Starting a small consulting business

An experienced consultant can make several orders of magnitude more salary than a comparably educated and experienced "company employee."

You can enjoy many other benefits as well, such as:

• Making your own schedule,


• Working on challenging and interesting projects within a wide range of companies,


• Getting responsibilities to match your experience and your technical know-how,


• Guiding your own career development through obtaining multiple simultaneous experiences in diverse professional sectors,


• Increasing autonomy and responsibility along the entire scope of your career,


• You can refuse projects, dump clients, and focus on work that interests you.

Types of consulting

There are a large number of areas where consultants are needed so it's not only management consultants that are in high demand.

Here is a list of the most common areas consultants are in high demand:

• Computer consulting


• Business


• Advertising


• Accounting


• Communications/Public Relations


• Auditing


• Gardening


• Human resources


• Payroll management


• Executive headhunter


• Writing services


• Taxes


• Publishing

So how should you go about starting a small consulting business?

There are three basic ways to set-up your business from a legal standpoint.

Sole proprietorship

Sole proprietorship is the easiest to accomplish from a legal point and requires the least investment of time and funds to do. However, it should be noted that sole proprietors accept all business-related liabilities at a personal level.

So, for example, if in the course of your business dealings you come under legal scrutiny for any reason (being sued by a client, for instance), resulting litigation may be able to hold your personal finances and assets as damages to the plaintiff in the case.

To put it bluntly, you are putting your butt on the line when you engage in a sole proprietorship.

Partnership

This approach is similar to sole proprietorship, but involves two individuals who share legal and fiscal responsibility for the business together. This partnership can be instituted in a variety of ways and typically involves the interested parties negotiating a contract that elaborates legally on the particulars of the partnership "deal."

For example, there are "silent" partnerships, which involve certain parties within the contract holding all legal obligations but not participating in the actual running of the business.

Corporation

A corporation is the most legally and fiscally complicated method of starting a business, but has its benefits as well. When a business is incorporated it becomes a legal entity of its own.

Incorporation allows for businesses to take greater strategic risks than sole proprietorships and partnerships because they provide for a legal and fiscal layer between the corporate entity and the individuals involved in the business.

Limited Liability Company

A popular type of company for small businesses is the LLC or "Limited Liability Company" which is easier and less expensive to set-up compared to a fully fledged corporation and suitable for smaller companies.

Business plan

It is crucial to have a sound business plan from the very beginning of your consulting endeavor. A good rule of thumb is: If you can plan for it ahead of time, by all means do so.

Below are some typical components required in a good a business plan.

A. Executive summary
B. Company description
C. Company goals
D. Management structure
E. Services and products you will offer
F. Market potential
G. Marketing strategy
H. Operational plan
I. A 3-5 year financial projection
J. Exit strategy

Here's a checklist of things to consider when you starting a small consulting business:

• Select a lawyer and accountant if needed


• Choose a form of organization


• Register your company's name and incorporate the business


• Prepare brochures


• Send incorporation papers for federal and state/province tax forms


• Join a professional organization (good for networking)


• Prepare and deploy your marketing strategy


• Obtain business licenses or permits


• Get a federal employer identification number


• Get an employer ID number


• Build a website


• Get an email address


• Get business cards


• Lease agreements


• Select suppliers


• Get furniture, phone, computer and other equipment

Branding

You need to brand yourself as the consultant of choice in your specific category. Find a category of your choice and grab it. The narrower the category you focus on the stronger your brand name.

Don't try to consult in all kinds of categories under the same brand name - it's simply not believable that you are an expert in all of them.

Don't try to be the best; try instead to be perceived as different and you will usually be perceived as the best if you provide a good service.

Marketing

Here are a selection tactics to market a small consulting business.

1. Create a media kit

A media kit is a very valuable and common way of marketing your business and it can be used in a variety of situations. You can send it to prospects. You can leave it after an interview, media inquiries, seminars and so much more.

2. Networking

At the onset, this is the absolute most effective element there is for getting new clients for your consultancy, bar none. The old saying "it's not what you know, it's who you know" may not be completely accurate when it boils down to long-term success, but it certainly rings true when beginning a business.

3. Word of mouth/referrals

Once you have started getting some business rolling in, word of mouth/referrals is an excellent source of generating more business. Happy clients are bound to want to refer you to other businesses that could use your talents, so be sure to keep your clients happy.

4. Cold Calling

This is usually everyone's least favorite method of marketing. "Cold calling" refers to the practice of calling a company or individual "out of the blue" with the intent of selling them on your services or business. Cold calling is very common because all you need is a phone book and a telephone.

5. Warm Calling

Warm calling is similar to cold calling, but instead of contact completely new entities, you are either re-calling past cold calls that have given you more information regarding their business details, which will afford you an easier time turning a phone conversation into a workable potential client meeting OR you are calling entities for the first time since another third party has given you information regarding the called party.

Consultative selling is usually done in three steps:

1. Identifying a problem

2. Offering an improvement or solution

3. Accepting responsibility for the delivery of the solution


Let's now look at these steps in more detail.

1. Identifying a problem

The first thing you need to do is to listen carefully to the clients situation and identify a problem. If possible, it's best to define the problem in financial terms (money talks) like for instance "You can increase your production yield with 9% and save $123,000 per year by doing ...". You should just be giving your view on the situation so don't start to pitch and sell at this time.

2. Offering an improvement or solution

Next you have to offer a solution to the problem. You are not a bid-sell-leave type of person, but a profit improver. You should demonstrate how your prospective client's situation can improve if the problem doesn't exist and tell how you can relieve the problem. Be as specific as possible and quantify whenever you can. It's especially important to "show them the money" and return on investment.

3. Accepting Responsibility

When purchasing a consultancy service all clients wants to pay the bill and enjoy the results without worrying if everything will be OK. You should therefore be ready to accept single-source responsibility for the results of your work. This will significantly lower the resistance for the prospect to buy your services and give you a far better chance to close the deal.

After the sale you need to deliver the result as fast and effectively as possible. This is to the benefit of both you and your clients.

You need knowledge about a few other things besides your technical knowledge to deliver an excellent service.

To be able to deliver a service fast and effectively you need besides being a subject matter expert in your area also need to have skills in:

• Conducting interviews


• Conducting meetings


• Conducting presentations


• Write reports


• Being organized


• Planning your time


• Self-discipline


• Human skills

As Warren J. Wittreich points out in his excellent article How to Buy/Sell Professional Services; "Any selling involved in a professional service has just begun when the contract is signed. All that has been sold up to that time is a promise. The major 'sale' comes in delivering on that promise." Nothing will help you sell more than if you do an excellent job for your existing clients.

Winning the deal is only the first step. Next you have to deliver what you are hired for and deliver extremely well. That will help you create trust from your client and generate future sales.