How to Start a Consulting Business

Consultin Business

Editor’s note: This article was excerpted from our Consulting Business start-up guide, available from the Entrepreneur Bookstore.

The dictionary defines a consultant as “an expert in a particular field who works as an advisor either to a company or to another individual.” Sounds pretty vague, doesn’t it? But unless you’ve been in a coma for the past decade, you probably have a good idea what a consultant is.

Businesses certainly understand what consultants are. In 1997 U.S. businesses spent just over $12 billion on consulting. According to Anna Flowers, spokesperson for the Association of Professional Consultants in Irvine, California, the association has recently noticed an increase in calls for information from people who want to get into the business. “The market is opening up for [the consulting-for-businesses] arena,” Flowers says.

Melinda P., an independent consultant in Arlington, Virginia, thinks more people are getting into the consulting field because technology has made it easier to do so. “The same technology that has helped me to be successful as a consultant has made it easier for others to do the same,” she says.

A consultant’s job is to consult. Nothing more, nothing less. It’s that simple. There’s no magic formula or secret that makes one consultant more successful than another one.

But what separates a good consultant from a bad consultant is a passion and drive for excellence. And–oh yes–a good consultant should be knowledgeable about the subject he or she is consulting in. That does make a difference.

You see, in this day and age, anyone can be a consultant. All you need to discover is what your particular gift is. For example, are you very comfortable working around computers? Do you keep up with the latest software and hardware information, which seems to be changing almost daily? And are you able to take that knowledge you have gained and turn it into a resource that someone would be willing to pay money for? Then you would have no trouble working as a computer consultant.

Or are you an expert in the fund-raising field? Maybe you have worked for nonprofit agencies in the field of fund-raising, marketing, public relations or sales, and over the years you have discovered how to raise money. As someone who has turned a decade of fund-raising successes into a lucrative consulting business, I can tell you that fund-raising consulting is indeed a growing industry.

Things to Consider Before You Become a Consultant

  • What certifications and special licensing will I need? Depending upon your profession, you may need special certification or a special license before you can begin operating as a consultant. For example, fund-raising consultants don’t need special certification, although you can become certified through the National Society of Fund Raising Executives. And in some states, you may need to register as a professional fund-raising consultant before starting your business.
  • Am I qualified to become a consultant? Before you hang out your shingle and hope that clients begin beating your door down to hire you, make sure you have the qualifications necessary to get the job done. If you want to be a computer consultant, for example, make sure you are up to date in the knowledge department with all the trends and changes in the computer industry.
  • Am I organized enough to become a consultant? Do I like to plan my day? Am I an expert when it comes to time management? You should have answered “yes” to all three of those questions!
  • Do I like to network? Networking is critical to the success of any type of consultant today. Begin building your network of contacts immediately.
  • Have I set long-term and short-term goals? And do they allow for me to become a consultant? If your goals do not match up with the time and energy it takes to open and successfully build a consulting business, then reconsider before making any move in this direction!

Top 20 Consulting Businesses Thriving Today

Although you can be a consultant in just about any field these days, the current top 20 consulting businesses include:

1. Accounting: Accounting is something that every business needs, no matter how large or small. Accounting consultants can help a business with all of its financial needs.

2. Advertising: This type of consultant is normally hired by a business to develop a good strategic advertising campaign.

3. Auditing: From consultants who audit utility bills for small businesses to consultants who handle major work for telecommunications firms, auditing consultants are enjoying the fruits of their labor.

4. Business: Know how to help a business turn a profit? If you have a good business sense, then you’ll do well as a business consultant. After computer consulting, people in this field are the next most sought after.

5. Business writing: Everyone knows that most businesspeople have trouble when it comes to writing a report–or even a simple memo. Enter the business writing consultant, and everyone is happy!

6. Career counseling: With more and more people finding themselves victims of a corporate downsizing, career counselors will always be in demand. Career counselors guide their clients into a profession or job that will help them be both happy and productive as an employee.

7. Communications: Communications consultants specialize in helping employees in both large and small businesses better communicate with each other, which ultimately makes the business more efficient and operate smoothly.

8. Computer consulting: From software to hardware, and everything in between, if you know computers, your biggest problem will be not having enough hours in the day to meet your clients’ demands!

9. Editorial services: From producing newsletters to corporate annual reports, consultants who are experts in the editorial field will always be appreciated.

10. Executive search/headhunter firms: While this is not for everyone, there are people who enjoy finding talent for employers.

11. Gardening: In the past decade the demand for gardening consultants has blossomed (pun intended) into a $1 million-a-year business. Not only are businesses hiring gardening consultants; so are people who are too busy to take care of their gardens at home.

12. Grantsmanship: Once you learn how to write a grant proposal, you can name your price.

13. Human resources: As long as businesses have people problems (and they always will), consultants in this field will enjoy a never-ending supply of corporate clients, both large and small. (People-problem prevention programs could include teaching employees to get along with others, respect and even violence prevention in the workplace.)

14. Insurance: Everyone needs insurance, and everyone needs an insurance consultant to help them find the best plan and pricing for them.

15. Marketing: Can you help a business write a marketing plan? Or do you have ideas that you feel will help promote a business? If so, why not try your hand as a marketing consultant?

16. Payroll management: Everyone needs to get paid. By using your knowledge and expertise in payroll management, you can provide this service to many businesses, both large and small.

17. Public relations: Getting good press coverage for any organization is a real art. When an organization finds a good PR consultant, they hang on to them for life!

18. Publishing: If you’re interested in the publishing field, then learn everything you can and you, too, can be a publishing consultant. A publishing consultant usually helps new ventures when they are ready to launch a new newspaper, magazine, newsletter–and even websites and electronic newsletters.

19. Taxes: With the right marketing and business plan (and a sincere interest in taxes), your career as a tax consultant can be very lucrative. A tax consultant advises businesses on the legal methods to pay the least amount of tax possible.

20. Writing services: Anything related to the written word will always be in demand. Find your specialty in the writing field, and the sky will be the limit!

Target Market

Your idea may be the best one you have ever thought of, but there needs to be a market for your ideas. Someone must be willing and able to pay you for your expert advice.

In other words, who are your potential clients? Will you be marketing your consulting services to large corporations? Or will you offer a specialty that would only be of interest to smaller businesses? Perhaps your services will be sought after by nonprofit organizations. Whatever the case, before you go forward, make sure you spend time preparing both a business plan and a marketing plan. You won’t be disappointed with the results–especially when clients begin paying you!

Why an Organization Wants to Hire You

According to a recent survey, here are the top 10 reasons organizations hire consultants:

1. A consultant may be hired because of his or her expertise. This is where it pays to not only be really good in the field you have chosen to consult in, but to have some type of track record that speaks for itself. For example, when I mentioned earlier that I had become an expert as a fund-raising consultant, I knew that every client who hired me was doing so partly on the basis of my track record alone. After all, if you are a nonprofit organization that needs to raise $1 million, it makes sense to hire someone who has already raised millions for other organizations.

2. A consultant may be hired to identify problems. Sometimes employees are too close to a problem inside an organization to identify it. That’s when a consultant rides in on his or her white horse to save the day.

3. A consultant may be hired to supplement the staff. Sometimes a business discovers that it can save thousands of dollars a week by hiring consultants when they are needed, rather than hiring full-time employees. Businesses realize they save additional money by not having to pay benefits for consultants they hire. Even though a consultant’s fees are generally higher than an employee’s salary, over the long haul, it simply makes good economic sense to hire a consultant.

4. A consultant may be hired to act as a catalyst. Let’s face it. No one likes change, especially corporate America. But sometimes change is needed, and a consultant may be brought in to “get the ball rolling.” In other words, the consultant can do things without worrying about the corporate culture, employee morale or other issues that get in the way when an organization is trying to institute change.

5. A consultant may be hired to provide much-needed objectivity.Who else is more qualified to identify a problem than a consultant? A good consultant provides an objective, fresh viewpoint–without worrying about what people in the organization might think about the results and how they were achieved.

6. A consultant may be hired to teach. These days if you are a computer consultant who can show employees how to master a new program, then your telephone probably hasn’t stopped ringing for a while. A consultant may be asked to teach employees any number of different skills. However, a consultant must be willing to keep up with new discoveries in their field of expertise–and be ready to teach new clients what they need to stay competitive.

7. A consultant may be hired to do the “dirty work.” Let’s face it: No one wants to be the person who has to make cuts in the staff or to eliminate an entire division.

8. A consultant may be hired to bring new life to an organization. If you are good at coming up with new ideas that work, then you won’t have any trouble finding clients. At one time or another, most businesses need someone to administer “first aid” to get things rolling again.

9. A consultant may be hired to create a new business. There are consultants who have become experts in this field. Not everyone, though, has the ability to conceive an idea and develop a game plan.

10. A consultant may be hired to influence other people. Do you like to hang out with the rich and famous in your town? If so, you may be hired to do a consulting job simply based on who you know. Although most consultants in this field are working as lobbyists, there has been an increase in the number of people entering the entertainment consulting business.

Location and Employees

Your consulting business will probably not require a large capital investment at first. In fact, if you are able to, you should consider operating out of your home. (Certain deed restrictions and local laws may prohibit you from doing this; check with an attorney before you proceed.)

There are many advantages to having a home office. Among them are:

  • Low overhead expenses. You don’t have to worry about paying rent or utilities for an office; you will appreciate this feature until you establish a regular client base.
  • Flexibility. There is little doubt that operating as a consultant at home gives you a great deal of flexibility. You can set your own hours and take time off as you need it.
  • No rush-hour nightmares. For anyone who has had to commute to and from a job during rush hour, this will be a welcome change of pace.
  • Your home office space will most likely be tax-deductible. The IRS has relaxed the rules for people who work at home, but check with your account or income tax preparer to see if you qualify for this deduction.

Employees

When you first open the doors to your consulting practice, you may be able to handle all the operations by yourself. But as your consulting business begins to grow, you may need help handling administrative details or help completing the actual consulting assignments.

You need to make some important decisions. For example, do you have the time it will take to make labels and insert your brochure into 1,000 envelopes? Can you afford to spend time doing administrative tasks when you could be using that time effectively marketing your services–and signing up new clients?

There are many options when it comes time to decide if you need help with your paperwork. For example, a quick look through the Yellow Pages will reveal a number of small secretarial support firms. The rates will depend on a variety of factors, including how large or small an organization it is and what types of services it provides.

While it will pay you to shop around for these types of services, don’t select a secretarial service just because it happens to have the lowest prices in town. Instead, ask for references, preferably from other consultants who have used their services, or from small-business owners. A good, reliable support service is worth the price in the long run.

There will come a time, however, when you may find it more cost-effective to hire someone to work in the office with you. Hiring a good administrative support person can sometimes mean the difference between success and failure–between obtaining more clients or constantly losing clients. There are some benefits to having someone in the office with you. Among them are:

  • You save time and money. By having someone concentrate on the more routine tasks (opening the mail, filing, answering phones, etc.) you can focus all your efforts on recruiting new clients. Think about this: Would you want to lose a $500-a-day client because you were too cheap to hire someone to stuff your brochures into envelopes?
  • You don’t worry about being out of the office. If you are a one-person operation, it’s hard to be out on the road marketing your services if you’re worried about clients calling–and only getting your answering machine.
  • You have someone to offer another perspective. Sometimes it can be pretty lonely trying to do everything yourself. Having someone around the office during the day who can offer another perspective can be worthwhile.

Income and Billing

Now that you have made the decision to open your consulting business, you need to get serious about how much money you will charge your clients. If you charge too little, you won’t succeed in business. If you charge too much, you won’t get any clients. So how do you find that middle ground that seems fair to everyone involved? One way to help you decide how much to charge is to find out what the competition’s rates are. A simple telephone call, asking for their brochure and rates, should do the trick. Then set your rates so that you are competitive with everyone else in the community.

Before setting your fees, make sure you have listed all of your expenses. There is nothing worse than setting your rates, having your client pay you on time and then finding out you failed to include several expenses that materialized. This brings up an important point to remember in every job you take from a client: Include a “miscellaneous” line item in your fee proposal. But don’t pad the miscellaneous figure to make additional income.

Most clients will understand that in every project, there will no doubt be additional expenses. Just be sure everyone knows upfront an approximate figure for those expenses.

Before you set your rates, find out what other consultants in your community are charging for their services. Sometimes a simple telephone call to another consultant’s office asking what their fees are will give you the answers you need. Or you may have to have a friend call and ask for their brochure, or any additional information they can collect regarding fees and pricing. If you live in a small town and there are no other consultants in your field, then rejoice and be glad, but set your fees at a reasonable level!

When setting your rates, you have several options, including hourly rates, project fees and working on a retainer basis. Let’s examine each one closely.

Hourly Fees

You need to tread carefully when setting hourly fees, because two things could happen: A) Your hourly rate is so high that no one could ever afford you (therefore no client will ever knock on your door). B) Your hourly rate is so low that no one will take you seriously.

Keep one important rule in mind when establishing your fee, no matter which structure you decide on: The more money people pay for a product or service, the more they expect to get for their money. In other words, if a client agrees to your hourly rate of $400, then you had better give $400 worth of service to that client every hour you work for them.

Some clients prefer to be billed on an hourly basis, while others hate the idea of paying someone what they perceive to be too much per hour. Those clients usually prefer to pay per project.

Project Rates

When working on a project rate basis, a consultant normally gets a fixed amount of money for a predetermined period of time. A few of my fund-raising clients actually preferred to be charged this way, so it wasn’t unusual for me to charge $36,000 for a one-year project in which I consulted them on how they could raise money. Because of the amount of money involved, most agencies preferred to be billed on a monthly basis. This worked out fine until I realized that many agencies were late paying their monthly bills.

Because of this, I decided that all future clients who wished to be billed on a monthly basis would pay the first-month fee and the last-month fee at the signing of the contract, which meant that if the agreed-upon amount of the project was $36,000, to be paid on a monthly basis, I received a check in the amount of $6,000 before I began any work ($3,000 for the first month’s fee and $3,000 for the last month’s fee).

Retainer Basis

Working on a retainer basis gives you a set monthly fee in which you agree to be available for work for an agreed-upon number of hours for your client. While in the ideal world you would have a dozen or so clients who hire you and pay you a hefty sum each month (and never actually call you except for a few hours here and there), don’t get your hopes up. Most companies that hire a consultant on a retainer basis have a clause in their contract that prohibits you from working for their competitors.

Working and getting paid in this method certainly has its advantages. You are guaranteed income each month, and when you are starting out in your consulting business, cash flow can be a problem. Some consultants actually offer a percentage reduction in their fees if a client will agree to pay a monthly retainer fee. The average income when a consultant is paid on a retainer basis is $3,500 per month.

Marketing

If your consulting business has no clients, then you have no consulting business. But you must remember that selling your consulting services is not the same as selling a car or a house. In the case of the car or the house, the customer is probably already in the market for one or both of those products. Your job, then, becomes harder, because you are marketing your services to people who may not even be aware that they need those services.

There are a variety of methods you need to become both familiar and comfortable with in order to begin attracting and keeping clients. Let’s look at some of the more conventional ones that are being used by many consultants today.

Brochure Basics

There are five issues your brochure should address. They are:

  1. It should clearly convey what your services are.
  2. It should tell customers why you are the best.
  3. It should give a few reasons why you should be hired.
  4. It should include some brief biographical information.
  5. It should include some information about who your other clients are.

That’s it. Keep it simple, but do it right. Remember, your brochure represents you in the marketplace, so make sure you polish it before you send it into action. Your entire consulting career depends on it!

Cold Calling

You must do whatever it takes to make cold-calling work and make it easier for yourself. There are a few tricks you can use to make cold-calling a little easier for you:

  • Prepare a script ahead of time. Spell out word for word what you expect to say when you get someone on the telephone. Remember, though, that your goal is to get a face-to-face interview and, eventually, a new client. So before you end up stumbling over your sales presentation (either in person or over the telephone), write your script and practice it again and again.
  • Be creative in your efforts to reach the decision maker. Most times you will encounter a secretary or administrative assistant who has years of experience turning away cold callers like yourself. But don’t give up! Don’t let any obstacle stand in your way! To avoid being screened by the secretary, try calling before she is on the job. Yes, you may have to call before 8 a.m. or after 5 p.m., but at these times, chances are the decision maker you are trying to reach will answer their own telephone.
  • Limit your cold calls to just several days each month. And look forward to those days, making sure you put your best effort into the process. That way, not only will it become easier to make those cold calls, but you will find yourself actually looking forward to making them!

Advertising

The limits you place on advertising your consulting services will be directly tied to your advertising budget. If you are lucky enough to have a very healthy advertising budget, remember that you don’t have to spend the money on ads just because you have it to spend. Advertising can be very expensive. Jeffery B., a Harrisburg, Pennsylvania, consultant, advertises in his association’s publication. “They publish what is called the Green Book, which is a directory of research and marketing consulting businesses around the country. It has helped me generate new business,” he says.

Other consultants, such as Merrily S. in Newark, Delaware, depend on word-of-mouth. “The best form of advertising [for my business] has been word-of-mouth and recommendations from other people,” she says.

Depending upon the type of services you offer, it may be necessary to advertise in specialized trade journals or magazines. For example, as a fund-raising consultant, I have placed ads in such publications as The Chronicle of Philanthropy, Non-Profit Times and Fund Raising Weekly.

Before you spend any money, start looking through professional journals and newspapers relative to the fields you specialize in. Take some time and examine ads that have been placed by other consultants, and then carefully determine how effective you think their ads may be. Then design one that suits you best.

Newsletters

Whatever your consulting field is you should have more than enough information to produce a newsletter as a means of attracting potential clients. If you don’t have the time, or don’t feel comfortable self-publishing your own newsletter, hire a local freelance writer and graphic designer to do the job for you. Again, you don’t have to make it an expensive, four-color, glossy publication. The simpler you keep it, the better. A good newsletter will sell itself based on the content rather than the splashy design.

Start collecting newsletters that are being published in your consulting field. If you think there are none being published, or if you think there are only a few in your field, guess again. A quick visit to the library will reveal several newsletter directories–Oxbridge Directory of Newsletters(Oxbridge Communications) and Hudson’s Newsletter Directory (The Newsletter ClearingHouse)–which list, by subject, newsletters that are published not only in the United States, but in other countries. Take some time and write for sample copies before you design and write the first issue of your own newsletter. You’ll be surprised at the quality of the newsletters that are being produced today.

Newsletters are an effective means of communication and, in my opinion, represent the best advertising media for a consultant to sell his or her services. Think about it the next time you receive a newsletter in the mail. Did you put it aside to read it later? And why did you do that? Probably because you wanted to make sure you weren’t missing any important news or information.

But what about that brochure you received in the mail the same day? Did you put it aside to read later? Or did it go directly into the trashcan? Think about this before you spend big bucks on a glitzy brochure that may not even be read.

Public Speaking

Public speaking is another excellent way to recruit new clients and to earn a reputation for excellence in your community. Unless you live in a town so small it doesn’t have a chamber of commerce or a Lion’s Club, Rotary Club or other similar service organization, you can begin offering your services as a speaker for luncheons, dinners or any other special occasion.

In addition to using the telephone directory, see if anyone has published a directory of service organizations in your community. You can visit the library and ask at the reference desk. Go through and make a list of organizations that hold monthly meetings and therefore may use guest speakers. Contact each group and offer your public speaking services.

Ask for Referrals

This often-overlooked method of finding new clients is such an easy marketing tool (which is why it’s usually not thought of), you’ll kick yourself for not thinking of it yourself. When you have finished your consulting assignment and your client is in seventh heaven (and is no doubt singing your praises), that is an excellent time to ask for a referral! Simply send a note or a short letter asking for the names of any colleagues, friends or business associates they feel might be good prospects for your consulting services. Ask their permission to mention their name when you write to the people whose names they pass on to you. Sometimes all it takes is having a mutual friend or respected business associate to get the potential client’s attention.

Why Putting People First Makes Good Business Sense

No business that strategizes around making people happy by giving them a voice and a sense that they have a stake in your business will experience less wealth. In the simplest sense we are talking about building relationships and communities around our business and the products and services we produce.


Here’s the bottom line: Putting people first is a different and a better way to think and to measure success. When we filter everything we say and do through the “putting people first” principle, we end up with a company that features the following:
1. The best products and services we can produce, because that is what people want and need.
2 Employees who are enthusiastic about their jobs and are given the responsibility and the ability to always say “yes” to customers by providing a solution, because that is what people want and need.
3. Products and services that offer great value at a fair price, because that is what people want and need.
4. A growing number of loyal and new customers, because you provide what people want and need.
5. Strong revenues and increased margins, because you provide what people want and need.
6. A company that never violates its values or acts unethically, because your focus is on people, not profits.
7. A company that communities vie for, because you provide what people want and need.
Of course, for any model to work, you must believe, you must be passionate in that belief and you must work hard to make the business achieve its goals and objectives.

Why Outsourcing a Blog Might Be Smart

This headline, sent to me by a colleague, appeared in a recent issue of the Wall Street Journal: “Should You Outsource Your Company Blog?” Like most questions addressed in communications, marketing and other similar fields, the answer is — Maybe. It depends.


1. If the company doesn’t have a communications or a marketing department, maybe you should.
2. If the company doesn’t have an executive spokesperson with the time, maybe you should.
3. If the company’s Legal and/or HR departments need to approve outgoing comments, maybe you should, but only if those departments get out of the way. Otherwise, don’t do a blog.
Or maybe not. And here are the arguments, as I understand them, against outsourcing the company blog. The point of blogging is:
1. Having an authentic voice.
2. Giving customers a personal connection to the company.
3. Ghostwriters do neither.
Well, pardon me, but who do you think writes executive speeches, letters from the CEO, and all those personal words to shareholders one finds in the Annual Report, and web site content, and most of the pithy executive quotes found in newspapers? Guys and gals such as me. I also write and manage several company blogs, who are my clients. As the period on the sentence, none of those things are done without interviewing executives and employees, studying the company and its customers, and, finally, getting approval from the company spokesperson for everything I write.
Would it be better if someone from the company wrote the blog? Maybe, maybe not. When work is outsourced, the consultants often have more influence over the executives and more freedom from message management. And if we’re fired, we haven’t lost our jobs, just a job. We don’t have the pressure of saying what we think the company wants to hear, at least many of us don’t. More important, key inhouse staff are focusing on their other jobs and responsibilities, while gaining the outsider points of view and expertise, which are then translated into blog posts.
So, there you have it. One consultant’s take on outsourcing blogging. Not right. Not wrong. It just depends.

The Art of Blog Marketing

This is a story about building relationships online through blogging and how connecting and sharing is about the art of marketing. For this post, we will leave science aside, except for the technology required to blog.


Over Memorial Day weekend, a group of us met in NYC to honor CK and her recently passed momma, Sandra J. Kerley, with a tree planted in a corner of a Spanish Harlem family garden. The spot is a haven of green among the concrete, brick, glass and steel setting. Five of us gathered with CK, but many participated in the celebration through their generous donations. Some who could not join us called to speak with CK.
In the group were Drew McLellan,
David Reich,
Luc Debaisieux,
Valeria Maltoni, and me. Drew and his family flew in from Des Moines, David drove from the ‘burbs, Luc came all the way from Belgium, Valeria trained from Philadelphia and I took the commuter line from New Haven. If you want to read more about the event, each of us posted or you can click here to read my post and see the photos.
The gathering made me think about what brought us and so many of you together. The tool was blogging but the strategy that connects us is that of relationship building. Each of us believes that life and the part of it we call business require the art of connection to grow. Anyone can blog. It doesn’t require either great technical or writing skill to do so. But among the bloggers who I have met in-person and online, a sense of sharing, connecting and getting to know others is inherent within us. And that is a basic principle in marketing.
At the end of the day, marketing is not about products, services, technology, advertising, public relations, or traditional tools. It is about creating connections, what some of us may call experiences. Successful marketing gives people a reason to care about us. In business we may call the “us” our brand. That is also true in life.
Why did we gather in New York City, a group of strangers, some of whom had previously met, others who had never met face-to-face? We cared about each other. We had connected. We wanted to be part of the brand experience (honoring CK and becoming friends). This may seem a strange analogy. To some it may seem a bad and heartless analogy, as we are talking about a friend’s loss. But to clarify, I am talking about love for a friend and caring for her. I am talking about what we gained through CK’s loss.
And that’s what customers feel about brands that they are loyal to: Harley-Davidson, Starbucks, Apple, VW, Coke or Pepsi. Those companies have connected with their customers. They share their human sides, build relationships, and become friends to and with their customers.
They do so by telling stories and touching our emotional sides with those stories. The 40-something accountant who loves the rumble of a Harley. The 30-something mom who cherishes her escape to Starbucks Third Place Experience. The Mac lovers who hold onto their minority but special status.
These things don’t just happen. They happen because of the art of marketing. That same art applied to our personal lives and our businesses is producing enduring relationships, more sharing opportunities by writing for other blogs such as the Daily Fix, and work opportunities. All because of relationship building. Like me, I suspect most of you have a similar story.

Happiness and consumption

When we first hear the headline “Happiness and Consumption”, the first thing we think of is the discussion whether consumption leads to happiness or not. There are several approaches to this question and we will deepen our analysis in some of the most representative ones. In any case, the issue about “Happiness and Consumption” could be understood the other way round: does happiness lead to consumption? This approach, although not evident, might be plausible, as well.

Seek of happiness is a relative recent concept; what is happiness? The first approach to this question might be satisfying Maslow’s pyramid of needs (of course, each individual is in a different level in each period of his/ her life). Coming to our point, mankind has always tried to achieve the levels and in the order explained by Maslow, but nowadays we need much more complex achievements to be content with the degree we perform in each level of the pyramid. Performing well in every level has become a more difficult duty, and this is the point where consumption steps in. We try to satisfy our needs with material things, which is linked to the materialistic culture of Western society, which is also spreading to the industrializing countries. There are several detractors of this view and we are going to analyze them as well.

MICROECONOMIC VIEW

We start with the most classical economic view of “happiness”:The microeconomic view of utility and goods is a consequence of the Western view of happiness.

Economics explains consumer behaviour and its seek of happiness in terms of utility, which is thought to be a positive function of the level of consumption of goods and services. In other words, the more an individual consumes, the happier he/she is.

When economists expose this theory, they portray a consumer that chooses between consumption of two goods, between consumption and leisure, and between consumption at different time periods. The consumer tries to maximize his/her utility depending on his/her prior needs. As it may become clear at this point, the needs are covered by material things. In fact, several authors define the entire subject of economics to examine how limited resources are allocated in alternative ways to satisfy human wants. According to them, the goal of economic activity is to achieve efficiency, which is usually to maximize the production of goods and services.

Consequently, consumption is seen as the driving force of the economy, providing people with the incentive to expend their time and energy to obtain more and better things.

OTHER ECONOMIC VIEWS

Referring to other economic views, as a brief introduction, we could compare the levels of happiness between different periods of history in which income levels vary considerably. For instance, income in the United States has risen a lot since the end of the Second World War and yet, the proportion of US population that assures to be happy remains more or less the same. More generally, time series data in individual countries that have experienced significant increases in income and consumption do not lead to significant increases in their level of happiness over time (the same applies to individuals, not only whole countries). Analyzing levels of self-reported happiness among different countries in the same period of time, we also get the same results: those that evidence higher levels of per capita income and consumption do not report to have a higher level of happiness beyond a certain level of income. Some authors show empirical proof for this, such as Deiner and Shigehiro, Frey and Stutzer, Andrew Oswald and Easterlin (who created the “Easterlin paradox”).

There are some possible explanations for this; first, human beings look over their shoulder all the time to compare what they own with what others own. They are on a “hedonic treadmill”; once basic needs are satisfied, humans care rather about relative than about absolute levels of income.

To expose the second explanation we draw back to the microeconomic view; utility grows when income does so, but each additional increase of utility is smaller than the previous one. In other words, marginal utility is decreasing. After a certain level of income, utility does not increase anymore (actually, according to the microeconomic theory, it may even decrease). Some studies suggest that in the short term people are happier – even if temporarily – but then their happiness level diminishes again.

Friedman and Savage propose that there are indeed some income increases that lead to increasing marginal utility; according to microeconomic theory, people are enemies of risk and therefore no one should have any incentives to take part in a lottery game. As lottery proves to be very popular in a lot of countries, Friedman and Savage conclude that marginal utility is increasing with respect to very high income growths that can change one’s life.

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In any case, this is a very special case and we focus on the idea that happiness cannot be measured through income.

There are some authors in favour of the existence of a strong link between happiness and consumption, such as Frijters, Haisken-DeNew and Shields (2004), who analyzed the changes in happiness of East Germans after the transition from communism. However, their findings seem not to take into account other socioeconomic changes that took place due to the transition.

MEASUREMENT OF HAPPINESS

What if we cannot measure happiness through GDP anymore? The solution proposed by many economists is the introduction of GHL (gross happiness level). Jigme Singye Wangchuck, Buthan’s King in 1972, invented the term Gross National Happiness (GNH) to substitute GDP in order to measure quality of life and social progress in a more holistic way, introducing aspects that GDP did not contain. This approach is based on the Buddhist mentality, which states that beneficial development of human society takes place when development is not only material but also spiritual. Buddhism relies on four pillars and GHL divides these four pillars in eight categories: time-balance, social and community vitality, cultural vitality, education, living standards, good governance and ecological vitality. Bhutan proves to be a “happy country” but this is highly affected by their concept of happiness they have: Buddhist economics proposes alternative principles such as minimizing suffering, simplifying desires, nonviolence, genuine care, and generosity. Buddhists do not expect to achieve great things to be happy, but they are content when minimizing suffering. In this sense, we could quote Fontenelle`s words: “expecting too high happiness is an obstacle to be happy”.

DIFFERENCE BETWEEN CONSUMPTION AND PURCHASE

One thing is not completely clear in this definition: according to what has been discussed up to this point, the question is whether we should rely on income to seek happiness, but actually income is not exactly consumption. However, we dedicated this space to talk about income and not directly about consumption because the level of consumption is usually proportionate to income. One could go a bit further and add that consumption does not necessarily imply buying things. It only implies that goods and services, independently from where they come from, are a source of happiness but we could get them by other means, such as creating them by ourselves, but we will not explain this kind of consumption in greater depth as we prefer to concentrate on consumption of purchased things, which can be expanded on consumption of ideas, lifestyles, etc.

RELIGION AND CONSUMPTION

Coming directly to the point of consumption, we could continue the path that we started when talking about Buddhism; the view of religions towards consumption is usually against materialism and in favour of strictly buying what we need (by the way, what we need and what we do not is another interesting issue). From the religious point-of-view, religions are supposed to give meaning to life and, in this sense, the purpose of consumption should just be to provide safety, food, shelter, etc. but in recent times consumption is competing with religions; the “religion of consumption” is being created. According to “Young and Rubicam”, one of the most prestigious communication agencies in the world, brands are now a new religion; people rely on them seeking the meaning of life. The agency compares itself with the missionaries who spread religions all over the world. The general opinion of religions is that they, just like brands, are based on powerful ideas, but whereas religions do provide a meaning to life, products just create the false sensation that we are more valuable in the eyes of others. Materialism is a disease of low self-esteem. Saint Francis of Assisi or Gandhi did not own superfluous objects that distracted their attention from the others and from God.

And so we come to the question already suggested above: does consumption lead to happiness?

All successful brands convince consumers about the fact that they –the brands- are able to satisfy the consumer’s needs. If satisfying needs is creating happiness, brands make consumers happier. The problem comes when brands keep creating new wants in consumers so that these have the impression that they never fulfill their needs completely. First, consumers need to believe that consumption will satisfy their needs and secondly, their expectations about happiness must never be achieved because they have to keep growing or changing. And in this case consumption will not lead to happiness.

SUSTAINABLE CONSUMPTION

The ideal kind of consumption would be sustainable consumption: substantial reduction of consumption (to avoid depletion of resources and to leave room for those who do not have much money), eco-friendly consumption and tradition-friendly consumption when it is a suitable option (small farmers, homemade products…).

Focusing on the problem of waste of resources, there comes a point where using more resources actually reduces your quality of life (and quality of life is connected to happiness). This can be seen on this graph; in this view, we do not only compare “income” with happiness, but we also include the effort to get this income, but this is usually like that in real life.

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When you use a lot of resources and you spend a lot of money and effort on something, you eventually end up feeling overwhelmed; your mind and your life are crowded. The more you have and the more you do, the worse you feel. If you start using fewer resources, you find yourself with more free time, eating more healthily. There is a point in the middle called the point of habituation where you do not feel happier with more achievements. The goal is being exactly in the point where you are really conscious of what you use, you do not take things for granted and you understand that your actions have consequences for other people and the planet. It is the point between asceticism and waste, between self-denial and self-indulgence and it is similar to the view that religions have about consumption (only that religions do not refer directly to eco-friendly consumption).

The materialistic view thinks the following about those characteristics:

– Happier with more consumption

Happiness is commonly associated with a high material standard of living and many purchases are driven by the expectation that they will make life more satisfying, especially the purchase of durable consumption good and the spending of money on holidays.

Not happier with eco-friendly consumption

Consumers are optimistic and think that technology will solve the problem of resources depletion.

Not happier with tradition-friendly consumption

The fact that these products tend to become obsolete (sometimes due to planned obsolescence) is seen to convey that modern products are more attractive.

BRANDS AND HAPPINESS

So in the previous section we come to the conclusion that there is a point where we cannot be happier anymore through consumption. Let us imagine that we are not at this point yet. We start with a practical example:

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In this case, Apple is not just selling a mobile phone, which is used to communicate with others (practical use); Apple is selling identification with a brand that target consumers value a lot (Maslow’s self-esteem level), belonging to a group of latest technology-owners (belonging level), being unique because of having a very special device (self-actualization/ self-esteem)… In this sense, the IPhone is satisfying needs that the consumers wants to satisfy in order to be happier. This needs could be satisfied by means that would not require any money, but here Apple has managed to offer something which consumers have to pay for and which Apple profits from. Whether this is ethical or not is another issue (some people could think so, but this is not the issue in this essay).

The question is whether the brand satisfies the need completely or it keeps stimulating wants in the consumers so that they always desire new products. This is the case for example of planned obsolescence. Planned obsolescence is deliberately planning or designing a product with a limited useful life, so that it becomes obsolete or nonfunctional after a certain period of time. Planned obsolescence has potential benefits for a producer because the consumer is under pressure to purchase again. Products produced this way have not necessarily designed to fail technically; “fail” can simply become obsolete because they are not fashionable anymore. Examples of this can be:

– The creation of new IPhone models every year with new applications that Apple consumers do not want to miss.

– Fashion in clothes every new season (bell-bottoms are not used anymore and some years ago they were the last word in fashion)

– Printers designed to print a specific number of pages and high reparation costs if the consumer wants to repair it instead of buying a new one

– IPhone battery designed to last very little

– Printing cartridges that stop being produced or that have a slightly different shape from the cartridges used in new models of printers of the brand; the printer may work perfectly, but it has no suitable cartridges

COMMUNICATION OF BENEFITS

Coming back to the personality of the brand, to make consumers identify more with them, brands try to communicate their positioning and the benefits belonging to it in their communication campaigns. Advertisers rely on topics such as happiness, youth, success, status, luxury, fashion, beauty, etc. In advertising, social contradictions and class differences are hidden and workplace conflicts that may take place in the enterprise are not shown. Advertising campaigns suggest that solutions to human problems are to be found in individual consumption, presented as an ideal outlet for mass energies.

This again makes us wonder whether the target population is really happy buying these products because the can only be really happy if they buy something when it is them who decide to buy it. This does not necessarily mean that they are not manipulated; advertising can manipulate them and then it is them who decide that they want to buy what the advertisement shows. Manipulating, in any case, can be interpreted as creating wants from existing needs.

In this sense, brands often refer in their communication campaigns to the freedom of the consumer to buy whatever he wants… by buying the product of that brand. Although it is quite paradoxical, this also contributes to the happiness of the consumer. One example:

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CONSUMPTION OF IDEAS

Ideas can be consumed, as well. Brands, political parties, religions, friends, etc. surround us with ideas that forge our mentality. Actually, in the era of materialism, we are overloaded by physical products and by services and brands are not interested anymore in selling such products and services referring to their functional features; a car is not a vehicle to drive to work anymore. It is a life as a successful businessman. The ideas that products are services appeal to have already been explained in greater depth in previous sections. The interesting part here is how political mentalities or religious beliefs can be consumed as a way to obtain happiness. When you choose a certain political party or you decide whether to have religious beliefs or not, you are choosing in some way a specific lifestyle that implies a specific culture, a specific social circle, etc. and this again is a way to achieve what we consider a happy life.

DOES HAPPINESS LEAD TO CONSUMPTION?

As we already explained in the beginning of this essay, the most obvious reaction to the title “Happiness and consumption” is to think whether consumption leads to happiness, but another approach would be to wonder whether consumption can be the result of happiness as well. When we are happier, we are in the mood to do more things that please us and one of them may be consuming, just like in the example of L’Oréal’s claim “because I’m worth it”. We have the energy to afford whims we wish and our bodies provoke the chemical reaction that makes us more creative, which eventually leads to consumption to express this creativity; for example, we may have much more ideas to combine different clothes.

SUMMARY AND CONCLUSIONS

The final objective of consumption seems to be happiness, but there is a point in our level of consumption from which utility does not seem to grow anymore and Western countries have reached this point by far-actually, there are some cases where utility may decrease with an overwhelming level of consumption. Increases of happiness occur only in the short term and then consumers return to their “standard” maximum level of happiness. What companies now do continuously is creating wants from pre-existing needs in order to make consumers desire this short term happiness.

Anyway, what we call happiness varies among different mentalities and so we could take the example of religions. Most religions argue that consumption just leads to false illusions and, focusing on Buddhism, its concept of happiness makes in no way possible that consumption of products and services lead to it.

Determine, Level, Happiness, Quotient, Consumers

1. DetermineExample Sentences: Verb
§ The purpose of this line of inquiry was to determine whether children would object to the stupid questions or simply answer them.
§ Tells the procedure used to determine where to drill a rescue hole.
§ But some researchers say it’s too soon to use the variation to determine treatment.
§ By following these guidelines it becomes easier to determine whether or not you have really found a fossil bone.
§ Besides staging games that are exciting and safe, three criteria will determine how well it does.
§ Together, cycle life and calendar life determine how long a battery will be useful.
§ The size and strength of the bubbles determine the durability of the meringue.
§ State policies also determine a teacher certification requirement-meaning who gets to teach and who doesn’t get to teach.
§ The professors harvested tweets for key words and plugged them into an algorithm to determine the mood of the broader market.
§ If a gun is recovered, a forensic scientist test-fires it to determine the markings it leaves on bullets and cartridge casings.

Main Entry: determine  [dih-tur-min]
Part of Speech: verb
Definition: conclude, decide
Synonyms: actuate, arbitrate, call the shots, cinch, clinch, complete, dispose, drive, end, figure, finish, fix upon, halt, impel, incline, induce, move, nail down, opt, ordain, persuade, pin down, predispose, regulate, resolve, rule, settle, take a decision, tap, terminate, ultimate, wind up, wrap up Antonyms: begin, start

2. Level
Example Sentences: adjective
Other Examples

  • The new faculty member will teach introductory chemistry and upper level inorganic chemistry and will direct student research.
  • Adjust position of grill if necessary so grill and liquid in pan are level.
  • But this ignores the fact that the level of water vapour depends on temperature.
  • The searchable site allows visitors to indicate a grade level and subject area for resources tailored to specific needs.
  • Then pull off any foliage or flowers that will be below the water level in the vase.

Noun

  • Many animals have some level of social intelligence, allowing them to coexist and cooperate with other members of their species.
  • Her garden is situated downhill from her house, but she wanted an outdoor dining area at house level.
  • Yet discussions regarding implementing a single payer system at the state or national level seem to be taboo.
  • Brant cannot claim that level of renown, but his résumé is not shabby.
  • Sea level rise affects more than beaches and oceanfront land owners.

Main Entry: level  [lev-uhl]
Part of Speech: adjective
Definition: smooth, balanced
Synonyms: akin, aligned, alike, calm, commensurate, common, comparable, consistent, constant, continuous, equable, equivalent, even, exact, flat, flush, horizontal, identical, in line, leveled, like, lined up, matched, matching, of same height, on a line, on a par, on one plane, parallel, plain, planate, plane, planed, polished, precise, proportionate, regular, rolled, same, stable, steady, straight, trim, trimmed, unbroken, unfluctuating, uniform, uninterrupted
Antonyms: ragged, uneven

3. Happiness
Main Entry: happiness [hap-ee-nis]
Part of Speech: noun
Definition: high spirits, satisfaction
Synonyms: beatitude, blessedness, bliss, cheer, cheerfulness, cheeriness, content, contentment, delectation, delight, delirium, ecstasy, elation, enchantment, enjoyment, euphoria, exhilaration, exuberance, felicity, gaiety, geniality, gladness, glee, good cheer, good humor, good spirits, hilarity, hopefulness, joviality, joy, jubilation, laughter, lightheartedness, merriment, mirth, optimism, paradise, peace of mind, playfulness, pleasure, prosperity, rejoicing, sanctity, seventh heaven, vivacity, well-being
Antonyms: depression, gloom, misery, pain, sadness, sorrow, unhappiness, woe

4. Quotient
Example Sentences
Noun
§ It could jack up the entertainment quotient, he says.
§ Since he has achieved all these goals, and is a happy surgeon, his happiness quotient is high.
§ Cramming bold flavors into lean proteins helps with the satisfaction quotient.
§ My system of writing was to type my way through successive drafts until their ungainliness quotient declined.
§ His video spots are always edited tightly to get the maximum laugh quotient.
§ Intelligence quotient and economic status have nothing to do with anything.
§ There’s a nursery where the cuteness quotient can be ratcheted up and a camera to snap photos of those special moments.
§ The number of bushels of shelled corn will be two-thirds of the quotient
Main Entry: quotient  [kwoh-shuhnt]
Part of Speech: noun
Definition: outcome
Synonyms: computation, remainder, result

5. Consumer
Example Sentences
Noun
§ Even as consumer spending increases modestly, those dollars are buying fewer goods and services.
§ They argue that new network services and consumer access to vital information could be stifled by added fees.
§ But the light-speed innovations in consumer electronics have turned many of us into serial replacers.
§ Brakes-even new ones-are plagued with the problem of squeal, a major cause of consumer complaint and warranty repairs.
§ Yet it is estimated that about half such food spoils on the way to the consumer.
§ Become a smart consumer and learn what natural and organic labels mean.
§ But ads in the trade papers have been slashed, as have campaigns in the big consumer newspapers.
§ It seems that every generation needs its public, tweedy, literary personality to sell its consumer electronics.
§ Recycling also helps reuse and conserve valuable resources, reducing the need for fresh materials in creating consumer products.
§ Cheap plastic has unleashed a flood of consumer goods.
Main Entry: consumer  [kuhn-soo-mer]
Part of Speech: noun
Definition: person who buys merchandise, services
Synonyms: buyer, customer, end user, enjoyer, purchaser, shopper, user
Antonyms: marketer, merchandiser

Source:
Roget’s 21st Century Thesaurus, Third Edition. Copyright © 2012 by the Philip Lief Group.

What is happiness? – 10 Definitions of Happiness

An interesting blog from: Donald Latumahina states –

Happiness is something everyone wants to have. You may be successful and have a lot of money, but without happiness it will be meaningless.
That’s why I’m excited with this month’s theme of Happiness. We will discuss this topic all month long and I’m sure we will learn a lot. But, before we move further, it’s a good idea to get deeper understanding of the word happiness itself. Understanding what happiness is will give us good ground upon which to build our discussions.
Let me start with an official definition. According to Merriam-Webster’s Online Dictionary, here is the definition of happiness:

  • a state of well-being and contentment
  • a pleasurable or satisfying experience

This definition is a good starting point and we can dig deeper from it. The best way to do that is to consult some of the greatest minds in history. So I researched what these people say about happiness and found 10 essential definitions. Each of them has deep meaning. Take your time to absorb it.
Here they are:

Happiness is when what you think, what you say, and what you do are in harmony.
Mahatma Gandhi

Happiness is that state of consciousness which proceeds from the achievement of one’s values.
Ayn Rand

Happiness is something that you are and it comes from the way you think.
Wayne Dyer

Happiness is essentially a state of going somewhere, wholeheartedly, one-directionally, without regret or reservation.
William H. Sheldon

Happiness is not a reward – it is a consequence.
Robert Ingersoll

Happiness is different from pleasure. Happiness has something to do with struggling and enduring and accomplishing.
George Sheehan

Happiness is the meaning and the purpose of life, the whole aim and end of human existence.
Aristotle

Happiness is not something you experience, it’s something you remember.
Oscar Levant

Happiness is not a station you arrive at, but a manner of traveling.
Margaret Lee Runbeck

Happiness is the spiritual experience of living every minute with love, grace and gratitude.
Denis Waitley

All in all, I would say that happiness is a decision. Your happiness is your decision to make. All the quotes above require actions on our part and actions require decisions.
So what do you think?