Small Business Labs

The Economics of Independent Consulting

The Zintro blog has an excellent infographic on the economics associated with being an independent consultant. Lots of interesting data including:

1. The startup costs for an independent business consulting businss range from $100 to $20,000 according to the infographic.  While we agree, our research indicates the majority of new independent consultants spend between $3,000 and $10,000 to get started.  

2. Not surprisingly, marketing is one of the largest independent consulting expenses.  According to the infographic, the average independent consultant spends about $7,500 per year on marketing. 

It's a bit unclear from the infographic if this is both hard and soft costs, but I think it's only hard costs (meaning cash outlays).

Our research indicates soft cost marketing expenses (meaning non-cash costs which are mostly time) tend to be quite high for most independent consultants. These include sales time, marketing presentations, time spent networking and on social media, etc. These often add up to 20%-40% (or more) of an independent consultant's time.

Anyone considering becoming an independent consultant should definitely include these soft costs in their business plan.

The infographic has lots of other interesting information.  Click here to see it. 

Franchising: An Important Sector of the U.S. Economy

Franchising is the Rodney Dangerfield of the business world - no respect.  We're guilty of this here at Small Business Labs.  We don't follow, study or report on franchising as much as it deserves.

I was reminded of this while reading CNBC's Hidden Small Businesses: The Case for Franchising Growth. The key quote is on the size of the franchising industry:

There are more than 825,000 franchise establishments across 300 business lines, which employ nearly 18 million people and accounts for one in eight U.S. private-sector jobs.

To put this number in perspective, it's more than the 12 million people the venture capital community claims works for U.S. venture backed companies (which includes firms like Fed Ex, Microsoft, Google, Starbucks, etc.).  

It's way, way more than the roughly 3.5 million Americans that work in the Auto industry, which includes auto parts manufacturers and auto dealers.  

It's also way more than oil and gas industry employs, which is 9.2 million according to the industry but only 2.2 million according to industry critics.  

Bottom line - franchising is an extremely important sector of the U.S. economy. We're going to try and treat it with more respect going forward.

Franchisee Demographics

Franchise Business Review - a market research company that focuses on the franchise industry - recently released their 2007 Franchisee Satisfaction Study. They surveyed over 14,000 franchise owners and asked about how satisfied franchise owners are with their business in general as well as details on the support they are getting from their franchise system.  Overall the results say franchise owners are basically satisfied.

I found the franchisee demographics quite interesting if not surprising - they are middle-aged white males.  Key quote:

"Franchisees for the most part are not a very diverse group – typically white, 40-something and male. That said, the “face of franchising” is changing, with more women, minorities and younger people entering the business daily."

The stats from the survey: 87% are white, 76% male and 68% between the ages of 35 and 54.  While other demographic groups are actively starting to invest in and operate franchises, the capital requirements and the franchise selection process favor this cohort.  As with all small business segments, we will see franchisee ownership become more diverse over the next decade.

I saw the reference to study on the Startupnation blog.