How To Start A Consulting Business

How to Start Your Independent Consultingp g

Business

Copyright © 2008 MBO Partners. All rights reserved.1

Presenter

Gene Zaino

President & CEO MBO PartnersMBO Partners


OverviewThe Entrepreneur

Pros & cons of being in business for yourselfbusiness for yourselfIs consulting right for me?Big vs. small

Business Structure1099, sole proprietor ?S-Corp, C-Corp, LLC, PER ?p, p, ,Self-employed tax benefits

Sales & MarketingCompliance, Insurance and Accounting

T d i i t tiFinding workMarketing your servicesNetworking and backlog

Tax administrationBusiness insuranceCash flow: billing, collections, expenses


, p

Is Consulting Right for Me?g g

Successful independent

consultants have tenacity, talent,

d t i l i d tand an entrepreneurial mindset.


Some Key Success FactorsCore Competencies of Independent Consultantsp p

Defined, verifiable expertise Maintain high integrity Comfortable with marketing and self promotionAble to develop high quality network and clienteleVision to easily identify opportunities and present ideasVision to easily identify opportunities and present ideas


More Key Success FactorsCore Competencies of Independent Consultantsp p

Skill to efficiently apply knowledge and expertiseHighlight results that add value to clients Create strong references (happy clients) Maintain a pipeline of potential new assignments without compromising existing client workp g gAssemble a strong support team to minimize time on financial, legal and business administration activities


The Independent LifestyleBenefits of the consulting lifestyleg y

Autonomy to do what you loveBuild the skills you want to developPick the projects you want Avoid office politics

Flexibility and controlBe your own bossDeliver your work, your wayManage your work / life balance

Fi i l dFinancial rewardsProfit from owning your talentLeverage your experienceOwn valuable relationshipsOwn valuable relationshipsLaunch pad to big business


Why the Time Is Rightfor an Independent Careerp

Build career resilience inuncertain economic times

Diversify your career portfolio“All eggs are NOT in one basket”

C t fl f t itiCreate a flow of opportunitiesGo-to network of relationships

Trend toward companies shifting to flexible workforceshifting to flexible workforce

More contractors and less full-timersLess fixed, long-term costs


Migrating to anIndependent Careerp

Set up your consulting parametersBuild a 12 to 36 month planBuild a 12 to 36 month planWhere do you want to work?When do you want to work? How many clients do you want?St l ?Stay solo or grow?

Set up shop at homeQuiet place with internet accessKeep overhead lowKeep overhead low

Build a financial bridgePlan nowStart while still generating other income Allocate six months of cash flowInvest in you



Hone your assignments to improve your marketability What’s in demand in your industry?Round out your experience based on market demandLearn the market rates (bill rates and pay rates)Focus on assignments that are your strengthsBuild a personal skills development planp p p



Do you have ideas for your first contract?Anyone you can approach?

f fMaybe lower your rates for right assignment to build reference baseYou can raise or lower rates on future assignments, just get started


Build Your BrandBuild marketing materials

List your skills and credentialsProfessional high quality business cardsProfessional, high quality business cardsSelect list of projects and case studiesNeed both a Resume and Services brochure

Position yourself as an expert Establish credibilityOnline discussion boards, blogs, or articles

Build online profile or website:LinkedIn, Network Solutions, VisualCV, or MBO PartnersKey words to emphasize Services, Projects and ResultsKey words to emphasize Services, Projects and Results

Email your contacts and provide them with your materialsFollow-up with key business relationships


Stay Connectedy

Network with friends, past employers professionalemployers, professional associations, online markets

Read professional journals

Attend conferences and workshops

Collect business cards, follow up

Connect with other consultants

Find a mentor or two


Market YourselfDirectly to Organizationsy g

Use corporate web site to identify opportunitiesGet names of HR contacts and recruiters from job postingsj p gPromotion notices in local business publicationsDevelop rapport with internal recruiter (or anyone)Call high in the organization and leave voicemail or emailCall high in the organization and leave voicemail or emailJust Do It! – activity breeds activity


When to Use Recruiting Firmor Staffing Companyg p y

If you can’t find a project directly or through referrals:

Important tips dealing with Staffing / Recruiting firmsProtect the integrity of your resume

No changes without permissionNo changes without permissionProtect your references

No contact without permissionProtect your freedom to work “directly” y y

Do notnot sign broad non-competesTry to establish a corp-to-corp contract

Or use a PER (more on that next)


Legal StructuresChoosing a Legal Framework for Your Businessg g

C-Corp S-CorpLimitedLiability Sole

P iS-CorpLimitedLiability Sole

Status

C Corp

Incorporated

S Corp

Incorporated

LiabilityCorporation

Incorporated

Proprietor

1099

S Corp LiabilityCorporation Proprietor

Personal Asset Protection?

How is Corp. Taxed?

D bl T ti ?

Yes

Corp. taxedseparately

Y

Yes

1040Schedule C

N

Yes

1040Schedule C

N

No

1040Schedule C

NDouble Taxation?

Shareholders

Investor-Friendly?

Yes

Unlimited

Very

No

Limited

Yes

No

Limited

No

No

N/A

NoInvestor-Friendly?

Audit Risk

Level of Administration

Very

Moderate

Highest

Yes

High

High

No

High

Moderate

No

High

Lower


g g

Business InsuranceWhat you need to “do business”y

Workers CompensationCompensation if injured at workGenerally required by clients to engage you as a contractor

General Liability Liability arising from personal injury to others or property damage

Professional Liability (Errors and Omissions)Liability arising from errors or omissions in services you deliver to clients


Vendor QualificationsHow to get “on the list”g

Qualifying for the vendor listGetting on is no small featgCorporate trend is less suppliersIncreased concern over reclassification riskGSA best for government work

Some general qualifiersYears in business Financial strengthFinancial strengthLegal structureBusiness insuranceStrategic to organizationSecurity clearance?Security clearance?

Negotiating contract termsCan take a long timeSeek good counsel


Seek good counsel

AccountingGetting systems in placeg y p

InvoicingHourly, by the project, by the pieceMonthly or project-based billingCollections

ExpensesSome may be billable to clientsOut-of-pocket, tax deductible

Management optionsSoftware, e.g. QuickbooksHired accountantPortable Employer of Record – manages back office (more later)


Tax ManagementMaximizing your tax benefitsg y

Tax management (Schedule C filers)Quarterly estimated taxes based on projected profitSelf employment taxes (same as employer side taxes)Self-employment taxes (same as employer-side taxes)Manage your “audit risk”

Maximize business tax deductions, legally and wiselyOffice supplies computer equipment communicationsOffice supplies, computer equipment, communicationsAdvertising, home office, seminarsMeals, travel and entertainmentBusiness mileage Per Diem for out-of-town travel for business

Tax-advantaged employee benefitsMedical insurance premiumsRetirement programsOut-of-pocket medicalContinuing education related to industryDependent / child care or elder care expenses


Dependent / child care or elder care expenses

Securing Affordable Medicalg

Group versus individualThrough a spouseThrough a spouseProfessional association plansIndividually rated plans – caveatsState programsState programs


Retirement and Financial Planningg

Popular self-employed retirement programsIf unincorporated, investigate

SEP (Simplified Employee Pension) or SIMPLE IRAKeogh Plan (Qualified Pension/Profit Sharing Plan)Solo 401k

Good retirement vehicles but not Schedule C deductionsGood retirement vehicles but not Schedule C deductionsYou pay your share of self-employment payroll tax on the retirement contributions

M t l i t dMost popular incorporated programs401k

Employee defers similar to aboveCorporation matches employee or morep p y

The amount invested by the corporation is not subject to payroll tax


What About Hiring Staff?HR & payrolling a team

Make sure you are legally compliant (exempt vs non-exempt)Don’t misclassify employees as contractors

g

Don’t misclassify employees as contractors

Employee benefitsMedical, dental, life, disability

Retirement for your staff401(k) program Tax deferredERISA compliant


There Are Other Optionsp

Consulting companiesSt ffi iStaffing agenciesPortable Employer of Record firms (PER)

Disclosure: MBO Partners was the first Portable Employer of Record


Understanding a PER:It’s Your Business, Make the Most of It,

Take everything you love about consultingabout consulting…

Operate as your own bossPick your own engagementsSet your own rate and termsSet you o ate a d te sWork multiple projectsBuild project teamsMaximize your tax benefits

…and add:Complete back-office supportPersonal account serviceAn “in” to huge clientsAn “in” to huge clientsImproved cash flowAffordable group benefitsFree GL, E&O, and crime bond


, ,Online system to track it all

Comparing the Alternatives

Le el of reclassification risk to o r client? None (if W 2)None

Staffing/Cons.PER

p g

High

1099 or Corporation

Level of reclassification risk to your client? None (if W-2)None

Find projects yourself? NoYes

Deduct business expenses? NoYes

Who handles client billings and collections? Staff/Cons CompanyPER

High

Yes

Yes

Self

Deduct business expenses? NoYes

Deduct medical expenses?* NoYes

Who handles financial admin? Staff/Cons CompanyPER

Who carries business liability? Staff/Cons CompanyPER

Yes

No

Self

Self/Corp

When do I get paid? Bi-weeklyUpon client payment**

Overall benefits quality? Low to mediumHigh

Benefits cost? Low to mediumMedium

Upon client payment

Varies

Very high

Who absorbs employer payroll tax? Staff/Cons CompanySelf/PER

Personal audit risk? LowLow

Credit profile? GoodExcellent

Self/Corp

High

Weak

Copyright © 2008 MBO Partners. All rights reserved.26 *Assumes under 7.5% of annual AGI in medical expenses

** May qualify for advanced financing

What % of billing rate is kept? 40% - 60%92-97%???

Next StepspDo the math and build the plan

Calculate hourly bill rates and projected workCash analysis: understand your financial needsPlan on what, when, and whereGut check for feasibility

Start networking and learningTalk with people that have “done it already” Research your industryTopic specific seminars and conferencesTopic-specific seminars and conferencesConnect with peers through LinkedIn, Facebook, Twitter

Contact usSlides and contact info will be emailedComplimentary MBO Partners consultationEmail Gene Zaino: [email protected]


Thank you for your time!

For over 22 years, MBO Partners has been making it easierhas been making it easier

for independent consultants and their clients

to work together.


How To Start A Consulting Business

Business

Transcript of How To Start A Consulting Business