In all, we built up roughly 15 years of experience and industry watching before trying to tell CEOs and venture capitalists how to run their businesses. Our biggest selling point is that we have grown up with the biotech industry and we have been through several financing cycles. We have watched companies evolve from 2-person startups to public companies with hundreds of employees, and we have worked with management teams as they grappled with the challenges of this growth.
This experience, and the strong personal contact network built up during that time, is useful to a broad range of clients: CEOs with big pharma experience but no real exposure to entrepreneurial settings or working directly with scientists; academic scientists with no experience dealing with the financial community or business partners; potential investors hoping for insight to aid them in choosing the best opportunity to finance; big pharma looking for the best technology and team with whom to partner.
At Bio Venture Consultants, we also are selling our scientific expertise, but more importantly we are selling our broad perspective of the drug development process, that is, how to take good science and turn it into a commercial product. As time goes by, our lab skills have become more and more antiquated, but our understanding of the scientific process is still very applicable. The ability to provide critical evaluation of potential new projects, to objectively review an R&D plan, and to help a client manage a scientific collaboration is a very important part of the services BVC provides. We also have honed our writing skills, a dying art in this country, so we can turn out a good business plan quickly. Communication is key, whether with potential investors, potential key employees, or with the business press.
Other areas where we have seen consultants flourish is in the clinical trial and regulatory area (backgrounds in the FDA or in clinical trial management), in public relations or investor relations (sometimes the two fields overlap), and in arranging partnerships between biotech and big pharma (consultants here usually have business development expertise).
Do You Take on a Partner?
Give serious thought to teaming up with someone. One of the biggest drawbacks to the consulting life is that it can get fairly lonely. If you are having trouble with a client, who do you call? There is nothing better than a partner who can share your woes (and triumphs!). In addition to listening to you, a partner can cover for you when you go on vacation, and, more importantly, he or she can tell you if your ideas are sound. A day-long meeting is much easier to handle if there are 2 of you. Being "on" for 8 hours during a client meeting is tough work, and a partner is invaluable during these times. Additionally, a partner with complementary experience and education can extend the areas in which your firm can operate with confidence.
But having a partner is work. Problems can arise when splitting up work (and fees) and handling the day-to-day affairs of the business. We have seen partners put together lengthy formally documented partnership arrangements, only to see them fall apart in a few years.
We have taken the informal route-there is no written document spelling out how we will work together. Each assignment is divided based on who has time available and the skills required. This approach has worked well because we had the luxury of time to work out our relationship, and we have a lot of confidence in each other's abilities and character.
The consulting partnership started as a part-time affair and was that way for the first couple of years, while our children were infants and Cindy got her publishing business more established. By the time Bio-Venture Consultants became a full-time occupation for both of us, in early 1991, we had collaborated on about a dozen assignments and we had figured out how to work with each other. Since we both have strong personalities, and we take pride in our work, it was important to find a way to work together and take advantage of our different strengths to create something better than anything we could have accomplished on our own.
This "getting to know you" attitude has been carried over into our consulting business. With each new client, we write a contract that includes a small "getting to know you" piece of work, which we bid fairly inexpensively. This gives the client direct experience with our working style and our capabilities. If the client is happy with that, we follow that initial project with much larger projects. This approach has worked extremely well for us. We are confident that clients will hire us for additional projects. This allows us to lose a little up front and to feel fairly confident that we will make it up on later parts of the job.
On a typical day, we will talk on the phone about 3 times, e-mail once or twice, and fax one or two documents back and forth. America Online has a great feature that allows you to send formatted documents back and forth, and we use it extensively. We have tried at various times to keep each other's calendars, but in keeping with our informal arrangement, it hasn't really worked out. We discuss important dates and we have learned to be flexible if one of us forgets to let the other one know what is going on. One of our greatest challenges was to learn to coordinate our activities so we could leverage our time.
We have toyed with the idea of adding someone to our partnership, but the right person has not come along. If you are just out of school, one way of breaking into the business may be to find a group that wants to add a junior person.
How Much Do You Charge?
The best way to find out is to ask people who consult in the same field that you intend to enter. Don't assume that all consultants are your competition. Most of us specialize in aspects of the business that are different enough so that we gain more than we lose from staying in touch with each other. In fact, clients really appreciate it when you admit that a project falls outside your area of expertise and you recommend another consulting group.
In the biotech management field, daily consulting rates range from $500 per day (usually for more inexperienced consultants) to $5000 per day (for larger groups that put several consultants on the job). Sometimes there are "success fees" on top of the project fee, typically when you help the company raise money or find a corporate partner. In some cases, you can get part of your fee in stock or stock options that can provide a chunk of cash if the company is successful.
The income earned by consultants is extremely variable, depending on how much work you bring in and the rate you charge. A consultant with around 10 years' relevant experience and a strong reputation should be able to earn from $100,000 to $150,000 per year. Keep in mind that you most likely will not be working 8 hours a day, 7 days a week; your fees have to get you through the inevitable downtime.
It is a real temptation to underbid your work when you first start consulting, because it takes time to learn how long certain assignments will take you and you just can't believe that anyone would pay you that much to do something that seems so straightforward. Remember, you spend a lot of non-billable time adding to your experience and information base by following the industry, taking care of your business (paying bills, invoicing clients, fixing the fax machine), attending technical and industry conferences, maintaining your network of contacts, and generating new business. Your clients must indirectly reimburse you for maintaining your business. Also, issues that seem intuitively obvious to you, thanks to your years of direct experience, are not obvious to many clients. You must value your contribution if you want the client to value it.
You can bill on a "time spent" basis, or give a fixed bid for a project, based on your estimate of the time required to complete it. You can be compensated with a combination of cash and stock in the client's company (source of a potential upside if you do a great job and the stock value skyrockets!). We currently bid most jobs on a fixed-bid basis simply because the client is more comfortable knowing how big a financial commitment they are making. After all this time we have a good idea how long a particular project will take. If you bill on an hourly basis, make sure to keep close tabs on your time. You will spend more time working than you realize, and clients will sometimes challenge your claimed hours-be sure you can account for the time you spend on a project.
There is a great deal of satisfaction gained when the check arrives in the mail. In a regular job, you can feel that you are paid regardless of how much or how little you work. In consulting, there is a direct correlation between the hours you put in and the reward. It is very gratifying to feel so in charge of your destiny. The downside, of course, is that the check needs to arrive sometime. Consultants moan about times of "feast and famine" and it's true. If you don't have funds to fall back on (retainer clients or a working spouse), only careful planning will get you through the dry times.
Getting It in Writing versus a Handshake
Over the years, we have developed a client contract that we insist must be signed before we do any work. You would be surprised at how many eager clients blanche when they see the contract. Just seeing it in black and white makes them get serious. Over the years we have found that clients sign about 75% of the contracts that we submit without significant changes.
Early in our business, it was difficult to demand a contract from clients, but now, if a client resists, we know that they are not serious about working on a significant project with us. It can become tense at times in the negotiation stage, but better so before you have invested any time rather than later when you submit the bill. "No surprises" should be the rallying call for consultants when dealing with clients.
If you would like to see a typical contract, call us and we would be happy to share it with you. Key components include a description of the work to be done, a clear outline of the time frame and fees, boilerplate legalese to protect you from being sued by third parties for something related to the project (this can be a real liability issue when you work on projects related to financings or deals), and limiting your liability to a maximum of your fee (otherwise, someone could wipe you out). The contract will not protect you in the event of gross negligence, breaking confidentiality, or illegal behavior.
A contract is also useful in dealing later with the IRS. It is important to define in writing your independence from your client so you can reap all the tax benefits (and Keough savings) of being a small business.
What about Travel?
Even for those who live in areas heavily populated by potential clients, travel is an important part of the consultant's job. We travel at least once a month, usually across the country, to visit current clients, to pitch business to a potential client, to attend a scientific conference related to a project, or to give a presentation at an industry conference. We have clients in Canada and all over the United States, and we travel to Japan and Europe once a year for conferences and to visit companies.
Establishing yourself as an industry expert by giving strong presentations is a great way to keep in touch with your network and to market your services-which essentially consists of using your brain. A great presentation on an area related to your services gives people a "free look" at your capabilities.
If you are traveling for a client, they cover all expenses. Make sure you keep good records, both for the client and for the IRS! Don't abuse your clients by flying first class (unless they agree ahead of time) or by charging nonessentials to their account.
