How to Start a Consulting Business
14 likes6,680 views
The document provides a comprehensive guide on starting an independent consulting business, including key factors for success such as expertise, marketing, and understanding legal structures. It discusses the benefits of the consulting lifestyle, highlights the importance of building a personal brand, and outlines practical steps for financial management and securing clients. Additionally, it emphasizes the importance of networking and offers insights into assessing the right consulting model for individuals.
How to Start a Consulting Business
- 1. How to Start Your Independent Consulting p g Business 1 Copyright © 2008 MBO Partners. All rights reserved.
- 2. Presenter Gene Zaino President & CEO MBO Partners 2 Copyright © 2008 MBO Partners. All rights reserved.
- 3. Overview The Entrepreneur Pros & cons of being in business for yourself Is consulting right for me? Big vs. small Business Structure 1099, sole proprietor ? S-Corp, C-Corp, LLC, PER ? p, p, , Self-employed tax benefits Compliance, Insurance Sales & Marketing and Accounting Tax d i i t ti T administration Finding work Business insurance Marketing your services Cash flow: billing, Networking and backlog collections, expenses , p 3 Copyright © 2008 MBO Partners. All rights reserved.
- 4. Is Consulting Right for Me? g g Successful independent consultants have tenacity, talent, and an entrepreneurial mindset. d t i l i d t 4 Copyright © 2008 MBO Partners. All rights reserved.
- 5. Some Key Success Factors Core Competencies of Independent Consultants p p Defined, verifiable expertise Maintain high integrity Comfortable with marketing and self promotion Able to develop high quality network and clientele Vision to easily identify opportunities and present ideas 5 Copyright © 2008 MBO Partners. All rights reserved.
- 6. More Key Success Factors Core Competencies of Independent Consultants p p Skill to efficiently apply knowledge and expertise Highlight results that add value to clients Create strong references (happy clients) Maintain a pipeline of potential new assignments without compromising existing client work p g g Assemble a strong support team to minimize time on financial, legal and business administration activities 6 Copyright © 2008 MBO Partners. All rights reserved.
- 7. The Independent Lifestyle Benefits of the consulting lifestyle g y Autonomy to do what you love Build the skills you want to develop Pick the projects you want Avoid office politics Flexibility and control Be your own boss Deliver your work, your way Manage your work / life balance Financial rewards Fi i l d Profit from owning your talent Leverage your experience Own valuable relationships Launch pad to big business 7 Copyright © 2008 MBO Partners. All rights reserved.
- 8. Why the Time Is Right for an Independent Career p Build career resilience in uncertain economic times Diversify your career portfolio “All eggs are NOT in one basket” Create flow of opportunities C t a fl f t iti Go-to network of relationships Trend toward companies shifting to flexible workforce More contractors and less full-timers Less fixed, long-term costs 8 Copyright © 2008 MBO Partners. All rights reserved.
- 9. Migrating to an Independent Career p Set up your consulting parameters Build a 12 to 36 month plan Where do you want to work? When do you want to work? How many clients do you want? Stay l St solo or grow? ? Set up shop at home Quiet place with internet access Keep overhead low Build a financial bridge Plan now Start while still generating other income Allocate six months of cash flow Invest in you 9 Copyright © 2008 MBO Partners. All rights reserved.
- 10. Migrating to an Independent Career p Hone your assignments to improve your marketability What’s in demand in your industry? Round out your experience based on market demand Learn the market rates (bill rates and pay rates) Focus on assignments that are your strengths Build a personal skills development plan p p p 10 Copyright © 2008 MBO Partners. All rights reserved.
- 11. Migrating to an Independent Career p Do you have ideas for your first contract? Anyone you can approach? Maybe lower your rates f right assignment to build reference base for f You can raise or lower rates on future assignments, just get started 11 Copyright © 2008 MBO Partners. All rights reserved.
- 12. Build Your Brand Build marketing materials List your skills and credentials Professional, Professional high quality business cards Select list of projects and case studies Need both a Resume and Services brochure Position yourself as an expert Establish credibility Online discussion boards, blogs, or articles Build online profile or website: LinkedIn, Network Solutions, VisualCV, or MBO Partners Key words to emphasize Services, Projects and Results Email your contacts and provide them with your materials Follow-up with key business relationships 12 Copyright © 2008 MBO Partners. All rights reserved.
- 13. Stay Connected y Network with friends, past employers, employers professional associations, online markets Read professional journals Attend conferences and workshops Collect business cards, follow up Connect with other consultants Find a mentor or two 13 Copyright © 2008 MBO Partners. All rights reserved.
- 14. Market Yourself Directly to Organizations y g Use corporate web site to identify opportunities Get names of HR contacts and recruiters from job postings j p g Promotion notices in local business publications Develop rapport with internal recruiter (or anyone) Call high in the organization and leave voicemail or email Just Do It! – activity breeds activity 14 Copyright © 2008 MBO Partners. All rights reserved.
- 15. When to Use Recruiting Firm or Staffing Company g p y If you can’t find a project directly or through referrals: Important tips dealing with Staffing / Recruiting firms Protect the integrity of your resume No changes without permission Protect your references No contact without permission Protect your freedom to work “directly” y y Do not sign broad non-competes Try to establish a corp-to-corp contract Or use a PER (more on that next) 15 Copyright © 2008 MBO Partners. All rights reserved.
- 16. Legal Structures Choosing a Legal Framework for Your Business g g Limited Limited Sole C Corp C-Corp S Corp S-Corp S Corp S-Corp Liability Liability Proprietor P i Corporation Proprietor Corporation Status Incorporated Incorporated Incorporated 1099 Personal Asset Protection? Yes Yes Yes No Corp. taxed 1040 1040 1040 How is Corp. Taxed? separately Schedule C Schedule C Schedule C Double T ti ? D bl Taxation? Yes Y No N No N No N Shareholders Unlimited Limited Limited N/A Investor-Friendly? Very Yes No No Audit Risk Moderate High High High Level of Administration Highest g High g Moderate Lower 16 Copyright © 2008 MBO Partners. All rights reserved.
- 17. Business Insurance What you need to “do business” y Workers Compensation Compensation if injured at work Generally required by clients to engage you as a contractor General Liability Liability arising from personal injury to others or property damage Professional Liability (Errors and Omissions) Liability arising from errors or omissions in services you deliver to clients 17 Copyright © 2008 MBO Partners. All rights reserved.
- 18. Vendor Qualifications How to get “on the list” g Qualifying for the vendor list Getting on is no small feat g Corporate trend is less suppliers Increased concern over reclassification risk GSA best for government work Some general qualifiers Years in business Financial strength Legal structure Business insurance Strategic to organization Security clearance? Negotiating contract terms Can take a long time Seek good counsel 18 Copyright © 2008 MBO Partners. All rights reserved.
- 19. Accounting Getting systems in place g y p Invoicing Hourly, by the project, by the piece Monthly or project-based billing Collections Expenses Some may be billable to clients Out-of-pocket, tax deductible Management options Software, e.g. Quickbooks Hired accountant Portable Employer of Record – manages back office (more later) 19 Copyright © 2008 MBO Partners. All rights reserved.
- 20. Tax Management Maximizing your tax benefits gy Tax management (Schedule C filers) Quarterly estimated taxes based on projected profit Self-employment Self employment taxes (same as employer side taxes) employer-side Manage your “audit risk” Maximize business tax deductions, legally and wisely Office supplies computer equipment communications supplies, equipment, Advertising, home office, seminars Meals, travel and entertainment Business mileage Per Diem for out-of-town travel for business Tax-advantaged employee benefits Medical insurance premiums Retirement programs Out-of-pocket medical Continuing education related to industry Dependent / child care or elder care expenses 20 Copyright © 2008 MBO Partners. All rights reserved.
- 21. Securing Affordable Medical g Group versus individual Through a spouse Professional association plans Individually rated plans – caveats State programs 21 Copyright © 2008 MBO Partners. All rights reserved.
- 22. Retirement and Financial Planning g Popular self-employed retirement programs If unincorporated, investigate SEP (Simplified Employee Pension) or SIMPLE IRA Keogh Plan (Qualified Pension/Profit Sharing Plan) Solo 401k Good retirement vehicles but not Schedule C deductions You pay your share of self-employment payroll tax on the retirement contributions Most M t popular incorporated programs l i t d 401k Employee defers similar to above Corporation matches employee or more p p y The amount invested by the corporation is not subject to payroll tax 22 Copyright © 2008 MBO Partners. All rights reserved.
- 23. What About Hiring Staff? g HR & payrolling a team Make sure you are legally compliant (exempt vs non-exempt) Don’t misclassify employees as contractors Employee benefits Medical, dental, life, disability Retirement for your staff 401(k) program Tax deferred ERISA compliant 23 Copyright © 2008 MBO Partners. All rights reserved.
- 24. There Are Other Options p Consulting companies Staffing St ffi agencies i Portable Employer of Record firms (PER) Disclosure: MBO Partners was the first Portable Employer of Record 24 Copyright © 2008 MBO Partners. All rights reserved.
- 25. Understanding a PER: It’s Your Business, Make the Most of It , Take everything you love about consulting… consulting Operate as your own boss Pick your own engagements Set your own rate and terms you o ate a d te s Work multiple projects Build project teams Maximize your tax benefits …and add: Complete back-office support Personal account service An “in” to huge clients Improved cash flow Affordable group benefits Free GL, E&O, and crime bond , , Online system to track it all 25 Copyright © 2008 MBO Partners. All rights reserved.
- 26. Comparing the Alternatives p g 1099 or Corporation PER Staffing/Cons. Level Le el of reclassification risk to your client? o r High None None (if W 2) W-2) Find projects yourself? Yes Yes No Who handles client billings and collections? Self PER Staff/Cons Company Deduct business expenses? Yes Yes No Deduct medical expenses?* No Yes No Who handles financial admin? Self PER Staff/Cons Company Who carries business liability? Self/Corp PER Staff/Cons Company When do I get paid? Upon client payment Upon client payment** Bi-weekly Overall benefits quality? Varies High Low to medium Benefits cost? Very high Medium Low to medium Who absorbs employer payroll tax? Self/Corp Self/PER Staff/Cons Company Personal audit risk? High Low Low Credit profile? Weak Excellent Good What % of billing rate is kept? ??? 92-97% 40% - 60% 26 *Assumes under 7.5% of annual AGI in medical expenses ** May qualify for advanced financing Copyright © 2008 MBO Partners. All rights reserved.
- 27. Next Steps p Do the math and build the plan Calculate hourly bill rates and projected work Cash analysis: understand your financial needs Plan on what, when, and where Gut check for feasibility Start networking and learning Talk with people that have “done it already” Research your industry Topic-specific Topic specific seminars and conferences Connect with peers through LinkedIn, Facebook, Twitter Contact us Slides and contact info will be emailed Complimentary MBO Partners consultation Email Gene Zaino: gene@mbopartners.com 27 Copyright © 2008 MBO Partners. All rights reserved.
- 28. Thank you for your time! For over 22 years, MBO Partners has been making it easier for independent consultants and their clients to work together. 28 Copyright © 2008 MBO Partners. All rights reserved.