Episode 84: The Pros and Cons of Being Independent or Working for Firms—with Alicia Smith

Deb Zahn: I want to welcome you to this week's episode of the Craft of Consulting podcast. One of the decisions that you need to make, actually not just at the beginning when you first start consulting but along your consulting journey, is do you want to be independent or stay independent? Do you want to work at a smaller or mid-sized firm? Do you want to work at one of the big firms with lots of folks? Or do you want to be the head of your own firms?

So all of those things are options for you as you're a consultant out in the world. They each come with pluses and minuses. So I brought on a guest who's actually done every single one of those things. Alicia Smith, who is one of the national experts in behavioral health care. She’s worked independently. Worked with all kinds of different firms in all kinds of different ways.

She's going to talk about the pros and cons of each one and what decisions you need to consider as you're making your choice with the ultimate goal of doing what she did. Which is to construct your consulting business in the way that you most want and allows you to do the work that you want to do and have the life you want to have. So let's get started. I want to welcome to my show today, Alicia Smith. Welcome. Thank you so much for joining me.

Alicia Smith: Glad to be here.

Deb Zahn: So let's start off. Tell my listeners what you do.

Alicia Smith: So I am an independent behavioral health policy consultant. What that really means is that I work with my clients and I focus on three areas. I do policy analysis, program design, and implementation support. So whatever it is a client needs, it has to fall into one, two, or all three of those buckets. And it's whatever they need analyzed. Whatever program they need developed. Whatever implementation they need supported.

Deb Zahn: That's wonderful. And I want everybody listening to take note of how crystal clear that was because that's how you want to talk when you're talking to clients and others about what you do. To have that level of absolute clarity about what you do and what you don't do. So that was wonderful. That was a great answer.

So you've had this really rich consulting path where, and I want to dig into that because it's this really unique mix of being independent, being at firms, different types of firms, and being the head of a firm. And since one of the decisions that consultants have to make not just at the beginning but as they go along is how do they want to do it?

Do they want to be independent or do some other version? So you're uniquely positioned to answer some questions about that. So I love that you're willing to come on and talk about it. So let's start this. How did you even become a consultant in the first place?

Alicia Smith: So I worked at Ohio Medicaid in 1995. And I knew I was going to give it five years. Thankfully, at the end of that five-year period, I was recruited by a law firm that did not have a consulting practice, but they needed consultants. And they asked me to join as a paralegal because they said, "We hire attorneys, secretaries and paralegals. You can't be a secretary and you can't be an attorney, but we need consultation. And that's the only way we can bring you in."

So their clients were behavioral health services providers, that is, providers who treat people with mental illness or substance use disorder. And those clients of theirs all often ran into problems with billing for Medicaid services, and staying compliant. Just staying out of hot water. So my consultation actually started in a law firm and it didn't feel like consultation.

It felt like doing the work I did at Medicaid, just doing it for the benefit of the providers than it was for the benefit of developing good Medicaid policy. I stayed there for two years. During the course of that time, I got some exposure to states outside of Ohio that were also trying to do a better job of developing improved Medicaid policies.

That turned into an opportunity working with those other states to join at the outset a Robert Wood Johnson Foundation-funded project that was a national program initiative. But because it was a national program office, an organization that was the director of that initiative didn't have the capacity to hire me as an employee. They wanted to bring me on as an independent contractor. And I foolishly said yes. Not knowing the tax implications of being an independent contractor.

I didn't know that they shouldn't be my only client so I quickly learned as an independent contractor you have to get other clients. So there I am, first time around as a solo consultant. But 90% of my time was paid for by this organization that was funded with Robert Wood Johnson Foundation money. And the organization was good about saying, “You got to get some other clients.”

So I started using the network. My, at that point, very sparse network, to just tell people, “Hey, if you need anything I'm here to help.” And at that point, whatever people needed to have done I helped with. And so I did that for a couple of years. That national program office lasted probably five, six years total, and I really liked the money that I was making. I liked the independence and flexibility, and I decided I'm going to keep doing this.

And that's when I ran into some troubles because I didn't realize or appreciate the value of having a pipeline. And my main pipeline dried up after I was on my own for a couple of years. And still learned a lot, have some really good clients but after a while, seeing the writing on the wall, I'm like I can't sustain being an independent consultant. Chasing clients. Doing the work. Doing all the admin. And I got to find a job.

So I landed at a consulting firm. And that was home for me for 11 years. I stayed there. Learned a lot. Had a lot of self-sufficiency built in because I already had the experience of getting clients, developing proposals, writing contracts, doing the work and doing that in a larger environment was easy. I brought clients with me to the firm, so I had a good leverage point to do that.

So 11 years later I decided, I've done this. I probably am ready to move on to something else. I like working with state Medicaid agencies so I joined an even larger international consulting firm with 65,000 people. And I did that for a couple of years. Didn't really like working from home. And I didn't really like not being able to have that entrepreneurial spirit and go out and do work that's fun.

That you enjoy. And I said, “This is not for me.” So I left there and thankfully walked into an opportunity where the very first place I got my consulting opportunity was in a law firm that had finally developed its own in-house consulting entity. So the prior president and founder of that consulting firm went on to become a state Medicaid director.

And I took her job as president of this boutique consulting firm that was still housed, a wholly owned subsidiary of the consulting of the law firm. That was fun. I realized very quickly though that being president of a small consulting firm inside a law firm brought its own challenges. It was difficult for me to go out and get clients who had conflicts. I could not upset the applecart when it came to, well, I want to reference this client.

I want to do work for this client, but this client has an issue in conflict with what the law firm practice was. So now we're nearing pre-COVID. Right at the cusp of, I think there's this going around. I'm having a little bit of a challenge figuring out, getting my footing to get the clients I want and to do the work that I enjoy. And as bad as COVID has been, it gave me the opportunity once the law firms in the consulting practice sent everybody home to work.

It gave me some time to think and reflect and consider, “Is this the time to go back out on my own?” So in July of this year, July 2020, I did just that. I restarted my consulting practice. Now that we're empty nesters. Now that I had all that understanding of what to do differently than before under my belt. And I just launched it and it was scary. But I did it. And that's what I'm doing now.

Deb Zahn: That's wonderful. Well, so that is such an amazing tale because it wasn't like, oh, you tried something it was horrible. You tried something else that was horrible. And then you finally figured out. Each step of the way, it sounds like there were pluses and minuses to it that you had to consider what you most wanted.

So if you were talking to somebody. A really smart professional. Who was saying, “I think I want to be a consultant, and I don't know of which of these options I should consider.” What would you tell them to consider about most? Start with independent. What would you have them ask themselves so that they would know if that's the right choice for them? And then we'll go through the other ones.

Alicia Smith: Sure. So I would say the first thing to ask yourself, if you want to go independent is, what's your backup plan with the bucket, the bottom falling out? If you have zero clients. Zero pipeline. Your cash flow is short or hasn't even started. If you don't have a way to pay the bills. And if you don't have that six to nine months in savings. The stuff that nobody ever wants to hear.

You never want to hear you need that six to nine months in savings before you can go do something because you figure you're smart. But it's not your skill. It's just a practical backup plan that you need to have in place. So if you don't have that cushion to fall back on, I would say don't necessarily start that way. Unless you have the luxury to bump your head a few times on that and figure out what you really need to do next.

Deb Zahn: The reason I liked that is, so I went to...You and I have had the pleasure of working together. And we were at one of those same firms, and you were certainly known as a rockstar there. But when I left the firm to become independent, I had a whole bunch of clients.

So it wasn't that my pipeline wasn't full, but the delays in payment was a problem. That wasn't my problem. Well, then it suddenly became my problem. And you know, in particular working with states. I was working with a state, well, states take…

 

Alicia Smith: They don't pay fast.

Deb Zahn: They don't pay fast. And so, yeah, I was waiting a year for payments. So I did have savings. I didn't have nine months. I had six months. But I could have used nine. Because I had no idea how long it takes for the cash flow to work out. And I had the pipeline. So I love that advice which is, before you leap if you have the luxury, and in this economy not everybody does. That's one of the most important things, is give yourself a cushion so that you're not desperate once you take the leap.

Alicia Smith: That's exactly right.

Deb Zahn: That's great. And anything about getting clients as an independent that you think folks need to consider?

Alicia Smith: And this is the part, and I'm curious to know. You're interviewing me but I want to know your thoughts about this, too. So I am not keen on consultants who come because they feel like they have a smart process that they can adapt and give from one client to another. I think you have to have some expertise. Some subject matter expertise that you come to the table with. And if you don't have that, what are you selling?

Because then your subject matter expertise is transportable. You know, if a client has a problem that needs X, Y, or Z solution, at least you have the subject matter expertise to discern that. But if all you have is a process, and I know how to do these forms or have these steps, but you don't really align yourself with an understanding of their problem, and how to fix it.

To me that's a shortfall. But I know others might have a different spin on that. I'm a firm believer that, and I say this as I reach out to people to work with me or for me, you've got to know something. And you got to have some history of work experience that you bring to the table.

Deb Zahn: Yeah. I'd say Hallelujah to that, which I just mispronounced but you know what I'm trying to say. So I'd say two things about that that I very much agree with. So the first is, there are people who try to be consultants who don't have a lot of work experience and they can't point to anything that they did as an accomplishment in their past. And my point is always, you cannot Google and YouTube your way to expertise.

You just can't. You have to be able to do something and point to something you've done. But the second thing is, yeah, I think your point about the process. I had to learn that along the way I am a generalist, which you can definitely make a good living as a generalist. And most of what people hire me for is my process expertise. So I cure decision-making disorders. I get groups of people who don't agree to come to an agreement.

But I can't do that with any topic. I am best when it's a topic that I understand. Because then that enables me to stop and say, “OK. hang on one second. We seem to be stuck here. You have this option, this option or this option. Let's go through all of those.” If I don't know what those are, then I'm just a traffic cop and that's less effective. It's less valuable. So I think that's really important for folks to consider.

You don't have to be super deep. You don't have to be a specialist. Often what I do is I talk people into things and then I send in the specialist who actually knows what they're doing. But you have to know something. Otherwise, you're going to be less helpful to clients. I think that's great.

So then you're the head of a boutique consulting practice, which I know is one of the things that people consider when they're leaving somewhere. You know, “Hey, I know these two or three or five or 10 other people. Maybe we start a consulting practice together.” What would you have them consider before they say, “I want to run a boutique firm?”

Alicia Smith: It's back to the basics around a pipeline and cashflow. You still have to have a little bit of cushion to be able to sustain the rough times. But you also have to be able to offer something that's needed. You have to have access to capacity beyond yourself. Even to this day, I rarely do work. And even inside the boutique consulting firms.

I rarely did work as the sole conductor of that project. I had to have partners because when you're small, you're small. And people's needs are either so varied that among the two or three people that are part of that boutique firm, they don't necessarily have what the client wants. So you have to partner with somebody.

Now, the one cool thing about being a boutique consulting practice is you have that ability to specialize and you can serve as that special ops team for, you know, if you need somebody to drill down really deep on this topic. We're always here for you. And you can sell your wares to multiple firms or other clients and not be beholden to one entity. That's great.

But it also comes with a challenge because if your leverage point is partnering, but none of the people you partner with have a need for you at that time, then you have to make sure you always have that space to create and generate work for yourself. Takes you back to that other problem: what's your specialty?

So then you're beholding again to, “I'll do whatever's out there and what's available.” That's a tough road to hoe for the duration. It's fine to do that every now and again because you just keep adding to your kitbag. But it's not a way to sustain and grow a business. It's just being everything to everybody.

Deb Zahn: That's right. Because you send really confusing signals out to your market. Most people do not hire a Jacks-or-Jills-of-all-trades. They want someone who knows how to solve their problem. So I love that. And I imagine also, so you were the head of this and so you were responsible for getting other people business.

So you didn't just have to worry about your pipeline work. You had to worry about everybody's pipeline of work individually. And then how did that roll up to the pipeline for the consultancy? That sounds scary to me. Was it as scary as it sounds?

Alicia Smith: It was very scary. And it was through no fault of the other colleagues who were bright and ready to do the work. But it was also that I have to sell what I can sell. And oftentimes I had to sell myself. And being self-sufficient selling myself I either had to create a space for colleagues to support, and that space wasn't big enough for them to maintain their hours.

Or I have to stop doing the work that I sold myself on to help find opportunities and work for the other colleagues who really weren't senior enough and didn't have enough national or even statewide exposure to manage their own project. So now I'm everywhere. I'm doing my own work. I'm project managing their work.

And in the meantime, you have to remember I'm still part of a larger organization who's subsidizing us to say, “What's your growth strategy? How are you making money for the larger firm under which this consulting practice operates?” Believe it or not, that was still less stressful than some of the other environments that I worked in.

Because at least I understood the parameters and there was a little bit of leeway in terms of, you're not just selling the consulting practice. You're also selling the good name of this larger law firm. And I got kind of street credit for that and where I might've come up short on billing, the exposure to the, “Hey, I didn't know you were part of that family now.” That brought some cash to the law firm as well. So it was a give and take, I think.

Deb Zahn: I think you also hit upon something that I think is critical for folks to know, particularly who are new. And I ran into this, and I know that you did because you had that reputation out in the market. I would imagine the same was true with you. If I show up to a prospective client even when I was with a firm and I'm obviously selling the work of that firm, but clients get connected to people. They buy from people. They weren't just in the way that they were at some of the big consulting firms. So if I'm in front of them and sell them on it, they want me.

Alicia Smith: They want you. That's right.

Deb Zahn: And they might want the rest of my team just as you said, but what they want is me. And the notion that I would sell something and disappear, wasn't going to work. And there was no client that wanted anything like that. So you had to have different considerations when you were trying to get other people business.

Alicia Smith: Absolutely.

Deb Zahn: Yeah, it wasn't easy. So let's go to the big firm. You were brave. For those of us, we were at a growing firm but still certainly midsize. And talk about like, if somebody's considering that what should they think about in terms of if that's a good choice for them?

Alicia Smith: I'd say it depends on the stage of the career of that person. A big firm for an early careerist is a great opportunity. Because the projects are varied. You are able to be kind of a Jack and Jill of all trades. If you come with a good acumen in writing, analysis, however you can clearly communicate, use of infographics and that stuff in a large organization, you will always be tapped. I saw that over and over again.

It's the equivalent of having kind of a research assistant slash junior consultant. You know you can always find work for those people. And in a large, super large consulting practice they have those people over and over and over again. And they learn so much and they're so valuable. In the content, expertise comes over time in a natural way.

They know enough to be able to understand the content that also have the luxury of applying the process and the method that they learn within that consulting practice. And I think the level of professionalism and just the way of, it was just an eye opener to see, “Oh wow, you guys have a process for this? And a process for this?” Those are great tools.

You don't have to spend your time developing. So to me, again, for an early careerist, maybe mid-career I would say, great. If you've already done all the hard, gnarly stuff in your career or in a consulting environment and then you go to one of these big places, you may be bored.

You may not find that satisfaction that you found when you were really digging into the nitty gritty of what the problem is. Large consulting practices have large teams on large projects. And as a result, your role is very surface-y most of the time. And unless you have enough of those things that can keep you busy at a surface level across multiple projects, that's one thing.

But if, you know, they need a ranch, you're a ranch person and they call you every three months. You're doing a lot of reading and a lot of downtime and a lot of career development, exploration and professional development in that downtime. And that may not be fun for everybody.

Deb Zahn: If you're used to being this amazing carpenter that can build these amazing, wonderful things. And then suddenly you're, “Hey, hand me the hammer. And your wrench today. You're going to do a little plumbing today. You're going to do some yard work.” I imagine that would be harder for folks who are used to getting stuff done and being the doers behind it.

 

Alicia Smith: Yes. And that's a great point because the other thing that it kind of does, it's a blow to your ego. Because you were a big fish in a pretty decent sized pond. And now you're a minnow in an ocean. And who are you again? What do you do? And again, it depends. That may float your boat, but again it may not. So that would be my thing for that.

 

Deb Zahn: If you've minnow-envy, that's for you. But yeah, and the benefit of big fish, it's an ego thing but it's also the ability to get work. And do the work that you love to do because you're more in control of it. And one theme that I heard as you were describing this the whole time, and it just warmed my heart is, you kept thinking about “What is the work that I most want to do?

And is this enabling me to do that?” And I think that's, you didn't say it as explicitly, but that's just a fantastic way to make decisions as you go along. Now, when you started you did the...Often when people first start if they get a big client that consumes a large chunk of their time, that can be a really good thing because now you're not hunting down business. But then you get into exactly the trouble you said, which is you got to worry about the IRS.

You had to worry about the day, yet. You have all these business sides of consulting things you have to think of. But it's also easy to fall off a cliff when that work ends. You did it smarter this go around when you became an independent consultant again. So talk about what you did that took the best part of that, but dealt with the stuff that didn't work.

Alicia Smith: Oh yeah. And I'm still loving it. This is still my heyday time. I'm still riding high on it. So in this current space, I'm independent once again, but I had a lot of time to think about and plan a couple of different scenarios of how would this play out? And I did do some spreadsheets and I did do some pros and cons. And this is even without regard to money. This is pure, “How do I see myself spending the rest of my life knowing that the entrepreneurial spirit is so deep within me. I can probably never get a regular job again?”

So knowing those things, I had categories of what is it that I want to work on? What's the kind of work that I want to do that I wish somebody would just pay me to do it and not worry about billing every single hour of my day? But how do I also keep sharp on those things that I was able to start my career off of, and frankly got a good reputation around? And not lose opportunities to do that really gnarly policy work and analysis and financing?

And then how do I have time to do all the other stuff that I've always had to say no to because I just didn't have time? And I finally was able to get the recipe that works for me and pursue a client from when I left the boutique consulting practice. And I said, “Hey, let me make you a pitch. I know you're working on an area that I deeply care about. I would love to continue working with you and bring along a colleague of mine who because we're closing down the law firm or the consulting practice who would be good to support me.”

Here's the pitch. Bring me on as a 60% FTE to serve as a director of one of the programs. This happens to be a private family foundation that specializes in supporting services and people with mental illness. To bring me on as a director of one of your programs. Bring on one of my colleagues and he'll be a project coordinator at 80-90% of his time. And you have us for as long as you need us to help you build a demonstration project that we're going to roll out here in Ohio in the coming months.

I also was able, and this was the fun part, too. The international consulting firm that was still doing, that I had done work for. Even as part of the boutique consulting practice, I was still able to have a subcontract through them to do some work. I continued that work as I pursued my independent status once again, and I charge an hourly rate for them. And I still do the work that keeps me sharp, which is great. But I know 60% of my time is covered by my foundation clients, and I don't have to bill. Did I mention that? I do not have to bill on time.

Deb Zahn: Are you excited about that?

Alicia Smith: And then I have my other client that happens to be a state agency. And you're right, they still pay...The ultimate client is a state agency. But the consulting firms that have the contract with them pay me, but I know it's coming. But it's not coming fast. But I'm not as worried about that because I've got that 60% pay for the other project. But now I also have this third part of myself, and I'm able to attend to, which is volunteering.

Deb Zahn: Oh, that's good.

Alicia Smith: I have one client. You know, they technically pay me to do some work on facilitation and diversity, equity, and inclusion. But I told them as many hours as I've spent, I owe you guys money. It's a labor of love. It's a lot of fun. I'm president elect of the College for Behavioral Health Leadership. And I get to spend time thinking about planning, using all this stuff we've known and do in our professional lives to apply to a role in a leadership support effort. That is truly fun.

And then I have some alumni staff. I'm a proud graduate of the Ohio State University, College of Public Health, Health Services, Management and Policy. And we have an active alumni network. So I can finally volunteer again and work with students and alumni and support mentoring and development. But it's having all the, they weren't really horror stories, all the lessons learned over the course of the years. I wouldn't change it. It is what it is.

But it's because of those experiences that helped me be smarter about how I want to approach what I'm now doing? Now, keep in mind. I said this, I started this work in July. March, once we got sent home from the offices and they had to work from home because of COVID. I'm sharing these things with my husband who's looking at me like, “You've got to be nuts. We are in the middle of a pandemic.”

You haven't been working at the boutique law consulting practice for that long. I didn't mention that I took a pay cut when I left the large consulting firm to go to the boutique consulting firm. So in my husband's mind, he's thinking probably, never said it, but I know he's thinking, “This chick's out of her mind.”

But we just had the conversation the other day he was like, "You really had a vision for yourself. I didn't see it or understand it, but you did." Had I left it to him and his timeframe. We wouldn't be doing what I'm doing now until my daughter graduates from college in four years. I pulled it off to two months before she graduated from high school. So I'm, as you can tell, super excited about where I am. And I'm so thankful that I have the opportunity to finally spread myself around the realms that I love.

 

Deb Zahn: You know, when we first started the conversation the phrase “she's living the dream” came up and then I realized, that's not it. You created it. That you carefully created by continually asking yourself questions about what you most want and what is possible. And then to boldly pitch, you know, which I think is a great strategy. I've certainly done it and said, “Look. Here's how I can help you achieve something you want to achieve, but let's do it this way.”

I have to tell you, I didn't know this part of the story, and I'm so impressed that you've done that. And I encourage other consultants to think of it, which is to get creative. If you're an entrepreneur and that spirit is within you…I know it's in me. I used to have waitress nightmares because I used to be a food server. I now have cubicle nightmares, or I have employment nightmares where suddenly I have a boss again. And it's not me. And I wake up in sweat going, “No, no, no, that's not for me.” But construct it the way you did. I just love that.
 

Now, obviously one other piece of that, and it sounds like your volunteer work as part of it, is also the other stuff you get to do in your life. So how do you also bring in, however it is you define balance in your life so that you have all of the other meaningful things in your life and working as well?

Alicia Smith: Sure. So balance has never been a problem for me because I'm keenly aware of my capacity and stamina. I'm a morning person. I can get up way before the crack of dawn by 3:00. I'm a potato. And I have to step away to re-energize. I'm also an introvert. If there was an introvert's introvert, it is me. So the time away from clients. Away from Zoom. Away from the phone. It’s re-energizing for me. So just that stepping away. Just knowing I don't have to interact with another human being is some of the balance.

But the other is, like I said, we're empty nesters now. After COVID, we'll try to enjoy life again in a different way. We have dogs. We go on walks. I'm an easy person to find that balance because I just cannot drive with the people who email at 10:00 or 11:00 at night that offends me. Go do something. And I like TV, and I only watch mindless reality TV shows. And so I have no problem finding that balance. And I hope it'll get even easier as the world opens back up to us.

Deb Zahn: I love that. And in some ways as a fellow introvert’s introvert, there's a certain time where you just can't people anymore. And I almost think its kind of easier for introverts because we have no choice. We can't keep doing it.

Alicia Smith: We have been depleted.

Deb Zahn: Yeah. We're done. Stick a fork in us.

Alicia Smith: That's right. That's right.

Deb Zahn: So I can't tell you how much I've enjoyed this conversation. And I think a lot of the listeners out there who are trying to figure out what their path is, this will be enormously helpful for them. So thanks so much for joining me.

Alicia Smith: Thanks for having me. This was a lot of fun. Happy to do it.

Deb Zahn: Thanks so much for listening to this episode of the Craft of Consulting Podcast. I want to ask you to do actually three things. If you enjoyed this episode or if you've enjoyed any of my other ones, hit subscribe. I got a lot of other great guests that are coming up and a lot of other great content and I don't want you to miss anything. But the other two things that I'm going to ask you to do is, one is, if you have any comments, so if you have any suggestions or any kind of feedback that will help make this podcast more helpful to more listeners, please include those.

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