Running a software consulting company sounds glamorous until you're three months in and realize you're basically running a very expensive daycare for adults who write code. After a full year of running Protocoding, I've learned that 90% of the advice out there is complete garbage. Most of it comes from people who either never ran a consulting shop or sold theirs in 2015 when the market was completely different. The reality is messy, stressful, and nothing like what you see on LinkedIn.
Here's what nobody tells you: you're not just selling software development. You're selling peace of mind to people who don't understand technology but know they need it. Your real job isn't writing code, it's being a translator between business problems and technical solutions while somehow keeping everyone happy and profitable. And if you mess up any part of that equation, you're toast.
Get One Big Client First (Not Five Small Ones)
Every wannabe consultant thinks they need a diverse portfolio of clients. That's wrong and it'll kill your business. You need one big, stable, long-term client who pays on time and gives you predictable revenue. I'm talking about a client that represents 60-80% of your monthly revenue for at least six months. This isn't a home run contract that makes you rich, it's your foundation that keeps the lights on while you figure out everything else. Without this anchor client, you're constantly in survival mode, taking whatever work comes through the door.
We landed our first big client through a connection at a tech meetup in Austin. They needed a complete overhaul of their customer onboarding system, and it turned into an 8-month engagement worth $180K. Was it the most exciting work? No. But it gave us the breathing room to be selective about other projects and actually invest in our team instead of scrambling for the next paycheck. That one client led to three referrals because we did solid work without drama.
Here's why small clients will destroy you: they demand the most attention for the least money. A $15K project from a startup will generate more emails, calls, and change requests than a $150K project from an established company. Small clients don't understand software development timelines, they want everything yesterday, and they'll nickel and dime you on every hour. I've lost money on probably 70% of our sub-$25K projects once you factor in all the hidden time costs.
Your Team Makes or Breaks Everything
Hiring for a consulting company is different than hiring for a product company. You need people who are technically excellent, can communicate with clients, and won't embarrass you in meetings. That third point matters more than you think. I've had to let go of talented engineers because they couldn't present their work to clients without making everyone uncomfortable. Your team is a direct reflection of your company, and clients judge you based on every interaction.
The best pay structure I've found is hourly with performance bonuses. Our top engineers can pull in $12K-15K per month when we're busy, and they earn every penny. But here's the key: you need margins that support paying people well. If you're billing at $150/hour and paying your engineer $75/hour, you're probably losing money once you factor in overhead, sales time, and project management. We bill most projects at $200-250/hour and our senior engineers make $100-120/hour. It works because everyone wins.
- Hire for communication skills first, then technical ability. You can teach someone React, but you can't teach them how to explain complex problems to non-technical stakeholders without being condescending
- Pay people enough to keep them happy and motivated. Cutting costs on talent is the fastest way to lose clients and damage your reputation
- Fire fast when someone isn't working out. Every week you delay letting someone go is money out of your pocket and stress added to your life
- Look for people who've worked at smaller companies or startups. They understand wearing multiple hats and dealing with ambiguity
The hardest part about building a team is knowing when to let people go. I've probably kept underperformers on the team for 3-4 months too long in every case. It's expensive and it hurts team morale when everyone knows someone isn't pulling their weight. Take ownership of bad hires and move on quickly. The longer you wait, the more it costs everyone.
Cash Flow Will Make You Insane
Nobody warned me that cash flow management would consume 30% of my mental energy. Clients pay late, projects go over budget, and you still need to make payroll every month. We've had months where we billed $80K but only collected $30K because of payment delays. Meanwhile, you're cutting five-figure checks to your team and wondering if you can cover rent. This is why that stable anchor client is so important.
Most consulting companies fail because they run out of cash, not because they can't find clients. You need at least 3-4 months of operating expenses in the bank at all times. That means if your monthly burn rate is $40K, you need $120-160K sitting in your account for emergencies. I learned this the hard way when a client delayed payment by 60 days and we had to use a business line of credit to make payroll.
“Cash flow is like oxygen - you don't think about it until you don't have it, and then it's the only thing that matters.”
Set up your contracts to minimize payment delays. We require 50% upfront for new clients and net-15 terms for everyone else. For projects over $50K, we bill monthly in advance, not after the work is completed. These terms filter out clients who can't afford to work with you and protect your cash flow. Don't be afraid to walk away from clients who won't agree to reasonable payment terms.
Networking Actually Works (But Not How You Think)
I used to think networking was just schmoozing at happy hours, but it's actually the most effective way to find good clients. Every major client we've landed came through a personal connection or referral. Cold outbound has maybe a 2% success rate, but warm introductions close at 40-50%. The key is being genuinely helpful to people without expecting anything in return.
In Austin, I attend 2-3 tech events per month and always follow up with interesting conversations. Last month I met a CTO at a fintech company who mentioned they were struggling with data pipeline issues. I sent him a detailed email with some free advice and resources. Three weeks later, he reached out about a $75K project to rebuild their entire data infrastructure. That's how real networking works.
The best events aren't the massive conferences with 5,000 people. Look for smaller, industry-specific meetups where you can have actual conversations. CTO meetups, startup founder groups, and niche technical conferences are goldmines. Come prepared with business cards and always, always follow up within 48 hours. Most people are terrible at follow-up, so you'll stand out just by being consistent.
Avoid Small Clients Like the Plague
This might sound harsh, but small clients will kill your business. Projects under $25K are almost never profitable once you factor in sales time, project management overhead, and scope creep. Small clients also tend to be the most demanding because they're used to getting personal attention from freelancers charging $50/hour. They expect the same level of hand-holding when they're paying professional rates.
We had a client last year who paid us $18K to build a simple e-commerce site. Sounds straightforward, right? Wrong. They wanted daily updates, insisted on approving every design decision, and changed the product catalog structure three times mid-project. By the time we launched, we had spent 40 hours on client communication alone. That's $4K in overhead on an $18K project, not including the actual development work.
Now our minimum project size is $50K, and we're moving toward $75K. This filters out tire-kickers and ensures every client is serious about working with us. It also means we can afford to do great work instead of rushing through projects to maintain margins. Your time and expertise are valuable. Price them accordingly.
What This Actually Means
Running a consulting company isn't about being the cheapest option or saying yes to every project that walks through the door. It's about building systems that let you do great work for clients who value that work. Focus on cash flow, team quality, and long-term relationships over quick wins. The companies that survive year two are the ones that treat consulting like a real business, not a lifestyle choice.
If you're thinking about starting your own shop, make sure you have 6 months of expenses saved and at least one potential client lined up before you quit your day job. This business is harder than it looks from the outside, but it's also incredibly rewarding when you get it right. Just don't expect it to be easy.
