Becoming an Independent Consultant

Contents Making the decision Positioning your practice Marketing plan Where to locate Setting up the office Now you’re lonely Contractual Relationships with associates Managing your finances Setting fees Legal, insurance and contractual

Making the Decision Consider these changes: Phone contact vs. direct relationships Need for self-discipline & time management Acquire more knowledge of admin & financials Have patience (and resources) in closing new clients Have a sharply focused marketing strategy Learn to operate office equipment/computers Maintain the highest ethical behavior

Positioning Your Practice Identify your unique experience & skills Your competitive advantages What has unusual value to potential clients Can this be communicated effectively Test out ideas with friendly clients Consider your marketing strategy: Types/sizes of clients/industry/geography Commodity service on an outsourced basis Convenience, flexibility, cost control Ideally, narrowly focus in a specialty that is in demand, but has few practitioners

Marketing Plan Systematic Marketing is critical Successful techniques include: Regular personal letters with clipping or book review Referrals/testimonial letters from satisfied clients Make speeches, do seminars or workshops Write articles as mailing pieces Publish a newsletter (burdensome on one person) Develop a web-site Marketing brochures (can do them w/MS Publisher)

Where to Locate Many work effectively out of their homes Need a pleasant, dedicated room If an outside office: Look into office condo or shared space Avoid renting a conventional office – too costly

Setting up the Office Communications is the consultant’s life blood Have 2-3 dedicated phone lines (one for faxes) Office equipment includes: Desk, chair bookcases/shelves, many file cabinets Good computer, large monitor, UPS, media safe fire proof storage box, scanner, laser printer, CD burner, good fax Office software: Microsoft Office, Quicken (or QuickBooks)

Now You’re Lonely Schedule informal lunches during the week Join a health club – and use it! Plan an errand each day away from the office Join a service club (Rotary, Lions, etc.) Develop network of consulting colleagues Local chapter of The Institute of Management Consultants Have to work hard at this (overcome jealousy)

Contractual Relationships with Associates Mostly simple letters of understanding defining mutual obligations Compensation vehicles: Agree on a per diem or per hour rate – agree via a detailed task plan how many hours/days each will get Agree on a split of the total fees based on roles with the client (ex – “x” percent for selling the job, “y” percent for managing the client, proportioning balance based on est. hours each is to work on the project Confidentiality agreement if one party has proprietary technology

Managing Your Finances Maintain meticulous financial records Obtain a separate tax ID Keep separate business checking account Have separate business credit card Estimate and pay self-employment taxes Consider self-employed retirement funding: SEP’s, Keoghs Defined Benefit Pension Plan for good years Be careful of the relationship with alliance associates (they could become employees)

Setting Fees Do NOT start out with low fees to speed up client acquisition Low priced consultants not taken seriously Potential or actual contributions not valued Fees depend on: Nature of the practice What competition charges Size and nature of prospective client organizations In general, base per diem rate is no less than 10-15% less than fees charged by large established competitive consulting firms for similar work If possible, estimate the total effort and quote a fixed price Be careful of quoting to “fit client’s budget” – this is discounting

Legal, Insurance and Contractual Need reasonable level of commercial insurance Includes professional and personal liability Includes protection of office equipment and records from loss May need “errors and omissions” insurance Carefully consider disability insurance This may be more important than life insurance With client proposals: Clearly list deliverables Basis of fees and invoicing a must Protect proprietary technology; copyright all written consulting tools, training materials and forms