How to Start a Consulting Business - Part 2

Target Market:

The idea you have in mind may be the best thing you have ever thought of, but there must be a place to market your ideas. There must be someone willing and able to spend money in order to get the advice of an expert like you.

In other words, who are your potential clients? Will you market your consulting services to large companies? Or are you going to showcase your specialty that might be of great interest to small businesses? Your services will likely be sought out by non-profit organizations. Whatever it is, before you complete your journey, make sure you spend enough time preparing a business plan and marketing plan together and you will not be disappointed with the results you will get, especially when clients start paying you.

What Motivates an Organization to Hire You?

According to a recent survey, here are the top 10 reasons why organizations hire consultants:

1. A consultant may be hired because of their experience:

This does not mean that the consultant just has to be good in the field they choose to specialize in, but also has to have a proven track record that expresses themselves. For example, as I said before, before I became an expert in consulting work in the field of fundraising, I knew that every client who hired me depended on my track record and experience. In the end, if you are a non-profit organization that needs to raise $1 million, it makes sense to hire someone who has already raised millions of dollars for other organizations.

2. A consultant may be hired to identify problems:

Sometimes employees are so close to a problem within the organization that they can easily identify it, and this is a golden opportunity for the consultant to prepare their equipment to protect the organization from this problem.

3. A consultant may be hired to complete the company's staff:

Sometimes a company discovers that it can save thousands of dollars per week by hiring consultants when needed instead of hiring full-time employees. Also, companies realize that it saves extra money when they do not have to pay additional fees to the consultants they hire. Consultants' wages are generally higher than the salary of one employee, but in the long run, hiring a consultant has good economic value.

4. A consultant may be hired to act as the motivating person:

let's face this, no one likes the phenomenon of change, especially American companies, but sometimes we need this change and then we need to bring in some consultant to facilitate things. In other words, a consultant can do certain things without overthinking company culture, employee morale, or any other issue facing the organization as it attempts to institute change.

5. A consultant may be hired in order to provide much-needed objectivity in companies:

Who is better qualified to identify a problem than a consultant? A good consultant brings an objective and fresh point of view without overthinking who might be thinking about the results and how they were achieved in the company.

6. A consultant may be hired to teach:

These days if you're a computer consultant and can offer employees a certain way to excel in a new program, then your phone probably won't stop ringing for even a short while. The consultant may be required to teach employees a number of different skills, but the consultant must intend to pursue new discoveries in their area of expertise and must be prepared to teach new clients what they need to be competitive.

7. A consultant may be hired to do unpleasant or difficult work:

Let's face it, none of us like to be asked to cut staff or remove an entire department of the company.

8. A consultant may be hired to add new life to an organization:

If you're good at adding new and effective ideas, you won't have any problems finding clients. Most companies need from time to time someone to do "first aid" to make things easier again.

9. A consultant may be hired to set up a new company:

There are consultants who become experts in this field although not everyone is able to generate an idea and develop a business plan.

10. A consultant may be hired to influence others:

Would you like to spend time with the rich and famous people in your city? If this is the case, you may be hired to do consulting work depending on the people you know. Although most consultants in this field work as advocates, there is a rise in the number of people entering into the consulting business in the field of entertainment. 

Location and Staff:

Your consulting business likely won't require a capital investment to start. In fact, you should consider working outside of your current location if you are able to. You may find restrictions and certain local laws that prevent you from doing so, so you should check them with the help of a lawyer before you start working. There are many advantages to having an office at home, including:

• Low indirect costs: You don't have to worry about paying rent or utilities for an office. You will appreciate this until you establish a regular client base.
• Flexibility: There is little doubt that working as a consultant from home will provide you with a great deal of flexibility. You can set your own working hours and break times according to your need.
• No rush hour nightmares on the roads: For anyone who has to ride a certain type of transportation to and from work during rush hours, this type of work is a desirable change of routine.
• Your home office will most likely be withholding tax: The IRS has eased laws on people who work from home, but you should check with your account or internal tax preparer to see if you qualify for this withholding. 

Staff:

When you first open up your consulting business, you may be able to do all the work yourself. However, as your consulting business begins to grow, you may need help with administrative details or help in completing actual consulting tasks.

You need to make some important decisions. For example, do you have enough time to create promotional cards and put your business brochure in 1,000 envelopes? Can you afford to spend time doing administrative tasks when you can spend the same time actively marketing your services and building new clients?

There are plenty of options when it comes to deciding if you need help with your office work. For example, a quick glance at the Yellow Pages will show you a number of small businesses that offer secretarial support. The wages required will depend on a variety of factors including, size of the organization and types of the services you provide.

Although the secretarial service will save you time to market yourself, do not choose this service once you have encountered the lowest prices in the city, but you should ask for references and it is better that these references be from other consultants who have used these services before or from small business owners. A small and reliable support service is well worth the price in the long run.

But there will come a time when you will find it more profitable to hire someone to work with you in your office. Hiring someone to do office support responsibilities can sometimes mean the difference between success and failure, and between getting more clients or permanently losing clients. Here are some of the benefits of getting someone to work with you in your office:

• You'll save time and money: By assigning someone to focus on more routine tasks (like opening mail, checking in, answering phones, etc.) you can focus all of your efforts on attracting new Think about this: Do you want to lose a client that gets you back $500 a day just because you weren't willing to pay extra to hire someone responsible for putting your brochure in envelopes?
• You won't have to worry anymore when you are out of your office: If you are doing your job on your own, it is hard to be on the ground and market for your services at the same time if you are worried about your clients calling and you have nothing but an answering machine.
• Have someone give you another point of view: Sometimes you may be really lonely trying to do everything yourself, but having someone with you every day in the office and providing another point of view may be worthwhile.

Income and Billing:

Since you have made the decision to open your consulting business, you need to be serious about the amount of money that you will cost your clients. If you assign them something very little, you will not succeed in the work, but if the cost is too big, you will not have any clients!

So, how do you find a middle solution that is fair to all? There is a way to help you determine the ideal cost, which is to discover the ratio of the cost rates of competitors, a simple phone call may do the purpose, asking for a brochure that explains their services and their prices, and then set your prices so that they are competitive for everyone in the commercial community.

Make sure that you have listed all your expenses before you set your fees because there is nothing worse than setting your prices and having a client pay you your fees on time and then discover that you have failed to include many expenses that appeared. This shows an important point to remember in every business you receive from a client which is you should add an item called (Miscellaneous Expenses) in your quote but do not inflate the number of these expenses to earn additional income.

Most clients will understand that there will undoubtedly be additional expenses in each project. You just have to make sure that everyone knows in advance the approximate value of these expenses.

Before you set your prices, you should find out the prices that other consultants in your community set for their services. Sometimes you will get the answer you need through a simple phone call to another consultant's office asking about their fees, or you may have a friend of yours who calls them and asks for their brochure or any additional information they can collect regarding fees and pricing. If you live in a small town and there are no other consultants in your field there, you should be happy, but make your fees at a reasonable level.

When you're pricing your services, you have several options that include hourly service fees, project fees, and a down payment before starting work. Let's study each one of these options more closely:

1. Hourly Fees:

You need to be careful when setting the hourly fee because two things can happen:

• Your hourly fees may be so high that no one can afford it (so no client will knock on your door).
• Your hourly fees may be so low that no one will take your work seriously.

You have to keep one important rule in mind when determining your fee, regardless of what structure you will define: The more people pay for a product or service, the more they expect it to pay off. In other words, if the client agrees to your hourly service fees as $400, then it is better for you to give that client for that $400 an appropriate service that is worth the cost.

Some clients prefer to be charged for the hour, while others hate the idea of paying someone what they see as too much per hour as these clients usually prefer to be billed for the entire project.

2. Project Fee:

When a consultant works on a project fee basis, they usually get a set amount of money in a predetermined period of time. Some of my fundraising clients have preferred to be billed in this way, so it was usual for me to set $36,000 for an annual project that I had consulted with them on how to raise money in it, and because of the amount of money going in, most agencies prefer to be billed monthly. This worked out fine until I realized that a lot of agencies are late with their monthly bills.

So, I decided that all future clients who would like to be billed monthly should pay the first and last month's fees upon approval of the contract. This means that if the agreed amount for the project is $36,000 to be paid monthly, I must receive a check for $6,000 before I start any work ($3,000 on the first month's fees and $3,000 on the last month's fees).

3. On Authorization Basis:

Working on an authorization basis secures you a monthly wage in which you agree to be available to work for an agreed number of hours for your client. In an ideal world you might have a large number of clients who hire you and pay you a large amount each month (they actually only call you for a few hours), don't get your hopes up too high. Most companies that hire a consultant on an authorization basis put a clause in their contract that prevents you from working for their competitors.

Working and paying this way has its advantages. You are guaranteed to receive monthly income and when you start your consulting business, cash flow will create a problem. Some consultants provide a cut-off percentage in their fees if the client will agree to pay a monthly authorization fee. The median income when the consultant is paid on the basis of the authorization is $3,555 per month.