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how to start a consulting business : Tips and tricks
how consulting business works and how to start consulting business.and also how to write a consulting business proposal | free pdf download
A Guide to
Starting and Running
a Consulting BusinessBy sharing the richness of your previous business
Table of contents
experiences, a consultant can help other companies
Consulting business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
see their operations differently and more effi -
ciently. But operating as a free agent can have
Special considerations for starting your consulting
business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
its advantages and disadvantages, personally and
Preliminary questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
professionally. Learn to how to help your business
succeed as you help others to do the same. These l
Do you have what it takes to start a consulting business? . . . . . 5
are just some of the special considerations of
Competence and character essential for starting a
consulting business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
consulting businesses that will be outlined in
Constraints on launching a successful consulting business . . . . 6
this Guide to Starting and Running a Consulting
The keys to success in consulting . . . . . . . . . . . . . . . . . . . . . . . 7
Business, brought to you by BizFilings and Business
Owner’s Toolkit®. Your roles as owner of a consulting business . . . . . . . . . . . . . . . . 8
Planning your consulting business . . . . . . . . . . . . . . . . . . . . . . . . 8
Structuring and operating your consulting business . . . . . . . . . . 9
What form of business entity will you choose? . . . . . . . . . . . . 9
How will you operate and organize your business functions? . . 10
What consulting services will you offer? . . . . . . . . . . . . . . . . . . . 10
Will you develop products as you provide consulting services? . 11
Setting your pricing for consulting services . . . . . . . . . . . . . . . . 11
Your marketing strategy for your consulting business . . . . . . . 12
Tapping existing relationships for consulting business . . . . . . . 13
Financing your startup consulting business . . . . . . . . . . . . . . . . 13
Tax and legal obligations of consulting businesses . . . . . . . . . 14
Special considerations for running and growing your
consulting business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Updating your consulting competencies through
continuous learning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Expanding your consulting network and relationships . . . . . . . 16
Promoting and marketing your consulting services . . . . . . . . . 16
M onitoring billing and collecting in your consulting business . . . 16
Managing compliance issues in consulting . . . . . . . . . . . . . . . . 16
Mentoring consultants for your business’s growth . . . . . . . . . . . . . 17
Improving your consulting communication skills . . . . . . . . . . . . . . 17
Building the character of your consulting business . . . . . . . . . . 17
– 2 –Consulting Business
The consulting industry thrives. Welcome to the world of How do you start, run and grow your consulting business?
consulting — a dynamic part of the ever-growing service In these next several pages, 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, to offer instruction of planning for a new consulting business and then imple-
and training to staff, or to serve as a catalyst for change (or menting the plan .
do the “dirty work” of change), you will be providing an
• First, we take a look at the many challenges of starting
essential service to your clients . You have the opportunity to
a new consulting business . It begins with the initial
add signic fi ant value to their operations and to help them
soul-searching question — ”Do I have what it takes?”
be the best that they can be .
— and continues on through a series of practical
Consultants add value. A consultant is a person consid- considerations that must be faced as you plan and
ered an expert in a specified field — with a wide knowledge initiate your business . These considerations include,
of the subject matter and a depth of experience — who among others, understanding your roles in running
gives professional advice and counsel to another . You your business, structuring your business, defining and
can put your special knowledge and experience to marketing your services, and setting-up recordkeep-
work, and provide an important service, by sharing your ing and compliance procedures .
wisdom and expertise with others . Consulting is simply
• Then, we identify the continuing challenges of running
the sharing of knowledge, wisdom and experience . And
and growing your consulting business after you get it
maybe one thing more — a passion and enthusiasm for
off the ground . The analysis here focuses attention
the subject matter, whatever it may be .
to the ongoing needs of the business — things like
continuous learning, effective networking, consistent
Clients need consultants. Engaging a consultant offers the
promotion and marketing of your services, and main-
client some real added value — access to deeper levels of
taining adequate cash flow .
experience and expertise for a special, often short-term,
need when it is not feasible to accomplish a particular goal
through in-house experts . It is cost-effective because the
client can purchase only as much service from the consul-
tant as is necessary to meet the need .
– 3 –Special Considerations for Starting Your Consulting Business
Consultants add value to their clients’ businesses. New and different types of consulting continue to blossom
Consultants are hired by clients to help develop and and grow . Consultants are used for training, personal
implement solutions to their operational or organizational coaching and team building . There are consultants for
problems and challenges . A consultant’s services can marketing, for fundraising, and, of course, for campaigning .
be targeted on very specic fi challenges: bringing a fresh In short, if there is an activity in life, and you have experi-
perspective to an old, nagging problem; offering objectiv- ence in that activity, you could become a consultant in that
ity in a situation where emotions and biases may run deep; e fi ld, whatever the activity may be . Consulting is simply the
sharing special knowledge and/or experience in tackling a sharing of knowledge, wisdom and experience . And maybe
particular type of problem or challenge . one thing more — a passion and enthusiasm for the subject
matter, whatever it may be .
Your clients will be looking to you for some particular
skills such as critical thinking, problem-solving, or project
management . They will look to you for leadership and rely
on your communication skills to achieve the goals for which
What do you need to know before you begin?
they seek your service .
Before you begin your consulting business, there are
A client will come to you because of a belief that he or she
many things to be considered . Ask yourself a series of
personally does not have the necessary capacity, or the
questions, and be thoughtful in your responses to them .
necessary capacity can not be found within their organiza-
tion, to address a particular challenge . The client will look
• Do I have what it takes to start a consulting business?
to you, the consultant, for wisdom and good judgment .
Running a consulting business requires more than
You may have heard the old saying, “Good judgment
merely providing consulting to clients . Whether I have
comes from experience, and experience comes from bad
the competence and capability to provide a valuable
judgment . ” A wise client wants to learn not only from your
service is just the r fi st consideration . Is my character up
earlier successes, but from your earlier mistakes, too . From
to the challenge of leading a business, effectively coordi-
whatever source it comes, your client wants the benet fi of
nating all the responsibilities of a professional enterprise,
your wisdom .
and balancing the needs of the business and the clients
with the needs of family and personal relationships? Do I
Consulting comes in many shapes and sizes. Different types
want the responsibility?
of consulting exist, each with a slightly different focus . For
example, strategic consulting aims at identifying the overall
• What roles will I have to perform that I don’t perform
direction, goals and strategies of a company or organization
now? Managing a business, promoting a business,
within its specic fi industry sector . Management consulting
providing a service to clients, billing and collecting fees,
focuses on how an organization can achieve its stated goals
maintaining records, employing people and paying
through choosing and implementing strategies, enhancing
taxes are just a few of the responsibilities of running a
and streamlining operations, and improving information
business . Which of these roles can I perform? What are
technology . Information technology (IT) consulting, as its
my strengths and weaknesses? How can I compensate
name suggests, pursues applications of technology to
for my lack of skills in a given area?
help an organization become more efc fi ient and achieve
• What will my business plan look like? If I am going to start
its goals . Industry specic fi consulting focuses on an indus-
a successful business, I need a business plan to identify
try’s special concerns, but may involve any or all the other
my goals and lay out the steps for achieving those goals .
aspects of consulting described above .
What are my goals? What are my strategies for success?
– 4 –• 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,
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, either full-time or part-time, 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 ofc fi e facility and equipment, or will I start out
ment of personal time and energy . Before you get started,
at home with what I have?
you need to do a preliminary gut-check and ask yourself
the question, “Am I ready, willing and able to start, run
• How will I den fi e 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, experi-
target market know the value I can add with my services?
ence and maturity that will benefit your potential clients .
But in addition you must ready yourself for a broad array
• Will I provide products with my services? If I use training
of responsibilities related to operating a business, and
materials, DVDs or other products when I consult, how
you must have the confidence that you can effectively
will I protect my rights in these products? If a consult-
coordinate all your business and consulting activities at
ing project includes the development of products, who
one time .
actually owns them — me or my client? How should
ownership issues be clarie fi d?
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 . The expertise you
in my own mind up-front will eliminate ongoing stress . have developed and the business relationships that have
How much do I need to charge to be satise fi d 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 . In fact, more
use hourly rates? Project rates? Monthly retainers? than anything, your experience and relationships will
be the key foundation on which to build your business .
• 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 . Am I ready, 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?
Are you willing? Armed with special knowledge and expe-
• How can my current relationships help me in starting my
rience in your field, and having relationships that can be
business? Can I identify current business or personal rela-
transformed into business, you meet the first criterion for
tionships that are likely to refer future clients or become
having what it takes . But there is more . You need to be
future clients? What strategies can I implement to benet fi
ready to run a business . Are you willing to take on the
from these existing relationships? What obstacles stand
added responsibility of starting and running a business,
in the way, such as non-compete agreements?
not just providing a service as a consultant?
• How will I n fi ance my start-up? There are some up-front
Will you take the initiative to see to it that all the tasks
costs to starting a business, though perhaps not so much
to keep the business going will be carried-out? Will you
for a consulting business . Have I thought adequately
put energy into promoting the business and pursuing
about how I will make it through the early stages of the
new clients? Will you “do what it takes” to successfully
business from a n fi ancial perspective?
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, tax
compliance matters will I face? Do I need help? Can I
compliance and collecting fees? In short, does your
n fi d resources on the Internet, or do I need a lawyer or
passion and enthusiasm extend beyond mere consulting
to running a business?
– 5 –If you can get excited about both serving your clients In addition to having the capability and competence to
and running your business, then you meet the second run the business, you need to consider whether your
criterion for having what it takes to start your own consult- character is up to the task . Do you have the character
ing business . 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, plan a course of action, and enthusiastically pursue
running a business, you have passed the first two tests
it? Can you discern your strengths and weaknesses and
for starting your business . 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 . 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 . Finally, you need to assess the various
keys to success in consulting . Here is a list of just a few character qualities that can
be put to good use in starting and running a consult-
ing business: Attentiveness; boldness; dependability;
Competence and character essential for
determination; endurance; enthusiasm; initiative; order-
starting a consulting business
liness; resourcefulness; thoroughness; truthfulness; and
Do you have the management skills and temperament to
wisdom . There are many other character qualities to
run your own business? Do you have the capability and
take into account, as well . 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,
and weaknesses, 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 . Before you move
ability to run a business . Essentially, you want to take full
ahead, 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 .
compensating for your weaknesses .
Constraints on launching a successful
For example, you may know a lot about your field of
consulting and can be very orderly and methodical in
providing your service, but you’ve never kept business
When you have completed your consideration of the
books and records or filed tax forms before . How are
issues surrounding your competence and character,
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, or perhaps
yourself in . Are there circumstances that would restrict
you can hire an accountant to perform that task for you .
your ability to move forward with plans to start a consult-
Maybe you’re great at one-on-one interaction, but you’re
ing business? Constraints can come in various shapes
not very gregarious, and self-promotion and marketing
and sizes They can be legal, financial or personal . .
are just plain scary to you . How will you accomplish the
necessary business-building communication? Do you From a legal perspective, to perform some types of
need another person to be your promoter and cheer- consulting a license or certification may be necessary .
leader, or do you need to take public speaking classes or Even if it is not mandatory, 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 . Special credentials speak to potential clients
about your professionalism .
– 6 –Also, if you are intending to consult in the same field The keys to success in consulting
in which you are currently working, you may need to
A successful consulting business doesn’t just happen .
consider any conflict of interest that would arise by
There are several, inter-related keys to success .
consulting with a competitor of your current employer .
If you have entered into a non-compete agreement with
First, you must have a solid base of knowledge and expe-
your employer, you must abide by the provisions of the
rience in your field that you can effectively share with your
agreement . Often, when employees and officials leave
client to add value to his or her life or business . And, as
a government post they are prohibited from consulting
time goes on, you must continue to grow and develop
with contractors in a manner that would be considered
your expertise, keeping up to date in your field .
lobbying . Be certain that you don’t create an ethical
Second, you must have an existing set of relationships
hazard for yourself as you start your business .
that can be transformed into clients or into referrals for
From a financial perspective, you need to consider
clients . These are the people that know you and your
whether you can afford to make the jump into starting
capabilities best . They know the value you can add . Enlist
a consulting business . Do you know how you will finance
their support .
your start-up? If you already have clients in the pipeline,
Third, you need a dynamic plan to promote your business
you may be in great shape, with a source of new revenue
and yourself to your target market . Networking will be
ready and waiting . If not, then your strategy for starting-
key to growth . Take opportunities — and make oppor -
up should take into account your financial needs . You may
tunities — to expand your network of relationships with
need to continue working your “day job” as you begin
others in your field and with potential clients .
to set-up your business to keep some income flowing
your way or perhaps to maintain your health insurance
Fourth, your ability to communicate effectively with
coverage for a family member with health problems . 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, running
an office right away . Remember to “count the cost”
and growing your consulting business . After all, what
before you make the jump .
is consulting but communication? Keeping clients
informed, communicating explanations and recommen-
Finally, from a personal perspective, you must count the
dations clearly, listening carefully and speaking truthfully
cost of starting your own business on your relationships
are all essential aspects of effective communication that
with family and friends . While it is possible that starting
will lead you to success .
your own consulting business will be less demanding
than continuing to do what you are doing now, the likeli-
Fifth, 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 . But a good reputation is only secure when built
than work currently requires . Be aware of this, and work
upon a foundation of good character . Give the best that
through these issues with your family as you make your
you have, and work for your clients with an attitude of
decision to start your business .
service and a passion for excellence .
Finally, make sure you enjoy your work . Your passion and
enthusiasm for work you enjoy can be contagious . Find
ways to keep the business fresh and exciting, and share
your enthusiasm with those around you .
– 7 –Personnel manager. There may come a time when you are
Your roles as owner of a consulting
ready to hire staff or some outside help to assist you in
providing consulting or performing some of these other
functions of operating a business . You’ll need to have
Running a consulting business requires a whole lot more
some understanding of employment law, payroll taxes,
than merely providing consulting services to your clients .
and other related matters, and then begin to manage
Certainly, that is the core of the business, but it takes a
people as well as functions .
lot of effort in other areas in order to be able to perform
your consulting service on an ongoing basis . Let’s look at
Janitor. Just a reminder that you’re responsible for every-
some of your other roles .
thing as you start your business .
Rainmaker (promoter) . If you don’t have a client, you
can’t consult . It’s that simple . Therefore, rainmaking is
your first role — promoting your business and yourself,
Planning your consulting business
and bringing in the clients . You may do this by transform -
ing current relationships into sources of referral or actual
Early in the process of starting your consulting business,
clients . Networking (and a bit of self-promotion) will be having a business plan will help direct you through the
various steps of building your enterprise . As with other
key to this role . You may even have to learn how to do
decisions and choices you must make, keeping the
some cold-calling to mine for clients .
business plan relatively simply is a good idea . Focus
Client relations manager. Careful attention must be given
on the ‘who, what, when, where, why and how’ of your
to your relationships with your clients . Merely providing consulting business . Outline your goals in terms of the
type and the amount of consulting work you want to
specified consulting services won’t be enough . Rather,
have and also in terms of the financial results you want to
the relationships must be nurtured to assure client satis-
achieve . Describe how you intend to achieve the goals
faction and to encourage a continuing business relation-
operationally . Provide a marketing plan that you can
ship . Clients may not be aware that they have needs for
implement in your drive to achieve your goals .
additional service unless you let them know .
The purpose of the business plan is to make you think
Marketing/advertising manager. Marketing method-
about your goals and what you must do to achieve them .
ologies will have to be developed and implemented .
When you know your goals, you can plan effective strat-
Whether it’s simply the creation and distribution of a
egies to identify and overcome obstacles . Preparing a
homemade brochure, establishment of a website, or
business plan early in your start-up process will even help
development and purchase of print, radio or television
you decide whether to keep moving forward with your plan .
advertising, you will need to pursue a marketing strategy .
As you consider your goals, think about both the time
you can devote to actual consulting and the time you will
Office manager. The general administrative activities
have to devote to running your business . Your consulting
related to running a business must be handled . Until you
revenues will have to cover all of your time and expenses,
can hire some support, the responsibility rests with you .
so consider these issues as you plan your hourly rate
structure . For instance, based on a regular work week
Accountant/bookkeeper/tax manager. Organization and
of 40 hours for 50 out of 52 weeks in the year, there are
orderliness are important characteristics of a well-run
2,000 hours to allocate . How much do you expect to (and
business . Accounting and recordkeeping are key to
how much can you) devote to consulting, and how much
maintaining order in your business . You’ll be much
will you devote to running the business . If 80 percent of
happier in the long run if you keep up with these duties on
those hours are devoted to consulting, then you need to
a routine basis .
make all your income for the year on 1,600 hours of work .
You need to set your hourly rate accordingly .
Collections manager. The lifeblood of a small business is
cash flow . Billing and collecting fees cannot be ignored .
Set this function in place right away .
– 8 –Then consider how you will meet your goals operation- in a consulting business is likely to be your own profes-
ally — keeping expenses low by having a home office
sional malpractice, which you can’t escape by operating
and using temporary help to meet some of your needs
in a corporate entity .
for administrative support; creating efficiencies such as
There are a couple of practical downsides to operating
template documents that can be used for routine activi-
ties; developing brochures and other effective marketing as a proprietor, too . First, many potential clients will only
and promotional tools . 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, limited liability company (LLC) or
reach your goals .
limited liability partnership (LLP) . They are concerned
that the IRS might later interpret the relationship with the
One other word of advice — don’t get so caught up in
consultant as an employment relationship rather than an
preparing a perfect business plan that you never begin
independent contractor relationship, which would result
to consult and perform billable services . Don’t let the
in the imposition of taxes and penalties . Second, many
business plan be an obstacle to taking first steps to
initiate your business . It can, and should, routinely be clients just perceive that a person operating in a corpora-
revised and updated .
tion or LLC is more professional . It’s not the reality, but it
is the perception of some .
To address the legal and practical downsides of operating
Structuring and operating your
as a sole proprietor, you may want to structure your
consulting business as a corporation, LLC or LLP . If you
set up your business as a corporation, it is probably best
Settling the legal structure of your consulting business
to apply with the IRS to be an S-corporation, 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 . Different factors will come into play as you
as a “professional service corporation,” for which higher
make the decision on choosing a formal business entity .
tax rates apply at the corporate level . If you set up as an
A handful of operational matters require your attention S-corporation, all income tax issues flow-trough to you
early in the process of setting-up your consulting as an individual, but you still have the protection of a
business . You need to think about how you are actually corporate entity .
going to accomplish the various tasks of operating your
An LLC or LLP provides the same kind of liability protec-
business . Just as with choosing your legal structure,
tion as a corporate entity as well as the flow-through of
keeping things simple should be your watchword .
income tax issues that exists with the S-corporation . LLCs
and LLPs are a bit more flexible than S-corporations, and
What form of business entity will you choose?
require less administrative effort to keep up-to-date will
legal compliance requirements .
If you are starting out relatively small, then keeping it
simple may work best . Working as a sole proprietor is the
Setting-up your business in corporate, LLC or LLP form
easiest way to begin . You really don’t have to do anything
could offer you some additional tax planning flexibility,
to get started, unless you are going to operate under an
too, especially when it comes to issues related to salaries,
assumed name, in which case you’ll need to file for the
distributions, and employee benefits .
use of the assumed name . Otherwise, there isn’t much
you need to do .
In short, keep your business structure as simple as
possible, especially as you are starting out . 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, LLC or LLP legal structure
in your business . However, your biggest risk of liability
relatively early in the life of your business .
– 9 –How will you operate and organize your business can provide your clients with efficient service and profes -
sional-looking work product .
First, are you going to do it all yourself, or are you going Another business office basic that will prove valuable
to enlist the help of others? And, if you get help from to you over time is the development of templates for
others, will you hire them as either part-time or full-time some of your basic business transactions — especially
employees, or will you seek their services as indepen- a template for proposals to provide consulting services .
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 . But you time you make a proposal . 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 . If you hire a person to do product created during consulting, and even for promo-
office work under your supervision, in essence to function tional talking points, mini sales pitches and scripts for
as an employee, don’t treat the relationship as an inde- cold-calling .
pendent contractor type . However, if you hire someone
to handle the accounting, run a marketing campaign or
provide legal services, those professional services fall
What consulting services will you offer?
pretty safely into the category of independent contrac-
tor relationships . 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 . But consulting comes in many
just can’t devote time to — and get the help you need .
shapes and sizes . And selling consulting services isn’t
the same as selling a TV or a car, where the customer/
Second, how will you set up your base of operations? Do
client is already in the market when they start looking .
you want to start out in an office in your home, or do
Sometimes, 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 . Thus, 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 .
financial considerations, client service requirements, and
attitudes about professionalism and the kind of image
The focus of your consulting services can have many vari-
you want to project . Remember, simple is better when
ations . It may vary from client to client or from project to
you’re starting out . You can always make adjustments as
project . So it is important for you to know what your focus is
you grow and prosper .
and what value you can provide to your potential clients . It
is important so that you can clearly explain it to them .
Third, 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 .
number of reasons . They may want you simply to identify
You’ll need a business phone (land line, cell or both) with
and analyze problems or needs inside their organiza-
an answering service or voice mail . You’ll want a business
tions . You may be asked to design and/or implement a
email address and, preferably, a web site so that people
project . They may just want you to supplement their staff
can access your business on the Internet . Old fashioned
for a short-term need . A client may want you to serve as
forms of communication live on, too, so you will want
a catalyst for change, as an objective outsider applying
business cards, letterhead and invoice statements,
a fresh perspective in a challenging situation, or as a
and a brochure that describes you and your business .
“hired-gun” to do its dirty work in the midst of reorganiza-
Obviously, good computers and a high-quality printer
tion and downsizing .
are also important business assets to have so that you
– 10 –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
As you get started in your consulting business, you must
themselves (give a man a s fi h and you feed him for a day;
seriously consider how much you will charge and in what
teach a man to s fi h and you feed him for a lifetime) .
manner you will charge your clients . These may be the most
Another possibility is that you may be asked to inu fl ence
important issues you need to g fi ure out before getting
others on behalf of your client . Lobbying, campaigning, fund-
started . To settle these issues in your own mind up-front will
raising and marketing activities would fall into this category .
remove much of the ongoing stress of revisiting the issues
from scratch with every potential new client . You can still be
Be clear — for yourself and for your potential clients —
e fl xible on the questions of how and how much, but having
about the services you are prepared to offer and perform .
a “standard” practice will help you analyze just how e fl xible
Be clear about the value you can add to your potential
you want to be .
client’s organization or operations .
As far as ‘how much’ is concerned, look at it from more
than one perspective . First, what do you need to make to
be satise fi d 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 . It’s easy to forget that
the business, too — your time devoted to management,
in the process of providing a service, you may also be
marketing and administration, all of your operating and
producing a product . Take, for instance, a consulting
overhead expenses, and so on . 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, or the taxes you will pay .
staff of your client, but you produce a DVD or CD with the
same presentation that can be sold or distributed more
Second, what do you need to charge so that the clients you
broadly . Or perhaps you tape the live training session so
are intending to attract will n fi d the price attractive? Another
that it can be used later .
way of asking that question is how can you make your
rates competitive in the market? Before you set your rates,
This raises some questions that you will need to consider
consider doing a survey of other consultants your market
as you plan your business . First, when you create training
area to see what their fees are and how they calculate them .
materials, for instance, in the form of a DVD, CD, or
This can help you set your rate and your n fi ancial expecta -
hardcopy materials and later sell them or incorporate
tions realistically .
them into your consulting work, how will you protect your
rights in these products . Copyrights can be an important
You have many options to choose from as a rate-setting
protection for your work . And when a consulting project
methodology, including hourly rates for services, lump-sum
includes the development of such materials or other forms
fees for specic fi projects or retainers for your ongoing avail -
of work product, a question is raised regarding who actually
ability . Whichever methodology you use, remember that
owns the materials — the consultant or the client .
your rates need to cover more than just your time spent
in consulting, as described above . Your rates must be set
Be careful to protect your rights to products that you
so that they can cover all your costs . Yet, they must also be
develop on your own for use in later consulting activi-
competitive in the market .
ties . Also, if work product is to be developed within the
parameters of a consulting contract, address clearly the
issue of ownership and control of the work product after
completion of the contract .
– 11 –Different clients will typically have different preferences But you need to continuously expand your network
about rate methodology . 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 . Networking through participation in various
cost of a proposed project . 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 . The more contacts you have, the better
basis, where you and your client set a periodic fee (eg, . your chances of getting new clients . 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 . 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 .
long-term relationship with your client and develop a
You can expand on the networking theme by making
secure financial base for your business . Many consultants
yourself available for public speaking . 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 .
interest to certain audiences and would spotlight your
However you design your pricing structure, be sure to expertise . If public speaking isn’t your bailiwick, then
put it in writing . 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 . Whether in print or online, your byline at the
it . Then, when a potential client is ready to get serious beginning of a well-crafted story or article (or even a
about working with you, 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 .
particular proposal .
You may want to use more traditional methods of adver-
tising to draw new clientele, as well . 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, and there
may be a place for some form of direct mail advertising,
especially when you have a specific target market .
Don’t believe that excellent skills and a good reputa-
Finally, don’t forget everyone’s favorite method for
tion alone will keep you in business . Your reputation for
getting new business — cold-calling . With effective
competence and character among friends and colleagues
researching and listening skills to ascertain a potential
may get you your first client or two as you start-up your
client’s needs, and a solid sales presentation that
consulting business, but don’t expect it to grow dramati-
clearly explains what those needs are and shows how
cally without conscious and very intentional marketing
your services can address them, you can influence the
and promotional efforts . Unless other potential clients
decision-makers in potential client organizations and
have exposure to you and your business, how can they
win new business .
know to seek you out?
In short, winning new business requires more than just
Certainly, transforming existing relationships with people
being a great consultant . It requires a constant process
you know into consulting relationships is step one in your
of self-marketing and self-promotion . Hopefully, a lot of
marketing efforts . Step two may be to seek referrals from
the promotion comes from others so you don’t have to
this group of people, and to encourage them to pass on
‘blow your own horn’ so much . But you can’t just focus on
the news of your new business by word of mouth .
being a consultant . You can’t sit back and wait for your
next client . You need to promote your business — and
– 12 –Maybe you have participated in organizations or activities
Tapping existing relationships for
where you met others who are prominent in your e fi ld or who
work in organizations that could benet fi from your services .
Who among this group do you think would be interested in
Your current pool of business and personal relationships
your success and willing to help you get started? Give them
almost certainly will be the source of your r fi st clients as
the opportunity to help you grow your business .
you start-up your consulting business . Your reputation for
competence and character among these people, and their
interest in your future success, will be key to getting your
business going . Transforming some of these relationships
Financing your startup consulting business
into consultant/client relationships may be the r fi st step in
your marketing plan . The transformation can occur in two
The good news on the n fi ancial front is that a consulting
ways — r fi st, by winning some of these people over as
business typically doesn’t require a substantial up-front invest-
clients and, second, by winning their support as cheerlead-
ment as you begin to do business . But that doesn’t mean you
ers for your business and sources for referrals .
can ignore n fi ancial concerns as you start your business .
Make sure you enlist the support of the people you know
Unless you already have your r fi st clients lined up, and they
best, and who know you best . Identify the people who
are ready to pay you a retainer, you may need to consider
you think would most want to help you as you start your
how you are going to survive n fi ancially during the early
business . Also identify the people who you think would be
days of your new consulting business . It may mean you start
most able to help you . Let them know what you are doing,
consulting part-time as you continue to work in your employ-
and give them the opportunity to help with business oppor-
ment capacity . It may mean that you minimize your business
tunities or referrals .
expenses until you are satise fi d that the o fl w of income is
If, prior to starting your business, you spent many years sufc fi ient to expand . It may mean that you negotiate with
working as an employee of a company, perhaps you can that r fi st client for an advance payment of part of your fee .
treat the company as your r fi st potential client . The people And it may mean seeking n fi ancing through small business
you have been working with, more than anyone else, know loans or other sources .
your capabilities . They know your value to the ongoing
Often, a consultant starting a new business can get started
operations of the company . If you have good working
using personal funds . Even if that is true, it is a good time
relations with leadership and staff in the company, 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 n fi ancing needs arise in
basis, especially if you can identify specic fi ways in which
the future as your business grows . You will want to have a
you can provide valuable service . If the company can’t
separate bank account for your business, and you may want
become a client, perhaps it can still become a cheerleader
to establish a line of credit or obtain a business debit or
and source of referrals .
credit card for more convenient n fi ancing and recordkeep -
Perhaps you have developed solid business relationships ing for your business .
through the years with customers or suppliers or business
You will want to plan for uncertainties . You can’t assume
partners of the companies you have worked for . Could
that the cash o fl w will constantly or consistently pour in as
these businesses have need of the services you intend to
you conduct your consulting business . There are likely to be
provide? If so, pursue these business relationships to see
down times when there isn’t much work, or times when it’s
what develops .
tough to get the clients to pay . So right from the beginning,
try to set aside some of your revenues to cover yourself
during those more difc fi ult times .
– 13 –Here are just a few of the issues you will need to learn
Tax and legal obligations of
about: Federal income tax and payroll taxes (FICA);
federal self-employment tax; state and local income
taxes; state and local sales taxes; federal and state
If you set up a corporation, LLC or LLP in which to operate
unemployment insurance programs and related payroll
your new consulting business, you will have a lot of
taxes; state workers’ compensation programs; local
new legal and tax compliance obligations as you begin
business licenses or permits; assumed name authori-
business . You can handle all these things yourself if you
zations . Each of these areas should be studied so that
want to, but you’ll probably be better off looking for some
you understand your compliance obligations before
help . Bizfilings can help you register a new corporate or
you are forced to learn the hard way — by getting
limited liability entity, and can help you maintain compli-
caught out of compliance .
ance with state registration and reporting requirements
over the lifetime of your business .
Some states may also have requirements for minimum
professional liability insurance coverage for your new
In addition, it may be well, early in the process of starting
consulting business . As you set up your entity and
your business, to hire an attorney and/or a tax specialist
register with state authorities, be sure to confirm your
to help you with many of the other tax and regulatory
obligations for coverage .
compliance issues that you will face in your new business .
Also, some states may have registration or certification
requirements for those who perform consulting services
in your particular field . You will want to make sure that
you comply with these requirements before starting out .
– 14 –Special Considerations for Running & Growing Your Consulting Business
So now you’ve gotten your consulting business started .
Updating your consulting competencies
Congratulations Now comes the harder part — running
through continuous learning
and growing your business day by day . Maybe you think
that starting a business is the hardest part, and then
The foundation of your consulting business is your ability
it’s all a downhill ride after that . Well, if that’s what you
to provide special knowledge and experience in your
think, it may be time for a bit of an attitude adjustment .
field to your clients . A consultant must pursue continuous
Running a business is a constant responsibility, and the
learning so that he or she maintains up-to-date skills and
responsibility only grows as the business grows .
abilities . You cannot grow a consulting business without
keeping abreast of the latest information and methods
Starting a business is new and adventurous and exciting,
in your field .
so it’s pretty easy to maintain enthusiasm . Running a
business is more about persistence, perseverance and
Information is part of the lifeblood of the consulting
processes . It’s about consistently maintaining business
industry . Therefore, you will want to make sure you know
function . Growing a business takes creativity . 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 . For consulting generally, there
flexibility to make course corrections along the way to
are many associations and institutes that support the
keep things fresh .
industry with information available on the Internet, with
distance learning programs, with seminars and confer-
In the following pages, we’ll be looking at a number of
ences, and with training materials and periodicals that
the special considerations for running and growing your
offer the latest information . Here are just a few of these
consulting business, including:
• Updating your consulting competencies through
• Institute of Management Consultants USA
wwwimcusa . .org
• Expanding your consulting network and relationships
• Association of Professional Consultants
www .consultapcor . g
• Promoting and marketing your consulting services
• Association of Communications Consultants
• Monitoring billing and collecting in your consulting
wwwconsultingsuccess . .org
• Independent Computer Consultants Association
• Managing compliance issues in consulting
wwwicca . .org
• Mentoring consultants for your business’s growth
• Consultants Mall
• Improving your consulting communication skills
wwwconsultants-mall . .com
• Building the character of your consulting business
– 15 –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, just like in any other small
and expanding the number of people you know and, more business, cash o fl w is king . We all know that billing and
importantly, who know you is essential to the ongoing collecting our fees is a tedious task, but an essential one .
health of your consulting business . So don’t stop . Don’t ignore the cash o fl w needs of your business .
Find new ways to connect with people that can help you Develop and maintain routine practices of billing your
grow your business . Stay active in business and industry clients and following-up to make sure that payment is
associations related to consulting and, more specic fi ally, to made . Developing strong client relations is really the key
the e fi ld in which you specialize . to making the billing and collection process o fl w smoothly .
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 .
Never stop promoting yourself and your business .
Managing compliance issues
Consulting is a pipeline business . It is often several months
between the time you r fi st start to pursue a client rela - in consulting
tionship, 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 . That means you
details of compliance with tax and regulatory requirements .
always want to have that next client or that next project
It’s boring, it’s tedious, and it can get you into a whole lot
somewhere in the pipeline .
of trouble if you’re not attentive to it . So the message is
So take advantage of opportunities to speak at public simple — just do it .
events about your e fi ld of work . 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
lfi ing requirements and payment requirements in a timely
clients so that they have a better understanding of the value
fashion . 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 . Market yourself and your business
and paying income taxes and payroll taxes, unemployment
actively, and encourage your clients to refer you to others .
and workers’ compensation obligations, annual organiza-
Don’t forget that you can advertise, do some direct mailing, tional reports and other matters .
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 n fi ancial obligation for taxes
about you…yet .
and penalties .
– 16 –business grows, and you have others working with you,
Mentoring consultants for your
and more work to do, and more deadlines squeezing
together, and more pressure building, then the role
of timely, constructive, encouraging communication
If you want your consulting business to grow and prosper,
becomes crucial .
then you need to think about training-up a new genera-
tion of consultants to work with you and after you in your
• To promote your business, communication skills are
business . You may want to slow down some day, but at the
essential . Just having the ability to describe who you
same time keep your business going and growing .
are and what you do in your business in a 30-second
sound bite during everyday conversation can help
That will be possible if you begin to work with and train
grow your business . In addition, the ability to perform
other consultants to take on greater responsibilities .
public speaking or to write readable articles and
Consider managing and mentoring other consultants in
newsletters provides an excellent avenue for raising
your business as your business grows and you have more
awareness of your business and your expertise .
work than what you can do by yourself . It will pay dividends
Developing brochures, web sites, advertising, and
later on .
phone scripts that can effectively speak to your target
market can boost your client base, and it all hinges on
effective communication .
Improving your consulting
Don’t underestimate the value of effective communica-
tion for growing your consulting business .
Everything in consulting revolves around communication .
Everything . Therefore, make excellence in communication
your goal from the beginning, and never let the level of
Building the character of your
excellence falter .
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 reputation without a strong foundation
in character is a very insecure asset that can be lost in the
• Client satisfaction is the core measure of success in
wink of an eye .
consulting, and building a strong relationship with a
client through consistent, straightforward communica-
Make character count in your consulting business, and
tion is essential to that satisfaction .
you will find that you will have more satisfaction in your
successes and greater peace and confidence during the
• Consulting itself is communication . Without effective
challenging times . Show your character not only in your
communication skills, you can’t provide the basic
actions but your attitudes .
service of your industry .
• As you get busier, coordination of business functions
You are providing a service, so be service-minded, and
requires more effective communication, especially as
treat your clients the way you want to be treated yourself .
more people become involved in the process . As your
– 17 –