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Introduction to how to create your own independent consulting business. If you have the skills, the time may be right for you to become a consultant. Perfect for independent contractors, freelancers, consultants, and entrepreneurs starting out. Watch the video version at http://www.mbopartners.com/about/events/pastevents.html.
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How to Start Your Independent Consultingp g
Business
Copyright © 2008 MBO Partners. All rights reserved.1
Presenter
Gene Zaino
President & CEO MBO PartnersMBO Partners
Copyright © 2008 MBO Partners. All rights reserved.2
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
Copyright © 2008 MBO Partners. All rights reserved.3
, p
Is Consulting Right for Me?g g
Successful independent
consultants have tenacity, talent,
d t i l i d tand an entrepreneurial mindset.
Copyright © 2008 MBO Partners. All rights reserved.4
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
Copyright © 2008 MBO Partners. All rights reserved.5
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
Copyright © 2008 MBO Partners. All rights reserved.6
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
Copyright © 2008 MBO Partners. All rights reserved.7
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
Copyright © 2008 MBO Partners. All rights reserved.8
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
Copyright © 2008 MBO Partners. All rights reserved.9
Migrating to anIndependent Careerp
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
Copyright © 2008 MBO Partners. All rights reserved.10
Migrating to anIndependent Careerp
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
Copyright © 2008 MBO Partners. All rights reserved.11
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
Copyright © 2008 MBO Partners. All rights reserved.12
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
Copyright © 2008 MBO Partners. All rights reserved.13
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
Copyright © 2008 MBO Partners. All rights reserved.14
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)
Copyright © 2008 MBO Partners. All rights reserved.15
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
Copyright © 2008 MBO Partners. All rights reserved.16
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
Copyright © 2008 MBO Partners. All rights reserved.17
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
Copyright © 2008 MBO Partners. All rights reserved.18
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)
Copyright © 2008 MBO Partners. All rights reserved.19
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
Copyright © 2008 MBO Partners. All rights reserved.20
Dependent / child care or elder care expenses
Securing Affordable Medicalg
Group versus individualThrough a spouseThrough a spouseProfessional association plansIndividually rated plans – caveatsState programsState programs
Copyright © 2008 MBO Partners. All rights reserved.21
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
Copyright © 2008 MBO Partners. All rights reserved.22
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
Copyright © 2008 MBO Partners. All rights reserved.23
There Are Other Optionsp
Consulting companiesSt ffi iStaffing agenciesPortable Employer of Record firms (PER)
Disclosure: MBO Partners was the first Portable Employer of Record
Copyright © 2008 MBO Partners. All rights reserved.24
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
Copyright © 2008 MBO Partners. All rights reserved.25
, ,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: gene@mbopartners.com
Copyright © 2008 MBO Partners. All rights reserved.27
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.
Copyright © 2008 MBO Partners. All rights reserved.28
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