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A Guide to

Starting and Running
a Consulting Business

15 l Updating your consulting competencies through continuous learning . . . . . . . Learn to how to help your business l Preliminary questions . These l Do you have what it takes to start a consulting business? . . . . . . . . . . . . . 13 l Tax and legal obligations of consulting businesses . . . . . . . . . . . . . 3 see their operations differently and more effi- ciently. . . . . . . . . . . . . . brought to you by BizFilings and Business The keys to success in consulting . . . . . . . . . . . . . . . . . . . . .By sharing the richness of your previous business Table of contents experiences. 5 are just some of the special considerations of Competence and character essential for starting a consulting businesses that will be outlined in consulting business . . . . . . . . . . . . . . . . 11 l Setting your pricing for consulting services . . . . . 13 l Financing your startup consulting business . . . . . . . . . . . . . . . . . . 17 l Building the character of your consulting business . . . . . . . 16 l Promoting and marketing your consulting services . . . . . . . . 4 professionally. . a consultant can help other companies Consulting business . . . . . . . . personally and business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 l Tapping existing relationships for consulting business . . . . . . . . . . . . . . . . . . . . . 9 How will you operate and organize your business functions? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 this Guide to Starting and Running a Consulting Constraints on launching a successful consulting business . . . . 11 l Your marketing strategy for your consulting business . . 10 l Will you develop products as you provide consulting services? . . . . . . . . . . . . . . . . 15 l Expanding your consulting network and relationships . . . . . . . . . . . . . . . . . . . . . . 10 l What consulting services will you offer? . . . . . . 9 What form of business entity will you choose? . . . . . . . . . . . . . . But operating as a free agent can have Special considerations for starting your consulting its advantages and disadvantages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 l Managing compliance issues in consulting . . . . . . . . . . . 8 l Structuring and operating your consulting business . . . . . . . . . . 16 l Monitoring billing and collecting in your consulting business . . . . . . . . . . . 6 Business. 8 l Planning your consulting business . 17 –2– . . . . . . . . . . . .16 l Mentoring consultants for your business’s growth . 14 Special considerations for running and growing your consulting business . . l Your roles as owner of a consulting business . . . . . . . . . . . . . . . . . . . 4 succeed as you help others to do the same. . . . . . . . . . . . . . 7 Owner’s Toolkit®. 17 l Improving your consulting communication skills . . . . . . . .

need when it is not feasible to accomplish a particular goal through in-house experts. wisdom and experience. You your business. considerations that must be faced as you plan and ered an expert in a specified field — with a wide knowledge initiate your business. effective networking. of the subject matter and a depth of experience — who among others. Welcome to the world of How do you start.Consulting Business The consulting industry thrives. and main- experience and expertise for a special. whatever it may be. by sharing your ing and compliance procedures. Engaging a consultant offers the continuous learning. we identify the continuing challenges of running the sharing of knowledge. –3– . and provide an important service. understanding your roles in running gives professional advice and counsel to another. often short-term. These considerations include. and setting-up recordkeep- work. taining adequate cash flow. to the ongoing needs of the business — things like Clients need consultants. run and grow your consulting business? consulting — a dynamic part of the ever-growing service In these next several pages. It is cost-effective because the client can purchase only as much service from the consul- tant as is necessary to meet the need. structuring your business. to offer instruction of planning for a new consulting business and then imple- and training to staff. A consultant is a person consid. Consulting is simply • Then. It begins with the initial add significant value to their operations and to help them soul-searching question — ”Do I have what it takes?” be the best that they can be. consistent client some real added value — access to deeper levels of promotion and marketing of your services. we take a look at the many challenges of starting essential service to your clients. You have the opportunity to a new consulting business. defining and can put your special knowledge and experience to marketing your services. or to serve as a catalyst for change (or menting the plan. And and growing your consulting business after you get it maybe one thing more — a passion and enthusiasm for off the ground. — and continues on through a series of practical Consultants add value. The analysis here focuses attention the subject matter. wisdom and expertise with others. you will be providing an • First. we review a series of consid- sector of our economy! Whether you will be helping to erations and decision points you will face in the process solve problems and make decisions. do the “dirty work” of change).

but from your earlier mistakes. for campaigning. Consultants are used for training. there are personally does not have the necessary capacity. They will look to you for leadership and rely on your communication skills to achieve the goals for which Preliminary questions they seek your service. and experience comes from bad the competence and capability to provide a valuable judgment. enhancing taxes are just a few of the responsibilities of running a and streamlining operations. field. New and different types of consulting continue to blossom Consultants are hired by clients to help develop and and grow. as its my strengths and weaknesses? How can I compensate name suggests. Ask yourself a series of necessary capacity can not be found within their organiza. whatever it may be. • What will my business plan look like? If I am going to start try’s special concerns. Consulting is simply the sharing special knowledge and/or experience in tackling a sharing of knowledge. And maybe particular type of problem or challenge. my goals and lay out the steps for achieving those goals. and you have experi- perspective to an old. Your clients will be looking to you for some particular skills such as critical thinking. nagging problem. and improving information business. whatever the activity may be. for wisdom and good judgment. tion. Information technology (IT) consulting. one thing more — a passion and enthusiasm for the subject matter. What do you need to know before you begin? A client will come to you because of a belief that he or she Before you begin your consulting business. or project management. if there is an activity in life. strategic consulting aims at identifying the overall • What roles will I have to perform that I don’t perform direction. and be thoughtful in your responses to them. goals and strategies of a company or organization now? Managing a business. I need a business plan to identify aspects of consulting described above. billing and collecting fees. For want the responsibility? example. and balancing the needs of the business and the clients Consulting comes in many shapes and sizes. pursues applications of technology to for my lack of skills in a given area? help an organization become more efficient and achieve its goals. problem-solving. the consultant. effectively coordi- whatever source it comes. Is my character up earlier successes. but may involve any or all the other a successful business. A consultant’s services can marketing. too. From to the challenge of leading a business. There are consultants for problems and challenges. your client wants the benefit of nating all the responsibilities of a professional enterprise. “Good judgment merely providing consulting to clients. your wisdom. Management consulting providing a service to clients. questions. of course. Which of these roles can I perform? What are technology. to address a particular challenge. Whether I have comes from experience. you could become a consultant in that ity in a situation where emotions and biases may run deep. The client will look • Do I have what it takes to start a consulting business? to you. What are my goals? What are my strategies for success? –4– . each with a slightly different focus. Different types with the needs of family and personal relationships? Do I of consulting exist. for fundraising. or the many things to be considered.” A wise client wants to learn not only from your service is just the first consideration. wisdom and experience. within its specific industry sector. promoting a business. focuses on how an organization can achieve its stated goals maintaining records. Industry specific consulting focuses on an indus. offering objectiv.Special Considerations for Starting Your Consulting Business Consultants add value to their clients’ businesses. be targeted on very specific challenges: bringing a fresh In short. employing people and paying through choosing and implementing strategies. Running a consulting business requires more than You may have heard the old saying. personal implement solutions to their operational or organizational coaching and team building. and. ence in that activity.

willing and able to do a customer base and/or a pipeline for business referrals? that? How can I do that in a positive way? • How can my current relationships help me in starting my Are you willing? Armed with special knowledge and expe- business? Can I identify current business or personal rela. • How will I market myself and my business? Self-promotion Can you add value to the lives or businesses of your target may have to become a basic part of my life as I start and clientele? Can you transform your current relationships into grow this business. or do I need a lawyer or passion and enthusiasm extend beyond mere consulting tax accountant? to running a business? –5– . Are you willing to take on the in the way. though perhaps not so much Will you take the initiative to see to it that all the tasks for a consulting business. and having relationships that can be tionships that are likely to refer future clients or become transformed into business. ownership issues be clarified? Perhaps you have been a professional in your particular • How do I determine my pricing? Settling pricing issues field for a number of years already. either full-time or part-time. experi- target market know the value I can add with my services? ence and maturity that will benefit your potential clients. Have I thought adequately to keep the business going will be carried-out? Will you about how I will make it through the early stages of the put energy into promoting the business and pursuing business from a financial perspective? new clients? Will you “do what it takes” to successfully meet the needs of your clients through the performance • How will I handle compliance issues? What tax compli- of your consulting services? Will you stay on top of grim ance matters will I have? What legal and regulatory ongoing administrative matters like recordkeeping. Before you get started. at home with what I have? you need to do a preliminary gut-check and ask yourself the question. DVDs or other products when I consult. rience in your field. “Am I ready. You need to be from these existing relationships? What obstacles stand ready to run a business. The expertise you in my own mind up-front will eliminate ongoing stress. or will I hire taken lightly. You need to think seriously about whether independent contractors to meet my needs? Will I buy you have what it takes. It involves a substantial commit- or lease an office facility and equipment. how of responsibilities related to operating a business. you meet the first criterion for future clients? What strategies can I implement to benefit having what it takes. and will I protect my rights in these products? If a consult. more use hourly rates? Project rates? Monthly retainers? than anything. does your find resources on the Internet. have developed and the business relationships that have How much do I need to charge to be satisfied with my grown through the years are likely to help you tremen- compensation? How do I determine market rates? Do I dously as you begin your new adventure. willing and able to start. run • How will I define the consulting service I intend to and grow a consulting business?” provide? Can I describe what I have to offer in a way that helps me know who my target market is and helps my Are you ready? You must already have the skills. such as non-compete agreements? added responsibility of starting and running a business. not just providing a service as a consultant? • How will I finance my start-up? There are some up-front costs to starting a business. But there is more. you must have the confidence that you can effectively ing project includes the development of products. Am I ready.• How will I structure and operate my business? What kind Do you have what it takes to start a of business entity do I need to set-up? Can I be informal. • Will I provide products with my services? If I use training But in addition you must ready yourself for a broad array materials. consulting business? or do I need to set up a corporation or LLC? How will I obtain the services I need to operate the business? Will I Starting a consulting business is not a decision to be hire employees. your experience and relationships will be the key foundation on which to build your business. or will I start out ment of personal time and energy. In fact. who coordinate all your business and consulting activities at actually owns them — me or my client? How should one time. tax compliance matters will I face? Do I need help? Can I compliance and collecting fees? In short.

and it will be important to consider do an inventory of your strengths and weaknesses related the impact of your strengths and weaknesses on your to these and other character qualities. qualities necessary to make a success of your business venture? Are you a self-starter that can take the initiative Are you able? Armed with your expertise in your field of to build a business and keep it running? Can you set a consulting and your passion for both serving clients and vision. In the same way you did an competence to run a business? You surely have strengths inventory of strengths and weaknesses in your skill set. you going to deal with that weakness? You may need you next need to consider the circumstances you find to obtain some training in that specific skill. truthfulness. determination. and Do you have the management skills and temperament to wisdom. and self-promotion and marketing and sizes. How will you accomplish the necessary business-building communication? Do you From a legal perspective. be certain that you have both the competence advantage of your strengths while either working on or and the character qualities that you need to succeed. or perhaps yourself in. –6– . leader. or do you need to take public speaking classes or Even if it is not mandatory. and enthusiastically pursue running a business. They can be legal. You next need to consider creatively work with them and work on them to bring out your capacity for running a business in terms of both the best in yourself and others? Can you balance the competence and character. enthusiasm. thoroughness. You also need to think about responsibilities of your work with your responsibilities to whether there are any constraints on your ability to start your family and friends? your business. are just plain scary to you. Essentially.If you can get excited about both serving your clients In addition to having the capability and competence to and running your business. initiative. and weaknesses. you may find that having join Toastmasters? additional training that results in earning a special certi- fication will be important for marketing your consulting business. Are there circumstances that would restrict you can hire an accountant to perform that task for you. compensating for your weaknesses. you may know a lot about your field of Constraints on launching a successful consulting and can be very orderly and methodical in consulting business providing your service. boldness. How are issues surrounding your competence and character. character is up to the task. Do you have the character ing business. Special credentials speak to potential clients about your professionalism. Before you move ability to run a business. but you’ve never kept business When you have completed your consideration of the books and records or filed tax forms before. you need to consider whether your criterion for having what it takes to start your own consult. as well. you have passed the first two tests it? Can you discern your strengths and weaknesses and for starting your business. Finally. to perform some types of need another person to be your promoter and cheer. but you’re ing business? Constraints can come in various shapes not very gregarious. you need to assess the various keys to success in consulting. financial or personal. order- starting a consulting business liness. then you meet the second run the business. dependability. consulting a license or certification may be necessary. resourcefulness. you want to take full ahead. your ability to move forward with plans to start a consult- Maybe you’re great at one-on-one interaction. There are many other character qualities to run your own business? Do you have the capability and take into account. endurance. For example. Here is a list of just a few character qualities that can be put to good use in starting and running a consult- Competence and character essential for ing business: Attentiveness. plan a course of action.

than continuing to do what you are doing now. and work upon a foundation of good character. you must abide by the provisions of the rience in your field that you can effectively share with your agreement. Second. communicating explanations and recommen- cost of starting your own business on your relationships dations clearly. keeping up to date in your field. your reputation for excellence and effectiveness hood is that you are taking on a greater workload that will be key to your ongoing success in the consulting will take more of your time and energy and attention field. service and a passion for excellence. you may be in great shape. when employees and officials leave client to add value to his or her life or business. If not. Give the best that through these issues with your family as you make your you have. consulting with a competitor of your current employer. from a personal perspective. –7– . lobbying. is consulting but communication? Keeping clients Finally. your ability to communicate effectively with coverage for a family member with health problems. Find ways to keep the business fresh and exciting. If you have entered into a non-compete agreement with First. But a good reputation is only secure when built than work currently requires. Often. Take opportunities — and make oppor- need to continue working your “day job” as you begin tunities — to expand your network of relationships with to set-up your business to keep some income flowing others in your field and with potential clients. After all. then your strategy for starting. what before you make the jump. and yourself to your target market. listening carefully and speaking truthfully with family and friends. you must count the informed. Your passion and enthusiasm for work you enjoy can be contagious. if you are intending to consult in the same field The keys to success in consulting in which you are currently working. your start-up? If you already have clients in the pipeline. you must have an existing set of relationships that can be transformed into clients or into referrals for From a financial perspective. you need a dynamic plan to promote your business ready and waiting. you may need to A successful consulting business doesn’t just happen. and work for your clients with an attitude of decision to start your business. the likeli- Fifth. running an office right away. you must have a solid base of knowledge and expe- your employer. These are the people that know you and your whether you can afford to make the jump into starting capabilities best. as a government post they are prohibited from consulting time goes on. Finally. make sure you enjoy your work. you must continue to grow and develop with contractors in a manner that would be considered your expertise. You both the spoken word and the written word will be your may need to work out of your home instead of opening strongest and most essential tool for starting. And. you need to consider clients. your way or perhaps to maintain your health insurance Fourth. Networking will be up should take into account your financial needs. Be aware of this. Do you know how you will finance their support. inter-related keys to success. You may key to growth. with a source of new revenue Third. Remember to “count the cost” and growing your consulting business. Enlist a consulting business. They know the value you can add. Be certain that you don’t create an ethical hazard for yourself as you start your business. and share your enthusiasm with those around you.Also. consider any conflict of interest that would arise by There are several. While it is possible that starting are all essential aspects of effective communication that your own consulting business will be less demanding will lead you to success.

clients. revenues will have to cover all of your time and expenses. radio or television you decide whether to keep moving forward with your plan. when. have and also in terms of the financial results you want to faction and to encourage a continuing business relation. based on a regular work week orderliness are important characteristics of a well-run of 40 hours for 50 out of 52 weeks in the year. thing as you start your business. How much do you expect to (and maintaining order in your business. cash flow. think about both the time Office manager. then you need to a routine basis. As you consider your goals. some understanding of employment law. achieve. Organization and structure. make all your income for the year on 1. and how much will you devote to running the business. payroll taxes. type and the amount of consulting work you want to the relationships must be nurtured to assure client satis. Just a reminder that you’re responsible for every- some of your other roles. Rainmaker (promoter). decisions and choices you must make. The general administrative activities you can devote to actual consulting and the time you will related to running a business must be handled. –8– . Until you have to devote to running your business. You may even have to learn how to do various steps of building your enterprise.000 hours to allocate. If 80 percent of happier in the long run if you keep up with these duties on those hours are devoted to consulting. You’ll be much how much can you) devote to consulting. where. Planning your consulting business and bringing in the clients. so consider these issues as you plan your hourly rate Accountant/bookkeeper/tax manager. Accounting and recordkeeping are key to 2. Preparing a homemade brochure. you can plan effective strat- Whether it’s simply the creation and distribution of a egies to identify and overcome obstacles. you can’t consult. Set this function in place right away. that is the core of the business. Your consulting can hire some support. Marketing method- about your goals and what you must do to achieve them. there are business. additional service unless you let them know. The purpose of the business plan is to make you think Marketing/advertising manager. You’ll need to have than merely providing consulting services to your clients. If you don’t have a client. Billing and collecting fees cannot be ignored. ologies will have to be developed and implemented. You may do this by transform- ing current relationships into sources of referral or actual Early in the process of starting your consulting business. or business plan early in your start-up process will even help development and purchase of print. Therefore. your consulting service on an ongoing basis. and then begin to manage lot of effort in other areas in order to be able to perform people as well as functions. Clients may not be aware that they have needs for operationally. Collections manager. Provide a marketing plan that you can implement in your drive to achieve your goals. Rather. Describe how you intend to achieve the goals ship. Focus Client relations manager. For instance. what. The lifeblood of a small business is You need to set your hourly rate accordingly. the responsibility rests with you. establishment of a website. Let’s look at Janitor. you will need to pursue a marketing strategy. Merely providing consulting business. Networking (and a bit of self-promotion) will be having a business plan will help direct you through the key to this role. but it takes a and other related matters. It’s that simple. rainmaking is your first role — promoting your business and yourself.600 hours of work. When you know your goals. Certainly.Your roles as owner of a consulting Personnel manager. advertising. There may come a time when you are ready to hire staff or some outside help to assist you in business providing consulting or performing some of these other Running a consulting business requires a whole lot more functions of operating a business. Outline your goals in terms of the specified consulting services won’t be enough. keeping the business plan relatively simply is a good idea. As with other some cold-calling to mine for clients. Careful attention must be given on the ‘who. why and how’ of your to your relationships with your clients.

in a consulting business is likely to be your own profes- ally — keeping expenses low by having a home office sional malpractice. Don’t let the independent contractor relationship. If you set up your business as a corporation. They are concerned One other word of advice — don’t get so caught up in that the IRS might later interpret the relationship with the preparing a perfect business plan that you never begin consultant as an employment relationship rather than an to consult and perform billable services. your biggest risk of liability relatively early in the life of your business.” for which higher make the decision on choosing a formal business entity. tion or LLC is more professional. LLC or LLP legal structure in your business. However. –9– . There are a couple of practical downsides to operating ties. You need to think about how you are actually corporate entity. tion as a corporate entity as well as the flow-through of keeping things simple should be your watchword. tax rates apply at the corporate level. First. Working as a sole proprietor is the Setting-up your business in corporate. all income tax issues flow-trough to you early in the process of setting-up your consulting as an individual. creating efficiencies such as template documents that can be used for routine activi. there isn’t much you need to do. going to accomplish the various tasks of operating your An LLC or LLP provides the same kind of liability protec- business. use of the assumed name. You really don’t have to do anything could offer you some additional tax planning flexibility. If you set up as an A handful of operational matters require your attention S-corporation. limited liability company (LLC) or reach your goals. LLCs and LLPs are a bit more flexible than S-corporations. simple may work best. many potential clients will only and promotional tools. Otherwise. In short. Describe how you will implement want to contract with a consultant who is operating as marketing and promotional activities that allow you to either a corporation. But be aware The only legal downside to a proprietorship is that you that you may have greater success building your business will remain personally liable for legal liabilities incurred if you set it up in a corporate. routinely be clients just perceive that a person operating in a corpora- revised and updated. and employee benefits. especially when it comes to issues related to salaries. keep your business structure as simple as possible. it is probably best Settling the legal structure of your consulting business to apply with the IRS to be an S-corporation. assumed name. for administrative support. and should. It’s not the reality. you may want to structure your consulting business consulting business as a corporation. which you can’t escape by operating and using temporary help to meet some of your needs in a corporate entity. but it is the perception of some. income tax issues that exists with the S-corporation. limited liability partnership (LLP). especially as you are starting out. It can. and What form of business entity will you choose? require less administrative effort to keep up-to-date will If you are starting out relatively small. Second. To address the legal and practical downsides of operating Structuring and operating your as a sole proprietor. unless you are going to operate under an too. because early in the process helps to get things on track with if you set up as a regular corporation you will be taxed your business. then keeping it legal compliance requirements. which would result business plan be an obstacle to taking first steps to in the imposition of taxes and penalties. to get started. in which case you’ll need to file for the distributions. many initiate your business. Just as with choosing your legal structure. too. Different factors will come into play as you as a “professional service corporation. LLC or LLP form easiest way to begin. developing brochures and other effective marketing as a proprietor. but you still have the protection of a business. LLC or LLP.Then consider how you will meet your goals operation.

First. However. It is important so that you can clearly explain it to them. as an objective outsider applying business cards. those professional services fall What consulting services will you offer? pretty safely into the category of independent contrac- tor relationships. If you hire a person to do product created during consulting. They may want you simply to identify You’ll need a business phone (land line. you perform your consulting services at your client’s business have to be able to describe to them both your service location? Your decision on this subject will be based on and their need for it. good computers and a high-quality printer tion and downsizing. client service requirements. You’ll want a business tions. a template for proposals to provide consulting services. so you will want a catalyst for change. It may vary from client to client or from project to you’re starting out. cold-calling. a fresh perspective in a challenging situation. you want to start out in an office in your home. are also important business assets to have so that you – 10 – . preferably. So it is important for you to know what your focus is you grow and prosper. or as a and a brochure that describes you and your business. in essence to function tional talking points. cell or both) with and analyze problems or needs inside their organiza- an answering service or voice mail. Templates are also useful have to be careful to treat the work relationship properly for consulting contracts and standard forms of work for tax compliance purposes. where the customer/ Second. Think through the services you need It sounds simplistic to remind you that you need to help with — functions you’re weak in or functions you know what you’re selling. and what value you can provide to your potential clients. if you hire someone to handle the accounting. a potential consulting client may not even you feel you need to have a business office? Can you be aware yet that they need your services. They may just want you to supplement their staff can access your business on the Internet. what are some of the “business office basics” that you need to have in the early stages of your consulting Clients may want to hire you as a consultant for any of a business? Many of these basics relate to communication. or will you seek their services as indepen. Remember. and even for promo- office work under your supervision. don’t treat the relationship as an inde. dent contractors? The simplest approach when starting This will protect you from “reinventing the wheel” each out small is to contract for the services you need. number of reasons. how will you set up your base of operations? Do client is already in the market when they start looking. “hired-gun” to do its dirty work in the midst of reorganiza- Obviously. But consulting comes in many just can’t devote time to — and get the help you need. A client may want you to serve as forms of communication live on. and attitudes about professionalism and the kind of image The focus of your consulting services can have many vari- you want to project. But you time you make a proposal. a web site so that people project. if you get help from to you over time is the development of templates for others. Old fashioned for a short-term need. pendent contractor type. will you hire them as either part-time or full-time some of your basic business transactions — especially employees. mini sales pitches and scripts for as an employee. And selling consulting services isn’t the same as selling a TV or a car.How will you operate and organize your business can provide your clients with efficient service and profes- functions? sional-looking work product. run a marketing campaign or provide legal services. are you going to do it all yourself. Third. too. or are you going Another business office basic that will prove valuable to enlist the help of others? And. simple is better when ations. financial considerations. You can always make adjustments as project. letterhead and invoice statements. shapes and sizes. or do Sometimes. You may be asked to design and/or implement a email address and. Thus.

ties. when you create training area to see what their fees are and how they calculate them. And when a consulting project methodology. how will you protect your rights in these products. First. – 11 – . Or perhaps you tape the live training session so are intending to attract will find the price attractive? Another that it can be used later. This raises some questions that you will need to consider consider doing a survey of other consultants your market as you plan your business. or This can help you set your rate and your financial expecta- hardcopy materials and later sell them or incorporate tions realistically. To settle these issues in your own mind up-front will raising and marketing activities would fall into this category. Your rates must be set Be careful to protect your rights to products that you so that they can cover all your costs. Whichever methodology you use. for instance. fund. you may also be marketing and administration. lump-sum includes the development of such materials or other forms fees for specific projects or retainers for your ongoing avail- of work product. a consulting overhead expenses. These may be the most Another possibility is that you may be asked to influence important issues you need to figure out before getting others on behalf of your client. seriously consider how much you will charge and in what manner you will charge your clients. a “standard” practice will help you analyze just how flexible Be clear about the value you can add to your potential you want to be. in the form of a DVD. too — your time devoted to management. As far as ‘how much’ is concerned. remove much of the ongoing stress of revisiting the issues from scratch with every potential new client. address clearly the issue of ownership and control of the work product after completion of the contract. Lobbying. way of asking that question is how can you make your rates competitive in the market? Before you set your rates. them into your consulting work. It’s easy to forget that the business. started. in the process of providing a service. if work product is to be developed within the parameters of a consulting contract. Take. client’s organization or operations. Copyrights can be an important You have many options to choose from as a rate-setting protection for your work. And don’t forget the costs contract that calls for the development of a training of health insurance and retirement savings you want to program. Perhaps you provide the training live for the provide for. as described above. Also.Or you may be hired to teach/train your clients or their staff Setting your pricing for consulting services members in a skill so that they can then perform the task for themselves (give a man a fish and you feed him for a day. campaigning. or the taxes you will pay. but you produce a DVD or CD with the same presentation that can be sold or distributed more Second. and so on. but having about the services you are prepared to offer and perform. CD. all of your operating and producing a product. what do you need to make to be satisfied that you are being paid adequately for your Will you develop products as you service and that you are earning enough to make a suffi- provide consulting services? cient living? Recognize that the rates you charge for your consulting services have to cover all of your costs of running Consulting is a service business. you must teach a man to fish and you feed him for a lifetime). materials. a question is raised regarding who actually ability. including hourly rates for services. what do you need to charge so that the clients you broadly. for instance. Yet. As you get started in your consulting business. remember that owns the materials — the consultant or the client. You can still be Be clear — for yourself and for your potential clients — flexible on the questions of how and how much. your rates need to cover more than just your time spent in consulting. look at it from more than one perspective. First. staff of your client. they must also be develop on your own for use in later consulting activi- competitive in the market.

client’s needs.. It requires a constant process marketing efforts. The more contacts you have. when a potential client is ready to get serious beginning of a well-crafted story or article (or even a about working with you. This method can be that you can quickly and comfortably communicate in particularly useful when you are seeking to establish a conversation with new acquaintances can be a big help. If public speaking isn’t your bailiwick. be sure to expertise. Your reputation for Finally. but don’t expect it to grow dramati. Don’t believe that excellent skills and a good reputa- tion alone will keep you in business. Many consultants yourself available for public speaking. your chances of getting new clients. transforming existing relationships with people In short. With effective may get you your first client or two as you start-up your researching and listening skills to ascertain a potential consulting business. don’t forget everyone’s favorite method for competence and character among friends and colleagues getting new business — cold-calling. But you can’t just focus on being a consultant. Having a standard monthly) and you agree to be available for work for your presentation about you and your consulting business client for a certain number of hours. You may want to use more traditional methods of adver- tising to draw new clientele. Print advertising in newspapers or business journals that relate to the type of Your marketing strategy for your consulting you do can draw clientele your way. as well. You need to promote your business — and yourself! – 12 – . your byline at the it. Whether in print or online. interest to certain audiences and would spotlight your However you design your pricing structure. and to encourage them to pass on the promotion comes from others so you don’t have to the news of your new business by word of mouth. and a solid sales presentation that cally without conscious and very intentional marketing clearly explains what those needs are and shows how and promotional efforts. then put it in writing. long-term relationship with your client and develop a You can expand on the networking theme by making secure financial base for your business. particular proposal. and there consulting business may be a place for some form of direct mail advertising. especially when you have a specific target market. Then. You can’t sit back and wait for your next client. Some like the hourly basis of of relationships that can serve as a pipeline for new charging while others would much rather know the overall business. Know it well enough so that it rolls perhaps writing articles or newsletters is more your cup easily off your tongue when someone asks you about of tea. a lot of this group of people. Certainly. you can be as flexible or book) serves as a great promotional device for you and inflexible as you want to be about the pricing for that your business. where you and your client set a periodic fee (eg. Step two may be to seek referrals from of self-marketing and self-promotion. You can even feel that they can offer a discount for a client willing to develop some specific presentations that would be of establish a retainer-based relationship. ‘blow your own horn’ so much. Unless other potential clients your services can address them. you can influence the have exposure to you and your business. how can they decision-makers in potential client organizations and know to seek you out? win new business. Networking through participation in various cost of a proposed project.Different clients will typically have different preferences But you need to continuously expand your network about rate methodology. Others prefer having your business and civic organizations can be very important ongoing availability over a period of time on a retainer in this effort. winning new business requires more than just you know into consulting relationships is step one in your being a great consultant. the better basis. Hopefully.

They know your value to the ongoing Often. and they best. Identify the people who are ready to pay you a retainer. Your current pool of business and personal relationships Who among this group do you think would be interested in almost certainly will be the source of your first clients as your success and willing to help you get started? Give them you start-up your consulting business. will be key to getting your business going. You will want to have a you can provide valuable service. treat the company as your first potential client.Tapping existing relationships for Maybe you have participated in organizations or activities where you met others who are prominent in your field or who consulting business work in organizations that could benefit from your services. It may mean that you minimize your business tunities or referrals. There are likely to be provide? If so. Also identify the people who you think would be days of your new consulting business. If the company can’t separate bank account for your business. you spent many years sufficient to expand. perhaps you can that first client for an advance payment of part of your fee. by winning their support as cheerlead- ment as you begin to do business. Your reputation for the opportunity to help you grow your business. It may mean that you negotiate with working as an employee of a company. perhaps it can still become a cheerleader to establish a line of credit or obtain a business debit or and source of referrals. Transforming some of these relationships Financing your startup consulting business into consultant/client relationships may be the first step in your marketing plan. Even if that is true. and who know you best. through the years with customers or suppliers or business You will want to plan for uncertainties. especially if you can identify specific ways in which the future as your business grows. your capabilities. prior to starting your business. more than anyone else. Could that the cash flow will constantly or consistently pour in as these businesses have need of the services you intend to you conduct your consulting business. It may mean you start most able to help you. then to develop a business relationship with a local banker so they may want to continue the relationship on a contractual that the relationship is there as financing needs arise in basis. You can’t assume partners of the companies you have worked for. or times when it’s what develops. If you have good working using personal funds. The transformation can occur in two The good news on the financial front is that a consulting ways — first. and their interest in your future success. a consultant starting a new business can get started operations of the company. credit card for more convenient financing and recordkeep- Perhaps you have developed solid business relationships ing for your business. The people And it may mean seeking financing through small business you have been working with. – 13 – . expenses until you are satisfied that the flow of income is If. by winning some of these people over as business typically doesn’t require a substantial up-front invest- clients and. it is a good time relations with leadership and staff in the company. and you may want become a client. consulting part-time as you continue to work in your employ- and give them the opportunity to help with business oppor- ment capacity. pursue these business relationships to see down times when there isn’t much work. second. can ignore financial concerns as you start your business. Make sure you enlist the support of the people you know Unless you already have your first clients lined up. try to set aside some of your revenues to cover yourself during those more difficult times. tough to get the clients to pay. competence and character among these people. So right from the beginning. But that doesn’t mean you ers for your business and sources for referrals. you may need to consider you think would most want to help you as you start your how you are going to survive financially during the early business. Let them know what you are doing. know loans or other sources.

Also. assumed name authori- want to. state and local income If you set up a corporation. you are forced to learn the hard way — by getting ance with state registration and reporting requirements caught out of compliance. and can help you maintain compli. it may be well. early in the process of starting professional liability insurance coverage for your new your business. be sure to confirm your compliance issues that you will face in your new business. to hire an attorney and/or a tax specialist consulting business. federal and state your new consulting business. – 14 – . Some states may also have requirements for minimum In addition. state workers’ compensation programs. over the lifetime of your business. Each of these areas should be studied so that help. obligations for coverage. state and local sales taxes. LLC or LLP in which to operate taxes. you will have a lot of unemployment insurance programs and related payroll new legal and tax compliance obligations as you begin taxes.Tax and legal obligations of Here are just a few of the issues you will need to learn about: Federal income tax and payroll taxes (FICA). some states may have registration or certification requirements for those who perform consulting services in your particular field. but you’ll probably be better off looking for some zations. You will want to make sure that you comply with these requirements before starting out. consulting businesses federal self-employment tax. As you set up your entity and to help you with many of the other tax and regulatory register with state authorities. local business. Bizfilings can help you register a new corporate or you understand your compliance obligations before limited liability entity. You can handle all these things yourself if you business licenses or permits.

org • Mentoring consultants for your business’s growth • Consultants Mall • Improving your consulting communication skills www.org • Managing compliance issues in consulting • Independent Computer Consultants Association www. with seminars and confer- In the following pages.icca. you will want to make sure you know function. For consulting generally. including: resources: • Updating your consulting competencies through • Institute of Management Consultants USA continuous learning www.com • Building the character of your consulting business – 15 – . in your field.consultants-mall. with distance learning programs. we’ll be looking at a number of ences. A consultant must pursue continuous Running a business is a constant responsibility. Well. Therefore. so it’s pretty easy to maintain enthusiasm. Growing a business takes creativity.consultingsuccess. and the learning so that he or she maintains up-to-date skills and responsibility only grows as the business grows.Special Considerations for Running & Growing Your Consulting Business So now you’ve gotten your consulting business started. there flexibility to make course corrections along the way to are many associations and institutes that support the keep things fresh. It’s about consistently maintaining business industry. Here are just a few of these consulting business. if that’s what you to provide special knowledge and experience in your think.consultapc.org • Monitoring billing and collecting in your consulting • Association of Communications Consultants business www. Running a business is more about persistence. Maybe you think that starting a business is the hardest part. industry with information available on the Internet. and then The foundation of your consulting business is your ability it’s all a downhill ride after that. You cannot grow a consulting business without keeping abreast of the latest information and methods Starting a business is new and adventurous and exciting. and with training materials and periodicals that the special considerations for running and growing your offer the latest information.imcusa. field to your clients.org • Expanding your consulting network and relationships • Association of Professional Consultants • Promoting and marketing your consulting services www. You have to and use the resources that will provide you with the best have energy and imagination to pursue your vision and information in your field. Updating your consulting competencies Congratulations! Now comes the harder part — running through continuous learning and growing your business day by day. abilities. it may be time for a bit of an attitude adjustment. perseverance and Information is part of the lifeblood of the consulting processes.

of trouble if you’re not attentive to it. Write articles and newslet- Make sure that you have procedures in place to comply with ters that you can make available to your clients and potential filing requirements and payment requirements in a timely clients so that they have a better understanding of the value fashion. to making the billing and collection process flow smoothly. tional reports and other matters. in consulting tionship. do some direct mailing. then make a proposal and then actually enter a Few people like to spend much time thinking about the contract and begin to provide services. but an essential one. to made.Expanding your consulting network Monitoring billing and collecting and relationships in your consulting business A successful consulting business is a game of numbers. In the consulting business. Consulting is a pipeline business. who know you is essential to the ongoing collecting our fees is a tedious task. annual organiza- Don’t forget that you can advertise. Talk to a lawyer and/or a tax accountant about the that you can add to their organizations or operations with various obligations your business will have for withholding your consulting services. health of your consulting business. and workers’ compensation obligations. So don’t stop. Developing strong client relations is really the key the field in which you specialize. just like in any other small and expanding the number of people you know and. So the message is So take advantage of opportunities to speak at public simple — just do it. and encourage your clients to refer you to others. cash flow is king. more business. Stay active in business and industry clients and following-up to make sure that payment is associations related to consulting and. consulting services Never stop promoting yourself and your business. it’s tedious. and even do some cold-calling to sell your services to Don’t make the mistake of ignoring it until you have a potential clients who you don’t know and who don’t know big legal problem or a big financial obligation for taxes about you…yet. We all know that billing and importantly. Clear communication about your fees and about your client’s level of satisfaction with your services will go a long Promoting and marketing your way toward making this task easier on everyone. and penalties. It is often several months Managing compliance issues between the time you first start to pursue a client rela. Find new ways to connect with people that can help you Develop and maintain routine practices of billing your grow your business. Don’t ignore the cash flow needs of your business. – 16 – . Market yourself and your business and paying income taxes and payroll taxes. more specifically. unemployment actively. always want to have that next client or that next project It’s boring. events about your field of work. and it can get you into a whole lot somewhere in the pipeline. That means you details of compliance with tax and regulatory requirements.

client through consistent. and never let the level of Building the character of your excellence falter. straightforward communica- Make character count in your consulting business. Show your character not only in your service of your industry. becomes crucial. you can’t provide the basic challenging times. It will pay dividends awareness of your business and your expertise. and more work to do. and phone scripts that can effectively speak to your target market can boost your client base. Just having the ability to describe who you same time keep your business going and growing. Everything in consulting revolves around communication. constructive. web sites. Without effective successes and greater peace and confidence during the communication skills. and requires more effective communication. of timely. the ability to perform Consider managing and mentoring other consultants in public speaking or to write readable articles and your business as your business grows and you have more newsletters provides an excellent avenue for raising work than what you can do by yourself. As your – 17 – . then the role If you want your consulting business to grow and prosper. and tion is essential to that satisfaction. you will find that you will have more satisfaction in your • Consulting itself is communication. especially as treat your clients the way you want to be treated yourself. later on. and building a strong relationship with a wink of an eye. are and what you do in your business in a 30-second That will be possible if you begin to work with and train sound bite during everyday conversation can help other consultants to take on greater responsibilities. Developing brochures. and you have others working with you. grow your business. and more pressure building. encouraging communication then you need to think about training-up a new genera.Mentoring consultants for your business grows. more people become involved in the process. tion of consultants to work with you and after you in your • To promote your business. and it all hinges on effective communication. actions but your attitudes. In addition. advertising. Therefore. communication skills are business. consulting business What is it about communication that makes it so key to the A lot of people count on their reputation to get them by growth and success of a consulting business? in business. but at the essential. But reputation without a strong foundation • Client satisfaction is the core measure of success in in character is a very insecure asset that can be lost in the consulting. make excellence in communication your goal from the beginning. so be service-minded. Everything. and more deadlines squeezing business’s growth together. You may want to slow down some day. coordination of business functions You are providing a service. • As you get busier. Improving your consulting Don’t underestimate the value of effective communica- communication skills tion for growing your consulting business.