Starting a Consulting company - what that looks like for us
Camper Chronicles said
06:03 AM Dec 14, 2013
As we are getting ourselves ready for full-timing, starting a consulting company has been a major task that's been a bit difficult to work through. I wanted to take a minute and share our steps for those who may need to do the same thing. First off I have worked for the same two companies for 21 years so consulting will be a new if exciting challenge. I have several professional colleagues that are consultants though and numerous talks with them have led me to taking this route. Please keep in mind I am not an expert in any area this is all what I have learned and should be validated for your personal situation with an accountant and possibly a lawyer.
1. Sole proprietorship or LLC - I met (for free) with a local group that provides free assistance to folks starting a small business. Look up the small business association in your area and the support was fantastic. After learning that an LLC must be registered (with a unique name) in every state you work in, we decided to go with a sole proprietorship. Because you have less protection if you are sued however we will need to get good professional liability insurance. It runs $1500 -$2000K for year. This decision is largely based on how risky the thing is you are consulting on. For example, I have a friend who does physical fitness consulting and she had to go to an LLC because someone could take her advice and get hurt. Since I plan on providing risk management and project management advice it is less risky but still need the insurance in case I gave bad advice and someone lost some money on what I suggested. The sole proprietorship has much easier tax filing requirements although it does have to be done quarterly.
2. What to charge - I had no clue so reached out to several consultants. and had them assess my skills and tell me what they thought they were worth. Because you have to pay the employee portion of Social Security you pay 15% social security taxes and I am hearing it ends up being roughly 50% of what you make goes to taxes. Yes you can deduct a lot but make sure you account for half going to taxes and bill yourself accordingly.
3. Marketing myself - this has been the biggest challenge for me. I've heard consistently you need some sort of website in order to make your business legitimate. Linked In alone will not get it done. You also need references so in the beginning, you may want to think about doing non profit work, or working at a much reduced rate so you can get some nice recommendations from the start. This includes designing a logo, business cards, etc...which you can certainly pay someone to do, but there are some online companies out there that assist with that. The other consistent piece of advice is being active on Linked In and joining professional groups. Not only do they post jobs but it's a nice way to network. Something else I am going to do, is after I leave my current position I will send a private liked in message to colleagues and let them know I have started my own company. I have also target reached out to a couple of folks from other companies and let them know my timelines in the hopes they could be my first clients.
One of the most revelations for me has been that I may not have to follow the work, but could build it in the area I choose to be in. I thought we would have to take jobs wherever they are, but a very good friend (and long time consultant) talked about how to market my skill set in a new town. So if we wanted to go to Yellow Stone Park we could see what is available in Idaho Falls. My friend recommended joining the local chamber of commerce and volunteering to do an hour presentation on something I was familiar with. They are always looking for speakers and this is a great way to let other small companies in the area know, you are in town and available to consult. What I thought was brilliant about her suggestion was to offer to train first. Small companies in rural areas need assistance and don't have the large pool of people to pull from that big cities have. So if you have a special skill set, offer to train their folks on how to perform those tasks. Way cheaper for the company than sending people to a big city to learn and it's a great way to get your foot in the door. For example, I could teach a one day seminar on project management, and if it went well they might bring me back to provide additional consulting to their folks. I can see this working with many different skill sets. Know a lot about computers, or marketing, or safety etc ...you can do a one hour introduction at the small business association and then possibly more detailed training to a larger group. I know this doesn't apply to everyone, but thought it was a great way to think about it and would allow us to choose where we wanted to go rather than the other way around which is incredibly exciting.
I know this doesn't apply to everyone, but wanted to share what I have learned in case someone out there was traveling a similar path :)
-- Edited by Trace on Saturday 14th of December 2013 03:14:47 PM
-- Edited by Trace on Saturday 14th of December 2013 03:15:25 PM
SnowGypsy said
06:51 AM Dec 14, 2013
I've seen seminars advertised by the Small Business Administration in the area where we live and I looked for the website to see what they do offer and came across this website: www.sba.gov/
I noticed they are having seminars on the Affordable Health Care Act and how it will effect self-employed and small business so that might be a plus for some to take a look at.
And, Trace, thank you for sharing ideas with others here. I believe you can never get too much information on any subject.
-- Edited by SnowGypsy on Saturday 14th of December 2013 07:03:31 AM
CurveCarver said
02:59 PM Dec 14, 2013
Very interesting, thank you.
Good luck with your new venture.
53 Merc said
04:28 PM Dec 14, 2013
I dunno what your consultancy is in. I have been a consultant since 1991 or so. My background is refining and gas processing. I have tried to retire several times, never been able to make it stick. Never advertised, never a website or other sites. My work comes from past practice and reputation!
Did a job in Kansas once. Got done with it and felt good about it. Couple of years passed, and one day the phone rings. Guy I had met in Kansas, asked if I was still working. Well, I could be if terms and conditions were right. He said, how do you feel about working in Singapore. That was an experience to say the least. Things went on, and one day the phone rings. Hey fella, we have never met, you still working? Again, terms and conditions. How do you feel about working in Yemen. Well now, that might cost you a bit. Came back from there. Retired again. Past client called and said, look, we have this special project, you willing to take it on? Here I sit working again.
All that to make one comment. Your work is your best advertisement. Do a job like you would be willing to pay for and you will never lack for employment. Good luck.
el Rojo and Pam said
05:02 PM Dec 14, 2013
Trace you on track in your research. One thing I would mention is when you buy your insurance make sure you have an "errors and omission" clause, not just liability. The chambers are a good way to meet people but you have to be active and volunteer a lot for it to work. Most people who attend chamber events sell to the common Joe ie. bankers, realtors, chiropractors to name a few, so make sure your customer base attends these functions. I'm not trying to pry but if we knew more about what you consult for we might be able to give you more specific answers or comments.
Thanks for the time you take to share your research and may your journey be a successful one.
Red
Camper Chronicles said
07:56 AM Dec 15, 2013
Thanks for the insights. Totally agree that's it's all about the work but with moving around as much as we want to building a reputation will be trickier. I am PMP, Six Sigma Certified Black Belt.
Because I have had the opportunity in my career to do many different things a friend asked me "What problem do you want to solve?" Which I thought was a tremendous way to look at it. I like to help people in a small way by making their day to day tasks easier and more effective. That's a long answer :). The short Answer is I am a project manger, business analyst, lean process analyst, Kaizen Facilitator, and Six Sigma Black Belt (that's not karate but efficiency analyst). I would like to specialize in short term projects to help businesses find practical solutions to problems and then implement them. I also have extensive experience with training and mentoring and am more than happy to teach people to fish so when I move on they can help themselves.
You asked :)
Camper Chronicles said
07:58 AM Dec 15, 2013
el Rojo wrote:
Trace you on track in your research. One thing I would mention is when you buy your insurance make sure you have an "errors and omission" clause, not just liability. The chambers are a good way to meet people but you have to be active and volunteer a lot for it to work. Most people who attend chamber events sell to the common Joe ie. bankers, realtors, chiropractors to name a few, so make sure your customer base attends these functions. I'm not trying to pry but if we knew more about what you consult for we might be able to give you more specific answers or comments.
Thanks for the time you take to share your research and may your journey be a successful one.
Red
The errors and omissions insurance is what will run about $1500 - $2000 a year and I agree for me it's necessary. Some consultants roll the dice without it but in my case I need strong insurance in this area.
el Rojo and Pam said
09:44 AM Dec 15, 2013
What type of companies would be your clients? Do they have professional or trade associations? I would assume you would be better off joining and attending these than chamber events. My reasoning for this is I would assume you work with mid to large size companies and you actually deal with the top level management or the owners. In my experience you don't see these individuals at many chamber events. Take hospitals for example, the director of marketing will attend the chamber functions and even sit on the board of directors but the president doesn't come around unless they win a business of the year award. I'm in no way knocking chambers of commerce, you just don't usually see "Hi-tech" people there.
-- Edited by el Rojo on Sunday 15th of December 2013 09:44:52 AM
Camper Chronicles said
10:17 AM Dec 15, 2013
el Rojo wrote:
What type of companies would be your clients? Do they have professional or trade associations? I would assume you would be better off joining and attending these than chamber events. My reasoning for this is I would assume you work with mid to large size companies and you actually deal with the top level management or the owners. In my experience you don't see these individuals at many chamber events. Take hospitals for example, the director of marketing will attend the chamber functions and even sit on the board of directors but the president doesn't come around unless they win a business of the year award. I'm in no way knocking chambers of commerce, you just don't usually see "Hi-tech" people there.
-- Edited by el Rojo on Sunday 15th of December 2013 09:44:52 AM
Great question. Until I talked to my friend I was thinking medium and large companies which would involve subbing through contracting firms, linked in, etc. not ruling that out but where we are is at he mercy of where the jobs are and not that appealing. Better than what I have today sure but not as much of the dream, plus Lee would be following me around and would be at the mercy of my schedule. The other way is much tougher for sure. Working with smaller companies...building a clientele wherever we go, but ultimately might be more rewarding as small companies are a lot more fun to work with in general and you can have more of an impact than in a large corporation. Also Lee could have some say in we spent time. Don't get me wrong he's thrilled about being out there wherever we end up but I know he'd rather be in more rural areas than near the cities.
cherylbrv said
06:23 PM Dec 16, 2013
Thanks for the great advice, Trace.
Question - do you need to meet with your clients face to face, or is it a business that can be run remotely? I have a business that I formed a few years ago, which I am now ready to move full speed ahead with as I plan to hit the road by spring (God willing the house sells quickly). My company is administrative support (virtual assistant) so as long as I have internet access, I can work from anywhere.
I ask because you stated that an LLC must be registered in every state you work in. My understanding, at least for my own type of service, is that people will be paying a company located in X state (in my case it will be FL). I may be in CA, doing work for a client in TX, but they are paying a FL company so only 1 LLC is needed. Am I wrong here?
BTW, while being static here in NJ, I did join my local Business & Professional organization and do a bit of volunteer work (as the Secretary). It got me a few small jobs but a lot of recognition. LinkedIn is a great networking tool as well (if you want, send me a PM and I'll send you a connection invite).
Good luck with all!
Camper Chronicles said
06:58 AM Dec 17, 2013
cherylbrv wrote:
Question - do you need to meet with your clients face to face, or is it a business that can be run remotely? I have a business that I formed a few years ago, which I am now ready to move full speed ahead with as I plan to hit the road by spring (God willing the house sells quickly). My company is administrative support (virtual assistant) so as long as I have internet access, I can work from anywhere.
I ask because you stated that an LLC must be registered in every state you work in. My understanding, at least for my own type of service, is that people will be paying a company located in X state (in my case it will be FL). I may be in CA, doing work for a client in TX, but they are paying a FL company so only 1 LLC is needed. Am I wrong here?
Great question...I would double check with a lawyer that specializes in small businesses but on the surface it sounds like you will be ok. My work will be predominantly onsite although I would love to work my way into providing remote support over time. Need to build a solid clientele first. Before you go the LLC route I would also talk to an accountant. I have heard that the expense (paperwork that needs to be filed, acconuting fees etc) of maintaining the LLC isn't worth it if you are providing a "low risk" service.
As we are getting ourselves ready for full-timing, starting a consulting company has been a major task that's been a bit difficult to work through. I wanted to take a minute and share our steps for those who may need to do the same thing. First off I have worked for the same two companies for 21 years so consulting will be a new if exciting challenge. I have several professional colleagues that are consultants though and numerous talks with them have led me to taking this route. Please keep in mind I am not an expert in any area this is all what I have learned and should be validated for your personal situation with an accountant and possibly a lawyer.
1. Sole proprietorship or LLC - I met (for free) with a local group that provides free assistance to folks starting a small business. Look up the small business association in your area and the support was fantastic. After learning that an LLC must be registered (with a unique name) in every state you work in, we decided to go with a sole proprietorship. Because you have less protection if you are sued however we will need to get good professional liability insurance. It runs $1500 -$2000K for year. This decision is largely based on how risky the thing is you are consulting on. For example, I have a friend who does physical fitness consulting and she had to go to an LLC because someone could take her advice and get hurt. Since I plan on providing risk management and project management advice it is less risky but still need the insurance in case I gave bad advice and someone lost some money on what I suggested. The sole proprietorship has much easier tax filing requirements although it does have to be done quarterly.
2. What to charge - I had no clue so reached out to several consultants. and had them assess my skills and tell me what they thought they were worth. Because you have to pay the employee portion of Social Security you pay 15% social security taxes and I am hearing it ends up being roughly 50% of what you make goes to taxes. Yes you can deduct a lot but make sure you account for half going to taxes and bill yourself accordingly.
3. Marketing myself - this has been the biggest challenge for me. I've heard consistently you need some sort of website in order to make your business legitimate. Linked In alone will not get it done. You also need references so in the beginning, you may want to think about doing non profit work, or working at a much reduced rate so you can get some nice recommendations from the start. This includes designing a logo, business cards, etc...which you can certainly pay someone to do, but there are some online companies out there that assist with that. The other consistent piece of advice is being active on Linked In and joining professional groups. Not only do they post jobs but it's a nice way to network. Something else I am going to do, is after I leave my current position I will send a private liked in message to colleagues and let them know I have started my own company. I have also target reached out to a couple of folks from other companies and let them know my timelines in the hopes they could be my first clients.
One of the most revelations for me has been that I may not have to follow the work, but could build it in the area I choose to be in. I thought we would have to take jobs wherever they are, but a very good friend (and long time consultant) talked about how to market my skill set in a new town. So if we wanted to go to Yellow Stone Park we could see what is available in Idaho Falls. My friend recommended joining the local chamber of commerce and volunteering to do an hour presentation on something I was familiar with. They are always looking for speakers and this is a great way to let other small companies in the area know, you are in town and available to consult. What I thought was brilliant about her suggestion was to offer to train first. Small companies in rural areas need assistance and don't have the large pool of people to pull from that big cities have. So if you have a special skill set, offer to train their folks on how to perform those tasks. Way cheaper for the company than sending people to a big city to learn and it's a great way to get your foot in the door. For example, I could teach a one day seminar on project management, and if it went well they might bring me back to provide additional consulting to their folks. I can see this working with many different skill sets. Know a lot about computers, or marketing, or safety etc ...you can do a one hour introduction at the small business association and then possibly more detailed training to a larger group. I know this doesn't apply to everyone, but thought it was a great way to think about it and would allow us to choose where we wanted to go rather than the other way around which is incredibly exciting.
I know this doesn't apply to everyone, but wanted to share what I have learned in case someone out there was traveling a similar path :)
-- Edited by Trace on Saturday 14th of December 2013 03:14:47 PM
-- Edited by Trace on Saturday 14th of December 2013 03:15:25 PM
I've seen seminars advertised by the Small Business Administration in the area where we live and I looked for the website to see what they do offer and came across this website: www.sba.gov/
I noticed they are having seminars on the Affordable Health Care Act and how it will effect self-employed and small business so that might be a plus for some to take a look at.
And, Trace, thank you for sharing ideas with others here. I believe you can never get too much information on any subject.
-- Edited by SnowGypsy on Saturday 14th of December 2013 07:03:31 AM
Very interesting, thank you.
Good luck with your new venture.
Did a job in Kansas once. Got done with it and felt good about it. Couple of years passed, and one day the phone rings. Guy I had met in Kansas, asked if I was still working. Well, I could be if terms and conditions were right. He said, how do you feel about working in Singapore. That was an experience to say the least. Things went on, and one day the phone rings. Hey fella, we have never met, you still working? Again, terms and conditions. How do you feel about working in Yemen. Well now, that might cost you a bit. Came back from there. Retired again. Past client called and said, look, we have this special project, you willing to take it on? Here I sit working again.
All that to make one comment. Your work is your best advertisement. Do a job like you would be willing to pay for and you will never lack for employment. Good luck.
Thanks for the time you take to share your research and may your journey be a successful one.
Red
Because I have had the opportunity in my career to do many different things a friend asked me "What problem do you want to solve?" Which I thought was a tremendous way to look at it. I like to help people in a small way by making their day to day tasks easier and more effective. That's a long answer :). The short Answer is I am a project manger, business analyst, lean process analyst, Kaizen Facilitator, and Six Sigma Black Belt (that's not karate but efficiency analyst). I would like to specialize in short term projects to help businesses find practical solutions to problems and then implement them. I also have extensive experience with training and mentoring and am more than happy to teach people to fish so when I move on they can help themselves.
You asked :)
The errors and omissions insurance is what will run about $1500 - $2000 a year and I agree for me it's necessary. Some consultants roll the dice without it but in my case I need strong insurance in this area.
What type of companies would be your clients? Do they have professional or trade associations? I would assume you would be better off joining and attending these than chamber events. My reasoning for this is I would assume you work with mid to large size companies and you actually deal with the top level management or the owners. In my experience you don't see these individuals at many chamber events. Take hospitals for example, the director of marketing will attend the chamber functions and even sit on the board of directors but the president doesn't come around unless they win a business of the year award. I'm in no way knocking chambers of commerce, you just don't usually see "Hi-tech" people there.
-- Edited by el Rojo on Sunday 15th of December 2013 09:44:52 AM
Great question. Until I talked to my friend I was thinking medium and large companies which would involve subbing through contracting firms, linked in, etc. not ruling that out but where we are is at he mercy of where the jobs are and not that appealing. Better than what I have today sure but not as much of the dream, plus Lee would be following me around and would be at the mercy of my schedule. The other way is much tougher for sure. Working with smaller companies...building a clientele wherever we go, but ultimately might be more rewarding as small companies are a lot more fun to work with in general and you can have more of an impact than in a large corporation. Also Lee could have some say in we spent time. Don't get me wrong he's thrilled about being out there wherever we end up but I know he'd rather be in more rural areas than near the cities.
Question - do you need to meet with your clients face to face, or is it a business that can be run remotely? I have a business that I formed a few years ago, which I am now ready to move full speed ahead with as I plan to hit the road by spring (God willing the house sells quickly). My company is administrative support (virtual assistant) so as long as I have internet access, I can work from anywhere.
I ask because you stated that an LLC must be registered in every state you work in. My understanding, at least for my own type of service, is that people will be paying a company located in X state (in my case it will be FL). I may be in CA, doing work for a client in TX, but they are paying a FL company so only 1 LLC is needed. Am I wrong here?
BTW, while being static here in NJ, I did join my local Business & Professional organization and do a bit of volunteer work (as the Secretary). It got me a few small jobs but a lot of recognition. LinkedIn is a great networking tool as well (if you want, send me a PM and I'll send you a connection invite).
Good luck with all!
Great question...I would double check with a lawyer that specializes in small businesses but on the surface it sounds like you will be ok. My work will be predominantly onsite although I would love to work my way into providing remote support over time. Need to build a solid clientele first. Before you go the LLC route I would also talk to an accountant. I have heard that the expense (paperwork that needs to be filed, acconuting fees etc) of maintaining the LLC isn't worth it if you are providing a "low risk" service.