When Jason Fearnow first entered the consulting business, taxes ate much of what could have been good money from his hard work. How did this mining consultant turn that situation around and eventually quadruple the revenues of his consulting firm, Prime Contract Solutions? In this episode, Jason speaks to Michael Zipursky about the biggest financial mistake he committed in his business and how he solved it. He also talks about his key takeaways from the Clarity Coaching Program, which eventually set him off to achieve his full potential as a consultant. Do you feel like you’re always after volume of work just to pay the bills? Listen to this episode to learn how you can focus on value instead and dramatically increase your earnings as a result.
I am with Jason Fearnow. Jason, welcome.
Thanks. I’m excited to be here.
I’ve been looking forward to this conversation with you and having you on the show. Jason, you are the Principal Consultant of your consulting firm, Prime Contract Solutions. You work with some of the world’s leading and largest mining companies and as a result of your expertise, you’ve supported the execution of over $40 billion worth of projects in the mining and metals industry. Let’s start at the beginning or at least the early days. How did you get into mining? How did you end up on a mountain and digging dirt and all that stuff?
By accident, to be honest. I studied supply chain in IT and when I graduated from school, I went and worked for an IT company doing online reverse auctions and procurement type of stuff. One of our primary clients was a mining company. Ultimately, they recruited me over. I spent a few years at the IT company and the mining company wanted me to come over and help them implement a certain software, so they brought me over as an SME of this IT solution. I knew nothing about mining.
How long were you there?
I was at that mining company for a year, and then it was a unique situation because I was driving back and forth an hour into the Rockies each way. I got tired of getting stuck in the snow and having a three-hour commute home. I stuck it out for about a year, and then I came down the hill and started working for a mining company that has their global headquarters here outside of Denver. I stayed with them for about ten years.
What prompted the decision for you to go out on your own and start your own consulting business?
It was totally by accident. I was working for a mining company for ten years and I had a good thing going. I had a good compensation package and stuff like that, and then another company recruited me over to come and run the commercial department for them. I was reluctant to do it, but they ultimately bought me out and they made me an offer that was too good to refuse so I took it. I worked for them for a few years and then ultimately got laid off. I thought, “You were salivating to get me over there. I thought this was a good secured gig.” It turned out that I still had a bunch of projects on the go for them. The guys and gals I was working with called me the same week that I got laid off and I started consulting for them right away.
Talk to us a little bit more about the specifics of that, not the people and places necessarily. You got laid off but you still were able to maintain the relationships that you had within that company and ultimately, turn that from an employee type of situation to a client and consultant. What did you do to be able to continue that work with them? What do you have to make happen to keep that client rather than being an employer to become a client for you?
I did it all wrong. That’s what I do know.
What does that mean? What was wrong about it?
I didn’t have any idea what I was doing. I knew how to help support my client and to give them what they wanted for an outcome, but I didn’t know anything about the consulting gig at all. I jumped on LegalZoom and spent $300. I got an LLC set up and off I went running. I signed a contract with them for hourly rates and started cranking out hours and billing on an hourly basis.
That was your start in around 2016. They became your first client. What was wrong about that situation? You mentioned that you signed a contract and you’re doing it on an hourly basis. What did you feel if anything was wrong about that as you move forward? Where do you start to cap out in terms of your capacity? What were some of the challenges that you encountered with that first client?
I learned maybe not so much with the first client but with clients in general because I added a couple of more. I had 2 or 3 clients going on an hourly basis. I was working 80 hours a week working like a dog but I was making what I thought was good money, so I was forging ahead. I did that for a few years but after the first year, what I learned was that there are smarter ways to organize your business in terms of your tax exposure.
In my first year of consulting, my tax payment was equal to my salary the year before and I thought, “This is stupid.” I’m all for distribution of wealth and things like that. It’s not that but I was working like crazy and I felt like it was disproportionate, so I got smarter there. I got a good tax accountant that helped me structure myself in a way that was a better entity and made more sense, so I did that. That was super helpful.
Before you go on, jump into that without getting into all the details. We have a global audience so it’s going to be different depending on where people live. What was the main shift that was made within the company structure or from a tax perspective that made the new structure better than the old one? What changes did you make?
I’ll try to make this as global as possible. I had a direct pass-through entity so every dollar that I earned was subject to tax. Since I was earning more money, it was all cash and not stock options, bonuses, and stuff, every dollar I made was subject to tax. Due to the amount I was earning, it was subject to the highest tax bracket in the States. The pivot was to take the entity and create a structure where I paid myself a fair salary and that salary was subject to tax, and then any residual revenue was issued out on a dividend basis and that had a different tax structure.It’s never about you and what you can deliver. It has always been about your clients and what they want. Click To Tweet
You’re finding ways to optimize. The taxes you’re paying are at a lower rate than what it would have been before. You’re optimizing your tax overall.
What I’ve seen as an independent consultant providing professional services, the number one expense you have is taxes. There’s no question about it. I wanted to optimize that and be as smart as I could all above board, of course, but I wanted to take advantage of the structures that were available to me.
This is such an important point that isn’t talked about enough. I see a lot of consultants who have the mindset of, “I’ll just do my bookkeeping myself and do taxes myself.” It’s straightforward. They get an accountant who does accounting for all different kinds of businesses and doesn’t understand business accounting. They don’t want to spend more money to get a better solution. Yet, when you get a good accountant or you get the right legal team or a lawyer or attorney or these professionals around you, they will cost you money but it’s a great investment. You end up making a lot more back or saving more or being a lot more efficient. You’re bringing up an important point here for people to consider in terms of what they’re doing right now.
If you look at it from an ROI standpoint, it’s like 10,000 to 1. It’s not even close.
You did that and you mentioned the first client came because they were your employer. How did you go about getting your 2nd and 3rd client?
Just pure networks. I had folks within the industry that I’d worked with previously that knew what I could do for them and how I could help them and they asked if I would support them, so I did.
How did they know that you were available to support them? Take us through how you facilitated landing those 2nd and 3rd clients?
Within our industry, there are six degrees of separation for many of the high performing professionals. When something like that happens, when somebody moves to another company or they pivot one way or the other, usually, you find out just through your network.
You’ve now picked up a few clients at this point. You’ve adjusted your tax or corporate structure to optimize that and you’re still working on an hourly basis. What’s the next chapter look like in the book of your business? What are some of the bigger changes that you’re starting to make or things you’re starting to learn that are helping you to improve the business?
I learned a large part, thanks to you, your program, book, podcast, and everything that you, Sam, and your team are doing, so kudos to you. What I learned is that the model I was under was incentivizing me to jump on an airplane and go halfway across the world. I could make more money sitting on an airplane than I could sitting in my house because I was billing on an hourly basis. I would work, jump on a plane, go on a trip, travel for 24 hours, and get paid for all that work like a dog for a week and fly back. I was making twice as much money in that week than I would when I was at home.
I had this model that incentivized me to leave my family and I thought, “This is stupid. What the heck am I doing? I love my family. I love my wife and my kids. I want to be home. I want to squeeze them and hug them. What am I doing? There’s got to be a better way.” I started doing homework on what options were out there for people and I did that for probably 9 to 12 months doing my own study on the side, trying to get smarter. I started to get smarter but what I didn’t have ultimately was the confidence to take the plunge. I was reluctant or nervous that if I did something stupid, my family would suffer, and I didn’t want to do something stupid.
Walk us through that. You came into the Clarity Coaching Program, and it would be helpful for people to know because a lot of people would resonate with being in that situation where you’re trading time for dollars and working on an hourly basis. You feel like you’re rubbing up against the ceiling and not making the progress that you want or not going to realize not that full value that is your potential. As you came through the program, what are some of the big learnings that you had or takeaways that you started to implement where you saw great results and feel like you made some good strides?
To be honest with you, there’s a ton. One of the things that I was thinking about when I was doing this study is I had anticipated taking my model to be a consultancy shop so that I would be selling hours. I would scale the business by bringing additional people in, charging twice what I pay them, and increasing my revenue in that manner. What I now know is that you don’t have to do that to make more money. For me, I didn’t want to be chasing that much work. I didn’t want to have to fill that pipeline because sales is something that I have plenty of room to improve on. I wanted to be working and adding value, not chasing work.
What does that look like for you more tangibly and more specifically? Your model is still focused on value or volume. You’re not just working with 100 clients at one time at low dollar values. Your engagements are quite sizable. They’re significant engagement. Each client is worth a lot to you and you provide tremendous value to them in terms of potentially millions of dollars being saved and creating more efficiencies and removing inefficiency. What does that look like in terms of your model and how you found so far the best way of creating value and adding value for your clients?
My client base is about five different clients and most of them, the engagements that I take are 6 to 9 months in length typically. Let me back up and say this. I read something from Seth Godin that said, “Marketing is the generous act of helping somebody solve their problem.” As soon as I read that, my mind shifted to, “This isn’t about you and what you can deliver. You’re servicing your clients and trying to help them get what they want.”
I started focusing on getting my clients what they want and helping them achieve what they want to achieve, whether it was personal or professional. One of my clients wants to get a promotion so I’m doing everything I can to think of ways to get him boosted up within the organization because that’s what he wants and it fills my cup to support them in that way. It was about figuring out my top clients, what problems they had, what potential solutions I could offer to them, and then how I could package it and sell it.
We have this thing called COVID and the pandemic has impacted a lot of people and has quashed a lot of opportunities to travel but your model has shifted even before some of that happened. What have you done to change or remove yourself from the need or the requirement to jump on an airplane, travel halfway across the world, and deliver value? You are in a position where you’re still providing great value to your clients, maybe even more than before, but you don’t have to travel halfway across the world. What did you do? What were some of the shifts that you start to make in your business or in your conversations with clients or in the way that you’re positioning your service offerings? To be able to go from those hourly fees, traveling across the world to fees based more on value, and not having to travel.
My business has quadrupled in 2020. There’s no question about it. I spend a lot of time on Zoom calls engaging in negotiations and conversations. Some of the shifts from a work standpoint would be instead of jumping on an airplane to fly to Brisbane or something, I’m taking calls at 5:00 at night. When those guys and gals are starting their day at 7:00, it’s 5:00 for me so we’ll jump on a call. It’s been about shifting work habits a little bit. I have periods of time where I have clients in South Africa. I’ll have calls early in the morning for me so it’s their afternoon.
It’s been about shifting, relative to that, but in terms of pricing, what I’ve told my clients is that charging by the hour is a disservice to them. It creates an incentive for me to make work rather than provide value, and what I want to do is provide value. I told my clients that I was no longer going to work on an hourly basis. We would come up with something that made sense based on the project that they wanted to deliver, and then we would set along a number. It hasn’t been an issue.
No real pushback from clients on that?
No. When they know that my objective is to serve them and to get them what they want, and I have the tools and the utilities to get them there, they’re happy to pay because the ROI that they’re getting is well worth it for them.
What was the biggest hesitation that you had? Was there any hesitation in having that conversation? A lot of people, deep down inside want to have that conversation with their clients. New clients are easier. You start from the new status quo, but with existing clients, it’s more challenging in a lot of people’s minds because they’re concerned like, “What if the client says no? What if I lose that business?” Did you have any concerns about having that conversation with existing clients? Was it clearly like, “I’m going to have it regardless. It just needs to happen.”
The first time I had the conversation, I was nervous because I was uncomfortable and I let emotion impact me more than a clear thought process. I knew the value was there but I hadn’t had conversations like that, so it was a new thing for me. It went well and it was a non-issue but I was a little bit reluctant. I forge ahead one way or the other. I took the plunge and had a conversation and it was no big deal.
Any advice you’d offer to someone who’s in that same position right now that wants to shift from hourly fees to more value pricing? Not necessarily the mechanics of how to do that but in terms of having that conversation with existing clients.
For me, what I tried to do is I tried to separate out the emotional discomfort of asking somebody for a handsome retainer. I try to let my body do what it does emotionally but keep my head focused on what I know is of good value for a client.
The other thing that I see a lot with you, Jason, is you clearly are focused on fitness and health. Every time we’re talking, you’re drinking a lot of water. At least that’s what I think it is. I can’t see through the bottle but I’m guessing it’s water, right?Structure your business to meet your desired lifestyle, not the other way around. Click To Tweet
I’m wondering for you, aside from having a body that’s in good shape, what do you think about exercise, health, fitness in terms of your mindset and you as a person? My follow-up to that is have you seen any impact on your business? Can you draw any connection between your health and fitness and the business itself?
My mind relies on the endorphin release I get from exercise. Life, in general, is so much about balance, whether it’s work, exercise, relationships, sports, hobbies and money. It’s all a balance so I’m constantly trying to find harmony in my life that makes sense for me and my family. I know what I want and therefore, I do what will get me to the point of what I want. In terms of fitness, I was stuck on what the next steps were for the business.
I didn’t know exactly how I wanted to take it. I went out for a run and on that run, I solved the problem. I came up with what the next steps were going to be, how we’re wanting to progress forward because I got that mental clarity, and how to step back enough to put time into myself and my body. My mind responded and said, “Knucklehead, what about this?” I was like, “That’s a great idea. Let’s do that.” Without exercise, I don’t know that I would have gotten to the same conclusion.
I operate the same way. It’s often said that the best ideas don’t come to us when we’re at our desks, where we typically do our work. It’s when you’re out for a walk in nature or exercising or in a shower. It’s about changing your environment. I find exercise to be such a great way because you’re benefiting not only from your body but your mind. You’re in a different environment, you also get great ideas for your business and thinking about prioritizing life and all that. The next question I want to ask you is you’re a family-focused guy. Every time we talk, we’re talking about our kids. You’re sharing with me what you do with your kids and how you have a lot of fun with them. How do you balance the work that you’re doing with still being a present father? Do you have any thoughts about that? Is there any model or principles that you apply?
Similar to you, when I think about my business, first and foremost, I think about my lifestyle and what I want to achieve. I want to have an amazing relationship with my wife. That’s what I want. I want to have an amazing relationship with my kids and I want to spend time with them. I reverse engineer what I want into what actions I take to get them there. I know that I want to be able to pick my kids up at 3:30 in the afternoon. Although I make my wife do it a lot. I want to be able to check out, so I try to reverse engineer it like, “I’m not going to agree to meet with someone between 3:00 and 5:00 because that’s family time,” as an example. It’s much about structuring my business to meet my lifestyle.
In my own experience, there are sacrifices that we make. When I was in Japan to see family and so forth, I might be getting up early in the morning to take client calls, or when I’m in Europe, it means I’m working in the evenings. There are some sacrifices there. It sounds like you do the same thing, but those sacrifices allow a greater balance. If I’m in Europe, it means I’m spending all day with my family and I’m working a little more in the evening. It sounds like you’ve adopted a similar mindset to that. Is there anything else that you add or any other way that you think about it?
Balance as well. This goes back to that conversation around balance. You’re always going to be a little off so you’ve got to tweak here and there. It’s being open to creative solutions and not following the status quo of 9:00 to 5:00.
You mentioned, Jason, that your business has quadrupled. Revenue has gone through the roof and there are lots of good things happening. If you can share a little bit about how having more money changed your life and your thoughts about wealth building, investments, future and business? Anything that you’re thinking about or anything that you’ve done that you weren’t able to do before or you didn’t see the possibility before when your business wasn’t at the level that it’s at now.
We’ve been having lots of fun. What I’m seeing is that as a result of being comfortable and having more resources, it allows me to focus more of my time, effort and energy on serving my industry. I know within mining and metals capital projects, we’ve got some serious problems that are going to hinder our market and our industry. Now that I have the ability to focus on that, I can go out and serve my community and serve my industry. One of the ways that we’ve done that is an idea that spawned from one of your Q&A calls. It was to have a roundtable.
We’ve created the Mining Misfits, which is a group of intimate leaders from around the mining industry who come together to deliberately talk about a specific issue or a specific challenge with the objective of trying to come up with a solution to that problem. We’re communicating it back out to the market to say, “There is a better way to do it, and here’s what we think.” That has generated a lot of conversation in the market, and we’re getting some good momentum. It allows me to give back, if you will, to the community because what we’re doing is right. There are better ways to do what we’re doing and it would be better for everybody that’s involved.
I know good things are coming from that and more good will come going forward. It’s not so much about marketing or business. It’s about a mission and something bigger. That’s easier for people to rally around and easier for people to be part of. At the end of the day, it’s about the ecosystem and the community that we build, we’re a part of, and we’re focused on adding value to. I’m excited for you on that.
It’s been fantastic. It’s been great. I enjoy conversation and I enjoy people. I want to see good things come for people that are in my life, and that translates into this mission. There’s no question I’m on a mission. I’ve made a proclamation to the industry that I am going to make changes to this market because it needs it. There are other people that feel the same way as I do and they’re willing to rally and get behind the movement. We’re bringing a movement forward that will benefit us all, and it’s exciting and fun.
Let’s make sure then, Jason, that people can find out more about you, the movement, and everything you have going on. What’s the best place for people to go?
Head over there, everyone. Check out Jason and what he’s got going on. He’s up to a lot of good stuff. I’m excited to see your continued growth. Jason, thank you for coming on.
Michael, it’s been my pleasure. If anyone out there who’s interested in talking to me, hit me up on LinkedIn. I’ll set aside 30 minutes so we can have a chat and figure out what’s going on with you and see if there’s anything that we can do to add value to your life. I appreciate it.