that you will face in operating your consulting business.
You will need to determine which risks you are willing and able to bear and which will require insurance cover.
An All Risks policy is just that; it provides cover for the main risks that a Professional working independently will typically face.
Alternatively, separate policies can be purchased to cover the range of exposures including Professional Indemnity , Public Liability , Product Liability , Slander and Libel.
In addition, if you intend to employ staff you will require Employers' Liability Insurance.
The related pages provide detailed information to enable you to more fully understand the risks that you will face when starting a consulting business and the importance of Insurance as part of your Risk Management Strategy.
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Starting a Consulting Business: T-3 months
In this section we consider a range of finance related matters including:
Business banking requirements including borrowing if appropriate
Invoicing your clients
Managing your cash flow
Accounting and financial control
Business charge cards
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Starting a Consulting Business: T-2 months
As an independent consultant you will find that for certain clients in some industry sectors perceptions can be of critical importance. Therefore it is important to anticipate clients’ expectations and maintain an appropriate professional image.
I’m not suggesting that you need to engage an image consultant or anything as radical as that, however depending on your profession and the clients you will be targeting there will be an expectation that you will dress and generally present yourself in a particular way.
When you’re working independently it could be said that you are the product i.e. the client is paying for your skills and experience and they come delivered in a wrapper which is simply you and the way you dress, behave and present yourself.
Therefore, whether you like it or not you will be on display when you are working with client staff and you need to think carefully about your image and also that of your business including subcontractors, staff, company vehicles, business stationery and business website.
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Starting a Consulting Business: T-1 month
In this final step we consider the main issues and actions associated with leaving your current employment.
This includes much more than merely drafting and presenting a letter of resignation, and working your notice period. You need to consider a significantly longer time period that begins when you make a firm decision that you will be leaving the organization and extends well into your first few years of operating independently.
It is important to ‘leave the door open’ and do all that is possible to maintain a positive working relationship and open communications with your current employer. It could well be to your commercial advantage if this can be achieved...
How To Set Your Consulting Fees?
The $101 billion (sales) consulting market is jammed with boutique shops looking to peddle their wisdom. The big question is: What is all that advice worth? Or more important from an entrepreneur's perspective, what are customers willing to pay?
New entrepreneur consultants tend to undercharge for their services. The mistake is understandable. First, it's difficult to know the going rate because most consultants vigilantly guard their prices. Second, despite the seemingly small barriers to entry, first-time consultants usually don't have the strong client relationships that giants like McKinsey & Co., Accenture (nyse: ACN - news - people ) and Marsh & McLennan (nyse: MMC - news - people ) have built; so, not surprisingly, small fries try to attract attention by competing on price. Finally (and perhaps ironically), many consultants simply underestimate how much a business will cost to run, says Bill Mooney of William Mooney Associates, a consultancy to consultants.
Aside from not being able to pay the electric bill, the other big problem with low-balling out of the gate is that it makes it hard to up the fees later--when problems inevitably arise--without rubbing clients the wrong way. (If you want to make a splash early, try offering the first consultation for free.)
To be sure, consultants' fees vary depending on location and target industry. But there is a common methodological framework for arriving at an attractive pricing structure--both for the consultant and her customers.
In Pictures: Figuring Out Your Daily Rate
The first issue to consider is how you want to get paid for your services. Should you charge by the hour or by the project? Perhaps you'd rather work "on retainer," whereby you provide consulting services on a continual basis as demanded? The answer will determine the smoothness of your consultancy's cash flow.
Typically, information-technology consultants will charge by the hour, while more high-level consultants like strategic planners or management coaches will charge per project. Lawyers, accountants and wealth managers tend to nab those retainers. Brian Conners, president of the Association of Professional Consultants (APC), says charging an hourly or daily rate is easier for first-time consultants. "People just starting out don't know how to sell a $10,000 project," he says. At the same time, he adds, customers skittish about working with a new consultant "are typically more comfortable with an hourly arrangement."
As for how much to charge, strategy consultants usually command the steepest fees, followed by operations-management, human-resources and IT gurus. Most consultants are cagey about their fees, so studying the competition is a bit tricky.
One data point: A partner at a small management or IT consulting firm (maximum sales: $10 million) charges $294 per hour on average, while an entry-level consultant goes for $175 per hour, according to Kennedy Information, a market research firm that publishes comprehensive industry reports that run into the thousands of dollars. Some professional organizations, such as the Institute of Electronic and Electrical Engineers, publish consulting-fee surveys for free online.
Coastal and urban-based consultants can command premiums up to 25% higher than their suburban, Midwestern and Southern counterparts, says Conners. Not surprisingly, the more specific and valuable your expertise, or the more name recognition you have, the more you safely can charge. If you've written a book or have worked with a marquee customer, sell it.
No matter what price you charge, be sure to give customers what they paid for. Elaine Biech, a consultant for 25 years and author of The Business of Consulting, offers a 100% money-back guarantee on the advice she provides. Says Biech: "If you don't believe in yourself, why should your clients?"
New entrepreneur consultants tend to undercharge for their services. The mistake is understandable. First, it's difficult to know the going rate because most consultants vigilantly guard their prices. Second, despite the seemingly small barriers to entry, first-time consultants usually don't have the strong client relationships that giants like McKinsey & Co., Accenture (nyse: ACN - news - people ) and Marsh & McLennan (nyse: MMC - news - people ) have built; so, not surprisingly, small fries try to attract attention by competing on price. Finally (and perhaps ironically), many consultants simply underestimate how much a business will cost to run, says Bill Mooney of William Mooney Associates, a consultancy to consultants.
Aside from not being able to pay the electric bill, the other big problem with low-balling out of the gate is that it makes it hard to up the fees later--when problems inevitably arise--without rubbing clients the wrong way. (If you want to make a splash early, try offering the first consultation for free.)
To be sure, consultants' fees vary depending on location and target industry. But there is a common methodological framework for arriving at an attractive pricing structure--both for the consultant and her customers.
In Pictures: Figuring Out Your Daily Rate
The first issue to consider is how you want to get paid for your services. Should you charge by the hour or by the project? Perhaps you'd rather work "on retainer," whereby you provide consulting services on a continual basis as demanded? The answer will determine the smoothness of your consultancy's cash flow.
Typically, information-technology consultants will charge by the hour, while more high-level consultants like strategic planners or management coaches will charge per project. Lawyers, accountants and wealth managers tend to nab those retainers. Brian Conners, president of the Association of Professional Consultants (APC), says charging an hourly or daily rate is easier for first-time consultants. "People just starting out don't know how to sell a $10,000 project," he says. At the same time, he adds, customers skittish about working with a new consultant "are typically more comfortable with an hourly arrangement."
As for how much to charge, strategy consultants usually command the steepest fees, followed by operations-management, human-resources and IT gurus. Most consultants are cagey about their fees, so studying the competition is a bit tricky.
One data point: A partner at a small management or IT consulting firm (maximum sales: $10 million) charges $294 per hour on average, while an entry-level consultant goes for $175 per hour, according to Kennedy Information, a market research firm that publishes comprehensive industry reports that run into the thousands of dollars. Some professional organizations, such as the Institute of Electronic and Electrical Engineers, publish consulting-fee surveys for free online.
Coastal and urban-based consultants can command premiums up to 25% higher than their suburban, Midwestern and Southern counterparts, says Conners. Not surprisingly, the more specific and valuable your expertise, or the more name recognition you have, the more you safely can charge. If you've written a book or have worked with a marquee customer, sell it.
No matter what price you charge, be sure to give customers what they paid for. Elaine Biech, a consultant for 25 years and author of The Business of Consulting, offers a 100% money-back guarantee on the advice she provides. Says Biech: "If you don't believe in yourself, why should your clients?"
How to price your consultancy services?
Many new consultants underestimate operating costs when pricing their services. Bill Mooney, founder of William Mooney Associates, a consultant to consultancies, offers a simple formula for calculating your daily rate.
The Magic Formula
Start from the bottom of your income statement and build up to get to your top line (i.e. the fees that you will charge).
Profit + Labor Costs + Overhead = Daily Fee Revenue
The Breakdown: Labor
Your time is money. If you plan to take home an annual salary of $200,000 and work 260 days per year (365 days, minus Sundays, a few Saturdays, holidays and two weeks' vacation), you will pay yourself $769 per working day.
The Breakdown: Overhead
Overhead includes recurring expenses associated with running your business, such as rent, a secretary, phone bills, postage, benefits, insurance and equipment. Say all of that equals $15,000 per month, or $180,000 per year. Next, divide your annual costs by the number of working days per year. Market-research firm Kennedy Information figures most consultants spend 58% to 62% of their time working directly for their clients; 62% of those 260 days equals 161 days per year. Grand total: $1,120 per day.
The Breakdown: Profit Margin
By Mooney's estimates, a consultancy's profit margin averages between 15% and 25% of its total expenses. Continuing from the previous slide, 20% of $1,120 is $224.
Adding It All Up
Plug those numbers back into the fee formula. Your daily fee equals $769 + $1,120 + $224. That's $2,113 per day--or $211 per hour for a ten-hour day.
The Magic Formula
Start from the bottom of your income statement and build up to get to your top line (i.e. the fees that you will charge).
Profit + Labor Costs + Overhead = Daily Fee Revenue
The Breakdown: Labor
Your time is money. If you plan to take home an annual salary of $200,000 and work 260 days per year (365 days, minus Sundays, a few Saturdays, holidays and two weeks' vacation), you will pay yourself $769 per working day.
The Breakdown: Overhead
Overhead includes recurring expenses associated with running your business, such as rent, a secretary, phone bills, postage, benefits, insurance and equipment. Say all of that equals $15,000 per month, or $180,000 per year. Next, divide your annual costs by the number of working days per year. Market-research firm Kennedy Information figures most consultants spend 58% to 62% of their time working directly for their clients; 62% of those 260 days equals 161 days per year. Grand total: $1,120 per day.
The Breakdown: Profit Margin
By Mooney's estimates, a consultancy's profit margin averages between 15% and 25% of its total expenses. Continuing from the previous slide, 20% of $1,120 is $224.
Adding It All Up
Plug those numbers back into the fee formula. Your daily fee equals $769 + $1,120 + $224. That's $2,113 per day--or $211 per hour for a ten-hour day.
The 5s Program
What is a Five S?
A Five S program is usually a part of, and the key component of establishing a Visual Workplace. and are both a part of Kaizen -- a system of continual improvement -- which is a component of lean manufacturing.
The Five S program focuses on having visual order, organization, cleanliness and standardization. The results you can expect from a Five S program are: improved profitability, efficiency, service and safety.
The principles underlying a Five S program at first appear to be simple, obvious common sense. And they are. But until the advent of Five S programs many businesses ignored these basic principles.
What types of businesses benefit from a Five S program?
Everyone and all types of business benefit from having a Five S program.
Manufacturing and industrial plants come to mind first, as those are the business that can realize the greatest benefits. However, any type of business, from a retail store to a power plant -- from hospitals to television stations -- all types of businesses, and all areas within a business, will realize benefits from implementing a Five S program.
What are the Five S's?
Use the following links to learn more about 5S
• Sort - the first step in making things cleaned up and organized
• Set In Order - organize, identify and arrange everything in a work area
• Shine - regular cleaning and maintenance
• Standardize - make it easy to maintain - simplify and standardize
• Sustain -maintaining what has been accomplished
What will it cost me?
The shipyard industry is spending nearly a million dollars to develop a Five S program the industry can use, and to implement that program at two shipyards. On the other hand you can implement a Five S program without adding an extra dollar to your budget.
Realistically you probably will need to spend some extra money to get your Five S program going. There will be training time; man-hours spent to get your facility cleaned up and organized; equipment purchases, such as buying a quality labeling system; and time spent on sustaining your Five S program once it is in place.
Your actual costs will depend on where you are now - for example what is the condition of your facility? The further you are from meeting the goals of a Five S program, the more it will cost to implement one and the greater the benefits you'll see as a result of your Five S program.
FREE 5S Quick Start Guide
"Introduction To The 5S Philosophy"
Labeling & Signs In A Five S Program: Proper labeling, and use of 5s posters and signs are an important part of 5S. We are a leading supplier of custom label and sign making equipment and supplies. We are happy to answer any questions you have about labeling or signs, or provide you with free brochures, specification sheets or other information. Please give us a call today at 1-888-326-9244 . Or use our label and sign information online request form.
What Is A Visual Workplace*?
Using Visual Communication In An Industrial Organization
The term "visual workplace" refers to one of the key underlying concepts of lean manufacturing. It refers to a workplace that uses a system of visual cues and visual communication tools that impart information visually at the time and place it is needed. The benefits of having a visual workplace is that it will improve productivity, safety, quality, on-time delivery, profits and employee moral by implementing "visual controls."
Visual controls make working areas user friendly by answering questions; identifying equipment, materials and locations; describing actions and procedures; and providing safety warnings and precaution information. Visual controls help employees avoid wasting time by giving them the information they need, where and when they need it.
A visual workplace begins with implementing a Five S program.
One part of creating a visual workplace involves using proper labeling and signage to create a workplace in which employees have the information they need, understand their role, and contribute in a positive way to the success of your company.
Establishing a visual workplace is not an expensive management tool nor is it difficult to implement. It involves posting information about the job to be done, the work area (environment), the equipment and materials to be used, safety and job performance.
Kaizen is...
... a system of continuous improvement in quality, technology, processes, company culture, productivity, safety and leadership.
We'll look at Kaizen by answering three questions: What is Kaizen? What are the benefits of Kaizen? What do you need to do to get started using Kaizen principles?
What is Kaizen?
Kaizen was created in Japan following World War II. The word Kaizen means "continuous improvement". It comes from the Japanese words 改 ("kai") which means "change" or "to correct" and 善 ("zen") which means "good".
Kaizen is a system that involves every employee - from upper management to the cleaning crew. Everyone is encouraged to come up with small improvement suggestions on a regular basis. This is not a once a month or once a year activity. It is continuous. Japanese companies, such as Toyota and Canon, a total of 60 to 70 suggestions per employee per year are written down, shared and implemented.
In most cases these are not ideas for major changes. Kaizen is based on making little changes on a regular basis: always improving productivity, safety and effectiveness while reducing waste.
Suggestions are not limited to a specific area such as production or marketing. Kaizen is based on making changes anywhere that improvements can be made. Western philosophy may be summarized as, "if it ain't broke, don't fix it." The Kaizen philosophy is to "do it better, make it better, improve it even if it isn't broken, because if we don't, we can't compete with those who do."
Kaizen in Japan is a system of improvement that includes both home and business life. Kaizen even includes social activities. It is a concept that is applied in every aspect of a person's life.
In business Kaizen encompasses many of the components of Japanese businesses that have been seen as a part of their success. Quality circles, automation, suggestion systems, just-in-time delivery, Kanban and 5S are all included within the Kaizen system of running a business.
Kaizen involves setting standards and then continually improving those standards. To support the higher standards Kaizen also involves providing the training, materials and supervision that is needed for employees to achieve the higher standards and maintain their ability to meet those standards on an on-going basis.
Sort (Clean Up)
This is step 1 in a Five S program:
"Sorting" means to sort through everything in each work area. Keep only what is necessary. Materials, tools, equipment and supplies that are not frequently used should be moved to a separate, common storage area. Items that are not used should be discarded.
Don't keep things around just because they might be used, someday.
Sorting is the first step in making a work area tidy. It makes it easier to find the things you need and frees up additional space.
As a result of the sorting process you will eliminate (or repair) broken equipment and tools. Obsolete fixtures, molds, jigs, scrap material, waste and other unused items and materials are disposed of.
The objective of this step is to clean up the work area. Cleaning up not only makes things look nice, it makes it easier to spot maintenance needs such as an oil leak. It improves safety. It eliminates clutter and confusion. It removes tools, equipment, supplies and waste that interferes with getting the job done.
Set In Order (Organize)
This is step 2 in a Five S program: Step two is to organize, arrange and identify everything in a work area for the most efficient and effective retrieval and return to its proper place.
Commonly used tools should be readily available. Storage areas, cabinets and shelves should be properly labeled. Clean and paint floors to make it easier to spot dirt, waste materials and dropped parts and tools. Outline areas on the floor to identify work areas, movement lanes, storage areas, finished product areas, etc. Put shadows on tool boards, making it easy to quickly see where each tool belongs.
In an office, provide bookshelves for frequently used manuals, books and catalogs. Labels the shelves and books so that they are easy to identify and return to their proper place.
The objective in this step is: A place for everything and everything in it's place, with everything properly identified and labeled.
This means there are two important parts to Systematic Organization - putting everything in its proper place and setting up a system so that it is easy to return each item to its proper place. The second part is where good labeling and identification practices are important. Both the equipment/tools and materials you use, as well as their proper storage locations, need to be clearly identified and labeled.
Information about label and sign making equipment.
Systematic organization not only refers to individual work areas. Your overall facility should also be systematically organized, including the proper placement of easy-to-understand labels and signs. Piping, valves, control panels, major equipment, doorways, minor equipment, instruments, storage areas, offices and files should all be clearly identified.
Sweep (Regular Cleaning)
Step Three: Once you have everything, from each individual work area up to your entire facility, sorted (cleaned up) and organized, you need to keep it that way. This requires regular cleaning, or to go along with our third S, "shining" things up.
Regular, usually daily, cleaning is needed or everything will return to the way it was. This could also be thought of as inspecting. While cleaning it's easy to also inspect the machines, tools, equipment and supplies you work with.
Regular cleaning and inspection makes it easy to spot lubricant leaks, equipment misalignment, breakage, missing tools and low levels of supplies. Problems can be identified and fixed when they are small. If these minor problems are not addressed while small, they could lead to equipment failure, unplanned outages or long - unproductive - waits while new supplies are delivered.
When done on a regular, frequent basis, cleaning and inspecting generally will not take a lot of time, and in the long run will most likely save time.
Standardize (Simplify)
Step Four: To ensure that the first three steps in your Five S program continue to be effective, the fourth step is to simplify and standardize.
The good practices developed in steps 1 through 3 should be standardized and made easy to accomplish. Develop a work structure that will support the new practices and make them into habits. As you learn more, update and modify the standards to make the process simpler and easier.
One of the hardest steps is avoiding old work habits. It's easy to slip back into what you've been doing for years. That's what everyone is familiar with. It feels comfortable.
Use standards to help people work into new habits that are a part of your Five S program.
Any easy way to make people aware of, and remind them about the standards is to use labels, signs, posters and banners.
For example, use a PosterPrinter to create large format signs, posters and banners. A PosterPrinter is a machine that takes an 8-1/2" x 11" original and enlarges it to poster size. You can also create posters and banners on your computer and print them directly on your PosterPrinter.
For labels and smaller signs consider an custom label printer. Label printers are available ranging from simple, monochrome models to machines that can print color labels cut into custom shapes.
Sustain
Step Five: The final step is to continue training and maintaining the standards.
Have a formal system for monitoring the results of your Five S program.
Don't expect that you can clean up, get things organized and labeled, and ask people to clean and inspect their areas every day -- and then have everything continue to happen without any follow-up.
Continue to educate people about maintaining standards. When there are changes - such as new equipment, new products, new work rules - that will effect your Five S program, and adjustments to accommodate those changes, make any needed changes in the standards and provide training that addresses those changes.
Using 5s Posters and Signs: A good way to continue educating employees, and for maintain standards, is to use 5s posters and signs. You can create your own custom 5S posters, allowing you to communicate the specific information that needs to be communicated at each location. Changing work habits can be difficult, and it is easy to slip back into doing things the old, comfortable way. Use custom 5S posters to remind employees of the proper procedures, and of the benefits that come from following a 5s plan.
Think of this step as sustaining the benefits you are getting from your Five S program.
Use equipment such as labelers, sign makers and PosterPrinters to help inform and educate people about your Five S program, new procedures and standards.
Custom 5S Posters
5S is a part of lean manufacturing that helps reduce waste and improve quality and productivity, through cleaning up and getting organized. Although 5S utilizes common sense principles, getting a 5S program started involves changing employee work habits. And that can be difficult.
Custom posters and signs that present information at the point of need can be valuable tools in overcoming old work habits, which helps implement and sustain your 5S program.
The term "5s" refers to the five Japanese words that describe the five steps. 5s posters can be a valuable tool in each of these five steps.
What are the Five S's?
• (Seiri) Sorting
• (Seiton) Systematic Organization
• (Seiso) Shine
• (Seiketsu) Standardize
• (Shitsuke) Sustain
The first step in a successful 5s program is to train your employees so they understand what a 5s program is; what the benefits are; and what they need to do. Having 5s posters in each work area, reminding employees of what 5s involves and the benefits they can expect, is a good way to reinforce your training.
5s posters should also be used to provide information needed to sustain what has been accomplished with 5s. For example, procedures and check lists for starting and ending a shift can be posted so they are easy to see and read.
________________________________________
5S Is A Five Step Process
Sort - Get areas cleaned up. Get rid of unused materials and waste.
Separating - put things in order. Get organized. Materials and tools can then be found quickly and safely, and easily returned to their proper storage location.
Shine -keep work areas clean. If machines are clean, it is easier to spot lubricant leaks or other potential problems.
Standardize - Establish standards so that areas stay cleaned up, free of excess materials and tools, and organized.
Sustain - Establish procedures to prevent backsliding.
5S is not complex, difficult or expensive to implement. It provides a structure and method that utilizes a lot of common sense.
A Five S program is usually a part of, and the key component of establishing a Visual Workplace. and are both a part of Kaizen -- a system of continual improvement -- which is a component of lean manufacturing.
The Five S program focuses on having visual order, organization, cleanliness and standardization. The results you can expect from a Five S program are: improved profitability, efficiency, service and safety.
The principles underlying a Five S program at first appear to be simple, obvious common sense. And they are. But until the advent of Five S programs many businesses ignored these basic principles.
What types of businesses benefit from a Five S program?
Everyone and all types of business benefit from having a Five S program.
Manufacturing and industrial plants come to mind first, as those are the business that can realize the greatest benefits. However, any type of business, from a retail store to a power plant -- from hospitals to television stations -- all types of businesses, and all areas within a business, will realize benefits from implementing a Five S program.
What are the Five S's?
Use the following links to learn more about 5S
• Sort - the first step in making things cleaned up and organized
• Set In Order - organize, identify and arrange everything in a work area
• Shine - regular cleaning and maintenance
• Standardize - make it easy to maintain - simplify and standardize
• Sustain -maintaining what has been accomplished
What will it cost me?
The shipyard industry is spending nearly a million dollars to develop a Five S program the industry can use, and to implement that program at two shipyards. On the other hand you can implement a Five S program without adding an extra dollar to your budget.
Realistically you probably will need to spend some extra money to get your Five S program going. There will be training time; man-hours spent to get your facility cleaned up and organized; equipment purchases, such as buying a quality labeling system; and time spent on sustaining your Five S program once it is in place.
Your actual costs will depend on where you are now - for example what is the condition of your facility? The further you are from meeting the goals of a Five S program, the more it will cost to implement one and the greater the benefits you'll see as a result of your Five S program.
FREE 5S Quick Start Guide
"Introduction To The 5S Philosophy"
Labeling & Signs In A Five S Program: Proper labeling, and use of 5s posters and signs are an important part of 5S. We are a leading supplier of custom label and sign making equipment and supplies. We are happy to answer any questions you have about labeling or signs, or provide you with free brochures, specification sheets or other information. Please give us a call today at 1-888-326-9244 . Or use our label and sign information online request form.
What Is A Visual Workplace*?
Using Visual Communication In An Industrial Organization
The term "visual workplace" refers to one of the key underlying concepts of lean manufacturing. It refers to a workplace that uses a system of visual cues and visual communication tools that impart information visually at the time and place it is needed. The benefits of having a visual workplace is that it will improve productivity, safety, quality, on-time delivery, profits and employee moral by implementing "visual controls."
Visual controls make working areas user friendly by answering questions; identifying equipment, materials and locations; describing actions and procedures; and providing safety warnings and precaution information. Visual controls help employees avoid wasting time by giving them the information they need, where and when they need it.
A visual workplace begins with implementing a Five S program.
One part of creating a visual workplace involves using proper labeling and signage to create a workplace in which employees have the information they need, understand their role, and contribute in a positive way to the success of your company.
Establishing a visual workplace is not an expensive management tool nor is it difficult to implement. It involves posting information about the job to be done, the work area (environment), the equipment and materials to be used, safety and job performance.
Kaizen is...
... a system of continuous improvement in quality, technology, processes, company culture, productivity, safety and leadership.
We'll look at Kaizen by answering three questions: What is Kaizen? What are the benefits of Kaizen? What do you need to do to get started using Kaizen principles?
What is Kaizen?
Kaizen was created in Japan following World War II. The word Kaizen means "continuous improvement". It comes from the Japanese words 改 ("kai") which means "change" or "to correct" and 善 ("zen") which means "good".
Kaizen is a system that involves every employee - from upper management to the cleaning crew. Everyone is encouraged to come up with small improvement suggestions on a regular basis. This is not a once a month or once a year activity. It is continuous. Japanese companies, such as Toyota and Canon, a total of 60 to 70 suggestions per employee per year are written down, shared and implemented.
In most cases these are not ideas for major changes. Kaizen is based on making little changes on a regular basis: always improving productivity, safety and effectiveness while reducing waste.
Suggestions are not limited to a specific area such as production or marketing. Kaizen is based on making changes anywhere that improvements can be made. Western philosophy may be summarized as, "if it ain't broke, don't fix it." The Kaizen philosophy is to "do it better, make it better, improve it even if it isn't broken, because if we don't, we can't compete with those who do."
Kaizen in Japan is a system of improvement that includes both home and business life. Kaizen even includes social activities. It is a concept that is applied in every aspect of a person's life.
In business Kaizen encompasses many of the components of Japanese businesses that have been seen as a part of their success. Quality circles, automation, suggestion systems, just-in-time delivery, Kanban and 5S are all included within the Kaizen system of running a business.
Kaizen involves setting standards and then continually improving those standards. To support the higher standards Kaizen also involves providing the training, materials and supervision that is needed for employees to achieve the higher standards and maintain their ability to meet those standards on an on-going basis.
Sort (Clean Up)
This is step 1 in a Five S program:
"Sorting" means to sort through everything in each work area. Keep only what is necessary. Materials, tools, equipment and supplies that are not frequently used should be moved to a separate, common storage area. Items that are not used should be discarded.
Don't keep things around just because they might be used, someday.
Sorting is the first step in making a work area tidy. It makes it easier to find the things you need and frees up additional space.
As a result of the sorting process you will eliminate (or repair) broken equipment and tools. Obsolete fixtures, molds, jigs, scrap material, waste and other unused items and materials are disposed of.
The objective of this step is to clean up the work area. Cleaning up not only makes things look nice, it makes it easier to spot maintenance needs such as an oil leak. It improves safety. It eliminates clutter and confusion. It removes tools, equipment, supplies and waste that interferes with getting the job done.
Set In Order (Organize)
This is step 2 in a Five S program: Step two is to organize, arrange and identify everything in a work area for the most efficient and effective retrieval and return to its proper place.
Commonly used tools should be readily available. Storage areas, cabinets and shelves should be properly labeled. Clean and paint floors to make it easier to spot dirt, waste materials and dropped parts and tools. Outline areas on the floor to identify work areas, movement lanes, storage areas, finished product areas, etc. Put shadows on tool boards, making it easy to quickly see where each tool belongs.
In an office, provide bookshelves for frequently used manuals, books and catalogs. Labels the shelves and books so that they are easy to identify and return to their proper place.
The objective in this step is: A place for everything and everything in it's place, with everything properly identified and labeled.
This means there are two important parts to Systematic Organization - putting everything in its proper place and setting up a system so that it is easy to return each item to its proper place. The second part is where good labeling and identification practices are important. Both the equipment/tools and materials you use, as well as their proper storage locations, need to be clearly identified and labeled.
Information about label and sign making equipment.
Systematic organization not only refers to individual work areas. Your overall facility should also be systematically organized, including the proper placement of easy-to-understand labels and signs. Piping, valves, control panels, major equipment, doorways, minor equipment, instruments, storage areas, offices and files should all be clearly identified.
Sweep (Regular Cleaning)
Step Three: Once you have everything, from each individual work area up to your entire facility, sorted (cleaned up) and organized, you need to keep it that way. This requires regular cleaning, or to go along with our third S, "shining" things up.
Regular, usually daily, cleaning is needed or everything will return to the way it was. This could also be thought of as inspecting. While cleaning it's easy to also inspect the machines, tools, equipment and supplies you work with.
Regular cleaning and inspection makes it easy to spot lubricant leaks, equipment misalignment, breakage, missing tools and low levels of supplies. Problems can be identified and fixed when they are small. If these minor problems are not addressed while small, they could lead to equipment failure, unplanned outages or long - unproductive - waits while new supplies are delivered.
When done on a regular, frequent basis, cleaning and inspecting generally will not take a lot of time, and in the long run will most likely save time.
Standardize (Simplify)
Step Four: To ensure that the first three steps in your Five S program continue to be effective, the fourth step is to simplify and standardize.
The good practices developed in steps 1 through 3 should be standardized and made easy to accomplish. Develop a work structure that will support the new practices and make them into habits. As you learn more, update and modify the standards to make the process simpler and easier.
One of the hardest steps is avoiding old work habits. It's easy to slip back into what you've been doing for years. That's what everyone is familiar with. It feels comfortable.
Use standards to help people work into new habits that are a part of your Five S program.
Any easy way to make people aware of, and remind them about the standards is to use labels, signs, posters and banners.
For example, use a PosterPrinter to create large format signs, posters and banners. A PosterPrinter is a machine that takes an 8-1/2" x 11" original and enlarges it to poster size. You can also create posters and banners on your computer and print them directly on your PosterPrinter.
For labels and smaller signs consider an custom label printer. Label printers are available ranging from simple, monochrome models to machines that can print color labels cut into custom shapes.
Sustain
Step Five: The final step is to continue training and maintaining the standards.
Have a formal system for monitoring the results of your Five S program.
Don't expect that you can clean up, get things organized and labeled, and ask people to clean and inspect their areas every day -- and then have everything continue to happen without any follow-up.
Continue to educate people about maintaining standards. When there are changes - such as new equipment, new products, new work rules - that will effect your Five S program, and adjustments to accommodate those changes, make any needed changes in the standards and provide training that addresses those changes.
Using 5s Posters and Signs: A good way to continue educating employees, and for maintain standards, is to use 5s posters and signs. You can create your own custom 5S posters, allowing you to communicate the specific information that needs to be communicated at each location. Changing work habits can be difficult, and it is easy to slip back into doing things the old, comfortable way. Use custom 5S posters to remind employees of the proper procedures, and of the benefits that come from following a 5s plan.
Think of this step as sustaining the benefits you are getting from your Five S program.
Use equipment such as labelers, sign makers and PosterPrinters to help inform and educate people about your Five S program, new procedures and standards.
Custom 5S Posters
5S is a part of lean manufacturing that helps reduce waste and improve quality and productivity, through cleaning up and getting organized. Although 5S utilizes common sense principles, getting a 5S program started involves changing employee work habits. And that can be difficult.
Custom posters and signs that present information at the point of need can be valuable tools in overcoming old work habits, which helps implement and sustain your 5S program.
The term "5s" refers to the five Japanese words that describe the five steps. 5s posters can be a valuable tool in each of these five steps.
What are the Five S's?
• (Seiri) Sorting
• (Seiton) Systematic Organization
• (Seiso) Shine
• (Seiketsu) Standardize
• (Shitsuke) Sustain
The first step in a successful 5s program is to train your employees so they understand what a 5s program is; what the benefits are; and what they need to do. Having 5s posters in each work area, reminding employees of what 5s involves and the benefits they can expect, is a good way to reinforce your training.
5s posters should also be used to provide information needed to sustain what has been accomplished with 5s. For example, procedures and check lists for starting and ending a shift can be posted so they are easy to see and read.
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5S Is A Five Step Process
Sort - Get areas cleaned up. Get rid of unused materials and waste.
Separating - put things in order. Get organized. Materials and tools can then be found quickly and safely, and easily returned to their proper storage location.
Shine -keep work areas clean. If machines are clean, it is easier to spot lubricant leaks or other potential problems.
Standardize - Establish standards so that areas stay cleaned up, free of excess materials and tools, and organized.
Sustain - Establish procedures to prevent backsliding.
5S is not complex, difficult or expensive to implement. It provides a structure and method that utilizes a lot of common sense.
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