If you put everything off till you’re sure of it, you’ll get nothing done.
Norman Vincent Peale
Vivian looked gingerly around the little coffee shop. Andrea had been shouting for more than 20 minutes—and her voice carried so far! Vivian was hoping no one else from the office was in the café, but it was unlikely anyone was. After all, it was 6:30 p.m. on a Friday night and everyone else was probably home preparing dinner. She looked at Andrea, who was yelling, “Why tonight, too? He knew I was going to the concert. I told him about it last week! Besides, it’s Friday night! Doesn’t he have a life? All these long work days! I’ll tell you, I can’t take it anymore! I can’t work for him. The entire department depends on me to solve every crisis! My skills are not appreciated and I want to do something for me!”
Trying to think of a way to calm her friend, Vivian said, “Well, maybe it’s time you did.”
“What do you mean?” Andrea shook her head slightly as if trying to refocus.
“Well, you’ve been talking about consulting for years. Maybe it’s time to do something besides talk about it. Maybe you should spend time thinking about what that would look like. You know—create a plan.”
“But I wouldn’t know where to start! What do I do first? How do I know I’ll make any money? What kind of consulting would I do? How do I find clients? What do I charge them?” asked Andrea in a more moderate voice.
Thankful that she’d been able to redirect her friend’s attention, Vivian chided her, “Oh, come on! You do all the strategic planning for your department and your division. You created the process to write the vision and mission. You even created a more efficient way to track the budget. You’ve been doing this for 13 years. Don’t say you don’t know how. You should be able to transfer some of your skills to your own consulting endeavor. Right?”
“Well, maybe …” Andrea replied hesitantly.
“Maybe?! Are you crazy? I’ll tell you what. I have another 40 minutes before I need to leave to meet Gil for dinner. Let’s brainstorm some of the things you know you’d need to do, the questions you need to answer and who you could tap for more information. Are you willing to try that?”
■ ■ ■
Are you excited to start your consulting practice, but have no idea how? Sometimes starting can be so overwhelming it becomes debilitating. You may be excited about tackling all the things necessary to begin your business but, like Andrea, you need a push to start. Making a list of all those questions is a good place to begin.
This chapter explores each of these questions and wraps up with a checklist that you can use to start your consulting firm. You may be surprised that starting a consulting firm can be easier and cheaper than you might expect. Even so, let’s review why start-up companies fail and why they succeed.
You’ve probably read the statistics of high failure rates for start-up companies. I’ve always thought they were just out there to scare people like you and me who want to start our own companies. It seems that Shikhar Ghosh of the Harvard Business School has nailed down actual numbers, stating that the failure rate of all U.S. companies is 50 percent after five years, and 70 percent after 10 years (Henry 2017).
But why? A FastCompany magazine (Linamagi 2015) survey of 100 start-up companies that failed cited many reasons for the failures. I was surprised that several were things that seem to be practical common sense. It would seem that they don’t have a chance without some of the basics in place. Several related to consulting include:
It would seem that if you pay attention to these logical items you will be in a better place than most start-ups. But there is more.
Why do start-ups succeed? Well, let’s start by saying there is no silver bullet, no guarantee of success for any entrepreneur. It seems that commitment to plans is critical—and that, of course, means that you have a plan. It also means that you are not so inflexible that you cannot adjust as changes come your way. Commitment also implies that there is passion and the founders believe in what they are doing. According to Henry (2017), “You need a plan, persistence, perseverance, a willingness to be flexible, and a world-class team. You also need to be frugal, bright, and cultivate strong mentors.” Is that you? Then success is in your future.
Let’s get started with naming your successful business.
When selecting a name, consider two important aspects: It should project the image you desire, and it should be easy to remember. Your business name is not something you will want to change. It will identify you for many years, and changing it is an expensive proposition. So choose carefully.
What do I mean by projecting the image you desire? Think in terms of who you are and what guides you every day. What values are important to you? What message should your business name portray? What do you want others to think and feel when they hear your business name? Credibility? Reliability? Authority? Excitement? Think about the image that the name Big Sky Bold Consulting conjures up for you.
The name of your company might tell a prospective client something about what you do. Halelly Azulay and I recently started an online business and wanted the name to clearly define our niche. We chose Building Your Training Consulting Business. In our situation, we definitely know that is all we will do; however, do take care that the name of your company is not too restrictive. For example, using the words “Strategic Planning” or “Talent Management” may not allow for expansion at a later time.
If your name does not explicitly state what you do, like ebb associates inc, you may want to add a tag line. A tag line is three or four words that explain what you do. My tagline is “consulting, training, design” to better define the work we do.
The name you select will have implications for how your clients view you and your business. The name can also project size. For example, you might choose to use your name. “Connie Sultant, Inc.” is clearly a one-person shop. It says who you are and the nature of your business. It does, however, limit your clients’ perception to one person. Even if you have a dozen employees, the name does not project that fact.
What plans do you have for changes in your company’s future? Will they include more people than you? Associates? Partners? “Connie Sultant and Associates” suggests that there are more consultants than Connie (you don’t really have to have those consultants when you start). However, the name also suggests that Connie is the owner. This may be a problem for those who work for her now or if someone joins her firm in the future. Since all clients want the best, they will assume that Connie is the one they want without even knowing the skills of other people in the firm. On the other hand, if you have strong name recognition, such as “The Ken Blanchard Companies,” you may want to take advantage of it.
“Sultant Associates” or “CSS Consulting” conjures up a group of people working together with less emphasis on Connie. Another consideration is that the second one tells you what the company does. “Sultant Website Designers” or “Sultant Marine Engineers” clearly defines each company’s area of expertise. Be sure that the names do not limit you for future growth. For example, if “Sultant Website Designers” wants to branch out to software design, computer security, or general computer graphics, the name will no longer be inclusive of the work they perform.
Also remember that your business name will be a marketing tool and, even though you want something that is easy to remember, you do not want it to be too cute. Select a name and add a graphic that adds to your marketing image, rather than detracts from it. For example, “Get Better” for a wellness training company or “Bank On Us” for a financial management consulting firm might project a less than professional image than either of the companies desire—especially if they intend to provide services to Fortune 500 companies. And, of course, there are always exceptions to the rule. Higher Grounds is a great name for a coffee shop. Can you think of anything similar for a consulting group?
Your image may be as important as the name. McDonald’s golden arches is a great example. You don’t need to be as big as McDonald’s to have name recognition through your brand. I have had people say, “the consultant with the three little letters,” referring to my lowercase name, “ebb associates inc,” which is an important part of my image. And, although they did not remember the company, they remembered the brand image and knew whom they wanted to work with.
It is never too late to change your company name if you are not satisfied with it. After being in business for four years, I was less than satisfied with the name of my company. At the time, I thought I could not change it since I had a client list and a good reputation. Now, after being in business for more than a quarter of a century, I look back in amazement about how small the reach of that reputation actually was and how much easier it would have been to change it then, rather than now. In fact, although I am not contemplating a name change, I now see it as a potential marketing opportunity!
How can you generate possible names? You can brainstorm with friends, search the Internet, hire a professional, or use one of the business name generators online. There seem to be hundreds of tools to generate a name, including Anadea Business Name Generator, Business Name Generator, NameMesh, and Namesmith.
Once you have generated a list of possibilities, allow plenty of time to sort through your results. You may want to share them with others to get their thoughts. After you have a short list, put them away for a couple of days before making your final decision.
Before you decide on your business name, check to make sure it’s not already trademarked. The federal database of the U.S. Patent and Trademark Office, Trademark Electronic Search System (TESS) will be helpful. In addition, search Google to make sure it is not being used.
You want a business name that grabs attention and hangs on. Your name will be a marketing tool, and even though you want something that is easy to remember, be careful of names that have double meanings. A business name that I thought was very creative was “Bank @Lantec.” Unfortunately, the company is no longer around. Another name that I like is “Team Up,” because these consultants are very clear that building teams is all they will ever specialize in.
Think about all the ways that your business name will be used: website, email address, stationery, business cards, pens, T-shirts, even coffee mugs! Consider the length of the name. Long names will not fit on computer-generated labels. If you are thinking about working internationally, research the translation of your name into other languages. Also be aware that if your company name begins with “The,” such as “The Schmidt Group,” it will be alphabetized under “The” in most directories unless you specify differently. Who would think to look under “The”? By the way, just for fun, check your local business directory under the word “the.”
Although they may seem minor, here are a few other questions before you make the final decision. Will your business structure dictate the use of an abbreviation such as Inc. or LLC? How might the length of the name matter? Will it be easy to pronounce? Should it be directly related to your services, such as consulting? Does the name you select limit you in any way if you change your focus in the future?
While you’re at it, search for a domain name. This is a simple process, but finding a good one that works for you and has not already been taken can be challenging and frustrating. To date, over 150 million domain names have been registered, so it may require some creativity to find one that will meet your needs. Even if it is not available exactly, you may be able to use an abbreviation, hyphens, or an alternate top-level domain (such as .net). Just because a domain name is available does not mean that you can use it without incurring liability for trademark infringement. The least expensive way to obtain a domain name is to be the first one to register it by contacting one of the authorized issuers of domain names, known as a “registrar.”
By the way, if your business name is anything besides your own, you may be required to register your business name with the Secretary of State’s office in the state in which you intend to do business. In addition, if you use any name in addition to the one you’ve chosen, you must file a Certificate of Trade Name or a Doing Business As (DBA) certificate. For example, your corporation may be Greene Ventures, Inc., and you may name your consulting practice Corporate Computer Consulting. This practice allows you to do business in states where someone else is already known as Greene Ventures, Inc. In addition, this practice allows you to incorporate once and have flexibility for various new start-ups. Contact your local city or state officials for more information. Finally, if you want to trademark your company’s name, you will need your attorney’s assistance.
If you have a limited liability company, a corporation, or a limited partnership in the United States, you will need to register your business with your state authorities. This is when your business name will also be registered. If your business is a sole proprietorship or a general partnership, you probably won’t need to register your business entity with the state, but instead through the county and/or city where your business is located. It’s not required, but you may also want to register your business name for a trademark.
Deciding on a name is hard enough. Don’t interject more problems. Here are a few to avoid:
Choosing a business name can be a lengthy process, but it is well worth the time you put in. Once you have chosen your business name, not only have you made a significant step toward officially launching your new venture, but you have also started branding your business and carving out your own niche in the small business world.
Finally, make sure you love the name. You’re going to say it over and over again!
Your first task is to select an accountant. You’re thinking, “Hey! Why do I need an accountant? I haven’t made any money yet!” That may be true, but you have many decisions to make that will be dependent on good advice.
How do you find a good accountant? I do not recommend that you use your second cousin Joey. You are making life-changing decisions and need someone who is knowledgeable (Joey probably is), experienced (Joey may be), impartial (Joey will have difficulty), and not personally involved with you (not Joey!).
You will find a good accountant the same way you have probably found the best employees, restaurants, and barbers—by networking and asking others. Start by asking successful people, preferably other consultants, who they use for accounting. Try to identify the qualities you are looking for so that you can describe your ideal accountant. First, you want someone who understands what you want—even if you’re not sure yet. Ideally you will find someone who has experience with small consulting start-ups. Interview a few accountants before you select one with whom you will work. This relationship is one of the most important to your business. It is worth the time to look for someone with whom you can partner on your most intimate business matters—money.
It is worth the time to look for someone with whom you can partner on your most intimate business matters—money.
I tried several accountants before I found one who met my needs. I wanted someone who would challenge me, keep me abreast of new tax and investment laws, and would take risks with me. I finally found the right person because I was able to describe what I was looking for in one phrase. I wanted a “creative accountant.” That may seem like an oxymoron, but when I used this phrase while interviewing accountants, I could tell by their immediate response whether they understood what I was looking for. Stephanie did. She keeps me informed, suggests options, challenges my reasoning, looks for creative alternatives, and allows me to take risks within legal boundaries. Stephanie practices in Virginia Beach, but that did not stop me from working with her for the 10 years that I lived in Wisconsin. The relationship works—even from a distance. It continues to be a successful partnership.
How do you know whether you’ve found a good accountant? The accountant should ask you about your business. Listen carefully to determine how he or she perceives your needs. Look for someone who knows something about your business and the issues you’ll face. If the person hasn’t had experience with consulting, has he completed some research prior to your meeting? How well does she communicate with you? As a business owner, you’re going to need to understand some legalese; will this accountant be able to clarify the jargon for you? Can the accountant provide referrals? How does the accountant calculate fees? Will you work with the accountant you are interviewing or a junior staff member?
A good accountant may offer to review your financial documents and present suggestions. After your initial meeting, follow up with questions. It will be a good test to determine how quickly you receive a response. Do you feel as if the accountant is going the extra mile to land you as a client? If not, he probably won’t once you hire him, either. And it probably is a given, but be certain any accountant you hire is a CPA.
The first decision your accountant can help you with is determining the business structure that will be best for you. Many of your other decisions will be based on your business structure.
Selecting a legal entity or business structure is one of the first and most fundamental decisions you must make. This is more critical than you might initially think, as it influences nearly every aspect of operations, such as how much you pay in taxes, the extent of your personal liability if anything goes wrong, and your ability to raise money for business expansion. There are four basic types of business structures: sole proprietorships, partnerships, corporations, and limited liability companies.
Note that some of the following information may only be valid in the United States. Check into your country’s business structures and tax laws.
The IRS can provide you with tax information online. Go to the IRS website at IRS.gov and click on “Tax Stats, Facts & Figures,” at the bottom of the page.” You will be able to access information on tax considerations based on the legal structure you choose and download tax worksheets and forms.
A sole proprietorship is the simplest form and creates no separate legal entity. Usually your Social Security number will serve as your company’s federal taxpayer-identification number. Federal tax reporting for sole proprietorships is the easiest of the four structures, requiring only the addition of a Schedule C on which you list business income and take deductions for expenses. The structure incurs no additional tax liabilities beyond yours. Although the fact that no separate legal entity is created is usually considered an advantage, it also poses a concern. It means that any legal or tax liabilities that transpire become your personal liabilities. For example, if a client sues you for business reasons, you are personally liable and your personal assets are at risk.
I do not recommend remaining a sole proprietorship. You need an entity, like an LLC or a corporation, to insulate your personal assets from litigation.
Like sole proprietorships, a partnership is not a separate legal entity. The difference is that you will need to obtain a separate federal employer-identification number, known as your FEIN. Your partnership will file a partnership return, even though it pays no separate federal tax. The business losses and income are reported on the partners’ personal tax returns. The division of profits will be governed by a partnership agreement. The decision to share equally or on a percentage basis is usually dependent on contributions of cash, experience, property, labor, and perhaps even reputation or earning power of each partner. Legally you and your partners are all personally responsible for liabilities incurred by any of the other partners or the partnership as a whole. Because so many terms must be spelled out in the partnership agreement—for example, the rights and obligations of each partner or what happens if one partner dies—a partnership can be more complicated than it may initially appear.
A limited liability company (LLC) is the most flexible and may provide the best of both worlds. It has the limited liability of a corporation, but the flexibility and tax status of a partnership. An LLC files articles of organization and an operating agreement with state authorities. Tax reporting is similar to a partnership, but liability is limited to the assets of the LLC.
You can establish an LLC online in a couple of hours. Start by checking with the Secretary of State offices. LLCs are best if you plan to have mostly a side hustle that brings in less than $100,000.
Corporations differ from the first two structures in that they are separate legal and tax entities. Your personal liability is limited if the corporation is sued. Corporations are formed when individuals invest assets to create equity. To incorporate you must file articles of incorporation, create corporate bylaws, and fulfill other state requirements. Stock must be issued, even if you are the sole shareholder. The corporate structure that you are most familiar with is the “C” corporation, which is required to pay income taxes separate from you and the other shareholders.
A subchapter-S corporation (commonly called an S corp) is an option for smaller businesses. This special structure is available to U.S. organizations of 35 or fewer shareholders. There are other guidelines, which your accountant will explain to you. One of the advantages of the S corp is that you will avoid double taxation on income to the corporation and dividends to you. The income is passed through to the shareholder (you), which you report on your personal return. By the way, both corporate structures require you to submit annual paperwork.
I usually recommend the S corp for a start-up consulting business. It has all the legal protection without much added expense. If you later decide to bring others into your business, the documentation is in place. If you anticipate that your company will take in $100,000 or more, choose an S corp. On the other hand, current tax law allows you to switch tax-free from an LLC to an S corp but not the reverse. Because choosing the right business structure is essential for maximizing your success, it is a choice you will want to make with the expert advice of your accountant.
A business plan is a fabulous tool to help you think about your future and as a place to gather all your ideas. Unless you will try to woo investors, it can be quite simple. Your business plan allows you to put everything that is in your head on paper in an organized way. This will help you stay focused on what is important to you. View your business plan as a working document that you refer to regularly. Make it work for you. Later, as you make new business decisions, you can return to your plan to identify what you might change, how to go about changing, and how those changes might affect the rest of your business.
View your business plan as a working document that you refer to regularly.
Business plans generally follow a similar format, as described here. Exhibit 4.1 will provide a guide for you.
Exhibit 4.1 Sample Business Plan
|
Cover Page Table of Contents Executive Summary Business Description Purpose Plans for the Business Business Activities Demographics of the Business Market Analysis Estimated Market Size Estimated Market Dollar Value Competitive Analysis Geographic Competition Competition’s Strengths and Weaknesses Organization and Management Key Players Resources Available Marketing and Sales Market Niche Pricing Strategy Marketing Tactics Literature Service or Product Line Description Benefits Financial Projections Appendices Financial Statement Supporting Documents |
The Small Business Administration’s website at sba.gov is an excellent source of business information. You will find resources to plan, launch, manage, and grow your business. You will also find a template for a business plan.
The cover page includes the company name and logo, date, owner, address, telephone, email, and website.
The table of contents provides an opportunity for you to impress your business plan reader by showing your organizational skills.
Your executive summary is a snapshot of your business plan as a whole and briefly describes your company profile and goals.
Begin the actual narrative with an introduction that states the purpose of the business plan. Follow this with a description of your consulting business. Use the following questions to guide you. You may divide the description into your plans for the business, the work you will conduct, and the business’s demographics. This will most likely be the longest and the most important section of your business plan.
Before launching your business, it is essential for you to research your business industry and the market. Your market analysis will be most beneficial if you can quote statistics about consulting, your consulting specialty, or the industry you have chosen. You may find some of this data in industry journals or on the Internet.
Spend some time examining the competition you expect to face. Answer the questions that are most unique to your business.
Every business is structured differently. Decide on the best organization and management structure for your business. Answer these questions about how you intend to manage your consulting business.
How do you plan to market your business? What is your sales strategy? You can use the following questions to develop a simple marketing plan. Remember, however, that you will develop a more in-depth plan in Chapter Five.
What do you sell? How does it benefit your customers? What is the product lifecycle? Tell the story about your product or service.
Provide financial projections for the income and expenses you anticipate. Use these questions to write a narrative. Support your narrative with financial statements in the appendix of your plan.
An appendix is optional, but it is a useful place to include information and documents such as resumes, permits, and leases. Your appendices will include documents that support your narrative. It may be divided into two sections or more. You may wish to include some of these listed here.
Once you’ve completed your plan, have it proofed and edited. You may wish to give it to several people: some who know the consulting business well, and others who can edit for typos, spelling, and grammatical errors. Make the corrections and print out a clean copy of your business plan on high-quality paper. You may wish to put it in a clear-front document binder.
You can see over 500 sample business plans, including those for consulting, at bplans.com/sample_business_plans.
Whatever you do with the plan, do not put it on a shelf. It should become a working document that you refer to regularly.
Keep your business plan handy and use it to help you make decisions. Check your business progress against the plan at least quarterly. Your business plan will keep you focused. Of course, if something is not working, you will change your direction. Staying focused does not mean staying the course even when something is not working. You will modify your strategies if they are not as effective as you originally envisioned. Keep your long-term vision in mind and continue to move in that direction. Consider the following to ensure that your business plan serves its purpose.
After you complete your business plan, and before you leave this chapter, schedule a date with yourself in your calendar to review your business plan. Schedule that date for six to 12 weeks out, depending on where you are in the process of establishing your consulting business. If you’re just starting out, “meet” in six weeks; if you have been consulting for some time, you could wait as long as 12 weeks. You decide. What seems appropriate to you?
During your planning, bookmark sites that you find helpful. One that will be useful is a site maintained by Entrepreneur magazine, entrepreneur.com.
Exhibits 4.2 through 4.5 provide the answers and supporting documentation for the financial section in the business plan. You will complete them and include them in the appendices.
Exhibit 4.2 Start-Up Expenses
| Estimated Cost | |
| Furniture | |
| Desk and chair | $___________ |
| Filing cabinet | $___________ |
| Bookcases | $___________ |
| Table and chairs | $___________ |
| ___________ | $___________ |
| ___________ | $___________ |
| Equipment | |
| Computer | $___________ |
| Software: ___________ | |
| ___________ | |
| ___________ | $___________ |
| Printer | $___________ |
| Copier | $___________ |
| Telephone system | $___________ |
| Mobile business phone | $___________ |
| ___________ | $___________ |
| ___________ | $___________ |
| Office Supplies | |
| Stationery | $___________ |
| Paper | $___________ |
| Pens, pencils | $___________ |
| Tape, glue, other adhesives | $___________ |
| Scissors, rulers, miscellaneous | $___________ |
| Marketing | |
| Website | $___________ |
| Business cards | $___________ |
| Brochures | $___________ |
| ___________ | $___________ |
| ___________ | $___________ |
| Corporate Set-Up Fees | |
| Professional fees | $___________ |
| Legal fees (incorporation) | $___________ |
| Business name search | $___________ |
| Accounting fees | $___________ |
| Banking start-up | $___________ |
| Insurance | $___________ |
| Licenses/permits | $___________ |
| Remodeling to accommodate office | $___________ |
| Unanticipated Expenses | $___________ |
Exhibit 4.3 Budget Format
| Net Salary for One Year | ___________ | ||
| Benefits | |||
| Health insurance | ___________ | ||
| Life insurance | ___________ | ||
| Disability insurance | ___________ | ||
| Retirement | ___________ | ||
| Total Benefits | ___________ | ||
| Taxes | |||
| Self-employment | ___________ | ||
| Social Security and Medicare | ___________ | ||
| State income tax | ___________ | ||
| City tax | ___________ | ||
| Personal property tax | ___________ | ||
| Total Taxes | ___________ | ||
| Business Expenses | |||
| Accounting, banking, legal fees | ___________ | ||
| Advertising and marketing | ___________ | ||
| Automobile expenses | ___________ | ||
| Books and resources | ___________ | ||
| Clerical support | ___________ | ||
| Copying and printing | ___________ | ||
| Donations | ___________ | ||
| Dues and subscriptions | ___________ | ||
| Entertainment | ___________ | ||
| Equipment leases | ___________ | ||
| Insurance | ___________ | ||
| Interest and loans | ___________ | ||
| Licenses | ___________ | ||
| Meals | ___________ | ||
| Office supplies | ___________ | ||
| Postage | ___________ | ||
| Professional development | ___________ | ||
| Professional fees | ___________ | ||
| Rent | ___________ | ||
| Repairs and maintenance | ___________ | ||
| Salaries (employees) | ___________ | ||
| Seminar expenses | ___________ | ||
| Telephone | ___________ | ||
| Travel | ___________ | ||
| Utilities | ___________ | ||
| Total Business Expenses | ___________ | ||
| Planned Profit | ___________ | ||
| Annual Total | ___________ |
Exhibit 4.4 First-Year Cash-Flow Projection
| Jan. | Feb. | March | April | May | June | July | Aug. | Sept. | Oct. | Nov. | Dec. | |
| Revenue | ||||||||||||
| Total Revenues | ||||||||||||
| Expenses | ||||||||||||
| Accounting/banking/legal | ||||||||||||
| Advertising/marketing | ||||||||||||
| Automobile | ||||||||||||
| Benefits | ||||||||||||
| Books/resources | ||||||||||||
| Clerical support | ||||||||||||
| Copying | ||||||||||||
| Donations | ||||||||||||
| Dues/subscriptions | ||||||||||||
| Entertainment | ||||||||||||
| Equipment leases | ||||||||||||
| Interest | ||||||||||||
| Insurance | ||||||||||||
| Licenses | ||||||||||||
| Lodging | ||||||||||||
| Materials | ||||||||||||
| Meals | ||||||||||||
| Office supplies | ||||||||||||
| Postage | ||||||||||||
| Professional dev. | ||||||||||||
| Rent | ||||||||||||
| Salaries | ||||||||||||
| Taxes | ||||||||||||
| Telephone | ||||||||||||
| Travel | ||||||||||||
| Utilities | ||||||||||||
| Total Expenses | ||||||||||||
| Monthly Cash Flow | ||||||||||||
| Cumulative Cash Flow |
Exhibit 4.5 Three-Year Projection
| Year 1 | Year 2 | Year 3 | |
| Total Revenue | ___________ | ___________ | ___________ |
| Expenses: | |||
| Salaries | ___________ | ___________ | ___________ |
| Benefits | ___________ | ___________ | ___________ |
| Taxes | ___________ | ___________ | ___________ |
| Marketing | ___________ | ___________ | ___________ |
| Administrative | ___________ | ___________ | ___________ |
| Total Expenses | ___________ | ___________ | ___________ |
| 5 Percent Inflation | ___________ | ___________ | ___________ |
| Contribution After Inflation | ___________ | ___________ | ___________ |
Your business plan will keep you focused.
Now you will need to determine whether you have the money to start or to expand what you are already doing.
Consulting start-ups usually fit into the low-cost category because starting a consulting practice can be surprisingly inexpensive. Exhibit 4.2 lists everything you need to start. As you review the list you might be thinking, “I already have a computer. It can’t be that expensive to have stationery and business cards printed. And I could work out of my home office initially.” As you total the expenses on Exhibit 4.2, you may find that you could start with as little as $10,000.
As you think about start-up money, consider your personal wealth. You have likely created a personal financial statement at some point. If not, you can find a simple financial statement on the website at www.wiley.com/go/newconsultingbiech. You may want to include it in your business plan; it is also a good place to identify what you might use as cash to start or expand your consulting business.
You have several options for raising funds to start your consulting practice. You could:
These are all possible ways to raise money to start your business. I’d like to add some precautions to one of the suggestions. When you ask friends, relatives, or colleagues for start-up funds, take care that you do not jeopardize your relationships. Turning to family and friends is common when banks resist extending loans to companies without a proven track record; however, be thoughtful about this option. First, be clear about what you are asking. Are you requesting a loan or offering part ownership of the business? Second, be transparent about the risks and spell them out on a business plan. Third, record your agreement in writing and make sure that everyone signs and receives a copy. And finally, keep everyone informed about progress, setbacks, and expectations. The best way to maintain the relationship is to pay back the loan on time and in full. Just because the lender is your dad does not mean he should be the last person to get paid.
Because few clients will visit you at your office, working out of your home is a practical option. Just remember that it will take discipline to stay focused on writing your marketing letters instead of watching television, to continue to pay the bills rather than visit the refrigerator. A home office offers financial advantages because you will be able to deduct a proportionate amount of your home’s utility costs, taxes, or rent. Keep in mind that the IRS may require proof that your home office is used exclusively for business. Also, a home office is sometimes a red flag that alerts the IRS to an audit, with potential tax implications. Your accountant will provide you with advice about your home office.
Download IRS Publication 587 to gain comprehensive information about working from your home. The publication addresses depreciating your home, business furniture, and equipment, qualifying for a deduction, calculating expenses, and, of course, record keeping. It supplies you with worksheets and instructions so that you can calculate your own deductions.
Given all the ways that you can reduce start-up expenses, the cost of starting a consulting business should not deter you. My only caution is this: Do not cut corners. Your professional image is at stake right from the start.
The opportunities available to you as a consultant are so broad that you must narrow the choices. Narrowing your choices will help you be more efficient and will ensure that you can achieve depth in an area. Some of this will come naturally due to your skills and the experiences you have had. And you should not forget where you have passion. Other decisions may be dependent on the kind of lifestyle you have chosen—for example, whether you wish to travel.
The terms niche market and target market are often interchanged, but there is a difference between them. A target market is the group of people you will serve. It is the “who.” A niche adds another dimension by combining your target market, who, with the “what” you are helping your clients with. For example, if you are a coach, you might be helping senior executives utilize their talent to create a more agile company. It is important to understand that your clients don’t buy a service or product. They want to buy solutions. The solution can help them solve problems or achieve goals. So your niche might be that you work with senior executives to create a more agile workforce to increase their competitiveness.
As you narrow your choices, you will define your niche or what service you will offer and to whom. A niche is a specific subset of a larger market where a customer has been identified with a specific problem. And the more specific, the better. There are many ways to define your niche. Let’s create a simple niche with three components: (1) who your client is, (2) what you will do, and (3) why clients will work with you (what result you will produce).
This is your first choice. You may define your ideal or dream clients by their level in the organization—that is, front-line employees, first-level supervisors, managers, or executives. Or at times your ideal might be the structure of the groups with whom you work—for example, teams, intact work groups, or individuals. You could also add your preference of location such as local, statewide, regional, national, or international.
Decide whether you want to work in the for-profit or nonprofit organizational category. Within the for-profit sector you can consider manufacturing, service, and so on. Within the nonprofit sector you can consider associations; educational institutions; local, state, or federal government agencies; or others in the public sector.
You can further narrow your niche by focusing on a specific industry. If you have decided to work in the for-profit service sector, you may narrow that down even more by selecting healthcare, hospitality, or finance. Focusing on a small number of industries can build your credibility in each.
You may choose to work with organizations that have special situations. These could include small, family-owned businesses, start-up businesses, multinational businesses, merged organizations, or high-growth businesses.
The size of the organization on which you focus gives you credibility with other organizations of like size. You may decide to work only with Fortune 500 firms. You may decide to work only with small organizations. I consider a small organization as one with 100 or fewer employees, a medium organization as one with 100 to 2,000 employees, and a large organization as one with over 2,000 employees. You may also consider the organization’s revenue. In some cases, the size measurement is industry-specific. Hospitals, for example, measure their size by number of beds.
Define who can benefit the most from your expertise. Who might be looking for your solution and is willing to pay for it? Consider also who you are passionate about helping.
You may define your work by the role that you play—for example, trainer, facilitator, coach, technical advisor, process consultant, cybersecurity guide, content expert, or resource. You might also define your work by your topic expertise—for example, team building, time management, leadership, computer programming, mergers, investing, or regulatory laws. You might also consider the processes you will use, such as surveys, interviews, research, or coaching. What is it you have the expertise to implement?
Decide why clients would want your solution. What problem can you help them solve? Increase profits? Decrease expenses? Increase employee engagement? Reduce turnover? Reduce rework? Increase customer satisfaction? Eliminate accidents? Increase a competitive advantage? Each of these is a reason a client would hire you. Ask, “What problem am I solving for my clients?”
However you define your niche, ensure that it is broad enough to have enough clients, yet narrow enough to provide focus for you. Once you decide, you can capture your niche value proposition in this format:
I help (who) to (what) so that (why). For example, “I help midsized manufacturing organizations to increase employee satisfaction in order to reduce turnover.
It can be difficult to narrow your niche before you even begin providing services. Yet this is another important element of your start-up. Don’t fret about it. Do the best you can. Have a now plan and a forever plan. Your now plan defines the best possible given the data you have as you begin. Six months into your business, you can redefine your niche based on what you know at that time. Don’t procrastinate. You can adjust as you go. It’s one of the benefits of being your own boss!
By the way, many consultants think that if they define a broader expertise and niche, they will appeal to a wider audience and be hired by more clients. That isn’t always true. The less specific you are in your definition, the less likely clients will be to think of you when they need assistance.
New consultants may not want to be pinned down with a specific niche, so they make any number of excuses. Don’t let this be you.
Your image is the most important marketing asset you have. In fact, as you start, your image is a critical attribute of your business as a whole. You do not have products to display; you do not have clients who brag about you; you do not have experiences to discuss. All that you have is you and the image you present. Therefore, it is imperative that you invest in making it all that it can be. Your name, your logo, your visual look, the public’s recognition and affection are all vital to your success. Your corporate identify is your most valuable possession.
Here’s some good news: You can look like a million on a shoestring budget right from day one! The secret? Ensure that everything you do reeks of quality. Nothing should leave your office unless it looks impeccable, sounds professional, and feels flawless. Quality should touch all the senses.
You can look like a million on a shoestring budget right from day one!
If you send a letter, it should exude quality in how it looks, sounds, and feels.
Create a brand image for your business. Invest in a logo. A logo is an important image builder, but it is also an important marketing tool, as it provides a recognizable identify for your consulting business. Keep these in mind when designing a logo:
A traditional design firm will charge $2,000 to $10,000 for a corporate logo. Instead, you can use one of the online firms. Check the websites of these three firms online: www.LogoDesignPros.com, www.Logojeez.com, or www.LogoWorks.com. I like all three because they have samples you can view, guarantee your satisfaction, provide fast turnaround (three to four days), and most important, offer reasonable pricing (packages from $199 to $599).
Printed materials that represent your business should also be created with quality in mind. If you own a copier, buy the best that you can afford. When you make copies, be certain that they don’t pick up the dirt specks from your copier’s glass. What’s the secret? Clean your copier glass often with a copier glass cleaner. If you use the services of a local copy shop, build a relationship with the manager and employees. Let them know how important it is that your copies be clean, straight, and on high-quality paper.
What else can you do to look like a million? The following quick ideas will help. Keep your eyes open for other ideas and add them to your list.
In addition to these ideas, you will want to think about the image you project in general. When I first went into business, I wanted to project a subtle professional image. I wanted to speak quietly, but professionally. To express this image, I chose to use all lowercase letters in the corporate name. I carried out the theme further by printing gray on gray. Since that time, my business has changed, as has my outlook on the world. I decided to shout a little. The corporate name, ebb associates inc, is still in all lowercase, and we shout with happiness using red, white and metallic gold—again on high-quality paper.
What image do you want to project? Many things complement this: the name of your company, the graphics you choose, the tone of your website, your title, the color and style of paper, the color of the ink, the style of brochure you distribute, the content of your marketing pieces, and the tone of your correspondence. Every interaction you have with your clients will express your image. Make sure it’s the one you want.
Remember when you were looking for your first job? It seemed that every job required experience, but how could you get experience without a job? It was a crazy circle: You needed experience to get a job, and you needed a job to get experience. Well, you may feel as if you are in that same place as you look for your first consulting project, and you may be asking yourself: “I need experience to get a project, but how do I get a project to get experience?” Landing your first client can be easier than you think if you plan ahead, expand your networking, and identify creative options.
It may take one to six months from the day you first speak with an organization until the day you begin the project. This means that you must decide to either maintain an income while you are establishing yourself or live off money you have saved for the start-up period of your business.
Your planning should include your present employer. A common way to transfer from your present job to consulting is to have your current employer become your client. You must plan this carefully. Identify which projects you could complete, list the benefits for your employer of utilizing your services, and allow enough time for your employer to accept this idea. Of course, the risk you run is that your employer may not agree with your plan, which may put you in an uncomfortable situation until your final employment date.
Another way your present employer could assist with your transition is to allow you to work part-time while you use the rest of your time for business start-up. If your employer is gracious enough to allow this to happen, make certain that you give your part-time work your full attention. It may be very difficult to focus on the same old job when you are starting an exciting new adventure. Remember, your employer is doing you a favor; you owe the company 110 percent in return.
Before you leap into a start-up, examine your network. Have you maintained an active network of professional contacts? If not, give yourself at least six months to build this network before starting your consulting practice.
Join professional associations and attend their meetings to identify organizations that might use your services. A word of caution, however. There is no greater turn-off to a corporate manager than to be accosted by a wannabe consultant at a professional meeting. Do not ask for work or make appointments at the meeting. So what’s the point of the suggestion to attend these events?
Attend meetings with plans to meet people who may use your services. Most people are attending for business-related reasons, so it will be appropriate for you to initiate conversations about the projects in which they are involved. Find topics about which you both enjoy talking. Share your business card. The next day, follow up with a note expressing a common interest, your pleasure at meeting the individual, or some other theme that was a result of your discussion. Be sincere. If you cannot be sincere, forget it. You will appear pushy and hungry. A test of your sincerity is whether you want to follow up even when you sense that there is no potential project at the present time. The key phrase here is “at the present time.” True networking is an investment in the future. Follow your note with a phone call to set a date for lunch or a meeting to explore opportunities or simply to learn more about the organization.
Identify other networking opportunities that can move you toward your goal, including the following:
Chapter Five covers the topic of marketing once you are in business; however, many of the ideas in the chapter can be used as you network prior to starting your business. But be sure to expand your networking list before you begin to count on a full-time salary from consulting.
The most creative tactic I used to break into the consulting business was to work part-time for a small consulting company for three months without pay. I agreed not to contact their clients and to work as an employee under their corporate name. It was a true win-win for both of us. I was able to observe the business generation (finding clients) and billable (serving clients) processes in action and to gain experience with actual clients whom I could use as references. They acquired a skilled trainer who added value to their business, worked without pay, and would not pirate their clients. Because I worked part-time, I could implement what I learned to build my own business during my off hours.
If you don’t want a long-term arrangement like mine, you can provide pro bono work for community, government, or nonprofit organizations. These organizations usually have limited funds and appreciate the services that you can provide. This can be the beginning of your list of clients served.
You could also subcontract full- or part-time with a large training firm that certifies trainers, or you could subcontract with other consulting firms. The first could be an easy route, especially if you have been certified to conduct training programs for the organization while employed at your present company. The drawback, however, will be conducting repetitive training material. The second approach may provide more options in projects or actual consulting. The drawback here is that you must suppress your own ego to represent the prime firm’s name. Drawbacks for both are that you will bill about one-third to two-thirds of your typical billable rate. The advantages are that you will have an income and will be able to build your own business while working part-time in the field.
If you’re looking for something more full-time, you could join an existing firm to gain experience. The obvious drawback is that it continues to put off even longer the opportunity to begin your own consulting business.
Although any of these ideas can serve as quick starts to becoming a consultant, some may also slow the process of starting your own business. Only you can weigh the pros and cons of each start-up tactic. Only you can weigh the advantages of finding work versus finding the work you want. Only you can make the final decisions. The sidebar will help you think of everything you need to make decisions for a successful start-up.
The items on this list are in a relative sequential order. I’ve suggested a general order, but you may have other circumstances that you want to take advantage of for timing or opportunity reasons. If so, do it! The key is to just start.
If you really want to start your own consulting firm, do it now. If you don’t, a year from now you will wish you had started today.
A year from now you will wish you had started today.
Getting started is the biggest step you take. It certainly can be daunting, but if you create a transition plan and find the right people to help, it can be smooth and fun. On the other hand, procrastination can lead to lots of regrets. Start with these suggestions to, well, start!
Hire the Best. You need the best accountant you can find on your team, and hiring one needs to be one of the first steps you take. Your accountant will provide advice as you make decisions about your business structure, accounting procedures, growth plans, and profitability. A great accountant will keep you in the black and out of trouble with the IRS (or whoever collects taxes in your country). Hire an accountant who educates, advises, and helps you grow your business.
Find Your Passion. The most successful consultants find that it is not just about making a living. It is about making a difference. That difference comes when you find your passion and you add a plan, perseverance, and persistence. Sprinkling in a bit of flexibility and agility ensures success.
It’s Really You. It’s never too soon to begin thinking about the image you wish to project. Of course, you know how to dress and groom professionally. That’s not it. Also consider how you align with the business you are starting. That would include your attitude, behavior, and conversation. Exhibit a positive, respectful attitude. Be confident but not cocky, polite but not compliant, friendly but not annoying. Of course, you need to be authentic. Your image is not about being something that you aren’t. However, you are now something that you haven’t been before—a business owner. You want to be viewed as one.