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Goal: To feel confident that you have the skills needed to be a successful consultant, and feel comfortable that you can make the necessary professional and personal life adjustments.
Questions to ask:
- How do my skills and abilities lend themselves to consulting?
- What support systems are currently available to me?
- What is my desired work style?
- What is my desired lifestyle?
- How will my changed lifestyle affect other members of my household? My personal and family finances?
- Does my financial situation support consulting?
Goal: Decide that it’s worth the time and effort to take your idea to the next step, or realize that consulting is wrong for you.
Questions to ask:
- What was (is) your greatest challenge?
- What worked for you when you started consulting?
- What would you do differently?
- What do you think of my consulting idea? Is it a viable business idea?
- How well do you think consulting fits with my skills?
- What do you think will be my greatest challenge?
Note: Keep in mind that finding potential clients and actually selling consulting engagements is the biggest single challenge for most first time consultants. Ask them about this specifically.
Goal: Line up three to six people who will provide straight advice to you, especially in areas where your skills are less developed.
You may meet with your entire board of advisors occasionally, but you will generally call on them individually for specific advice in their area of specialty. Some of your advisors will be paid. You may trade out services with others, and some may provide services free of charge. But make sure that the free advice is worth more than every penny you spend on it.
Questions to ask:
- Does the advisor have experience in an area where I need assistance?
- If the advisor charges fees, are they appropriate?
- Do I feel comfortable with the advisor? Will the person be objective, willing to say no to unsound ideas, and speak up about tough or critical issues?
- Which of the following specialties should I consider for my board of advisors?
- commercial banker
- financial planner
- insurance specialist
- independent sale representative
- marketing consultant
- seasoned businessperson
- contacts in potential client organizations
- strategic associates in other consulting businesses
Goal: Get three knowledgeable people to agree that your business definition is clear, market appropriate, and potentially viable.
Questions to ask:
- Exactly what consulting services will I offer?
- What is my target market (e. g., industries, locations, size) for these services?
- Who are my ideal clients (job titles, ages, interests, concerns)? What are their needs?
- What will my clients see as the benefits of my services?
- What is my USP? How will it motivate these clients?
- What will I name my business? Does it reflect my USP? Will it age well with my business?
Goal: Identify at least three potential clients and determine that they might be in the market for your services.
Questions to ask:
- What are some of my target companies/potential clients? Do I have contacts in any of them? Friends? How many?
- What are the major trends impacting my clients and my business? What might the future trends be?
- What are my clients’ needs? What are their wants?
- What do they buy now? What else might they buy? Who do they buy from now? What would it take for me to get business from them?
- What do they pay? What will they pay?
- When do they buy? Why?
- How do they make buying decisions?
- How can I get new referrals from my clients?
- What is my niche in the market? Is my USP appealing to my prospective clients?
- What kind of services do clients expect of me? What kind of services would satisfy or even delight them?
Goal: Identify at least three competitors, know how they compete, and know how you can compete against them.
Study competitive information, such as their publications, promotional brochures and websites. If necessary, refine your business definition and unique selling proposition based on the information you have acquired from this research.
Questions to ask:
- What is my competition offering?
- How are they positioning their services? What is their sales proposition?
- How do they price their services?
- How well established are they with their clients?
- What are my strengths and weaknesses in comparison?
- What is my USP in relation to competition? How do I differentiate my capabilities versus theirs?
- Is my USP an effective competitive tool?
- If I were the buyer, from whom would I buy?
- Is there room in the marketplace for additional competition?
Goal: Establish fees that are competitive and in line with your skills and income needs.
A rule of thumb in consulting is that at least one-third of your time goes to marketing, sales, preparation, administration, and other non-billable activities. Therefore, count on at least one-third of your time selling and only two-thirds (or less) delivering billable services. With good contacts or a strong reputation, you may need less sales time.
On the other hand, if you are starting out cold with no immediate clients, you will be in full time sales initially, with no income. You will want to ease that down to 50%, which is standard in some forms of consulting.
Questions to ask:
- How many billable days will I have (or do I want to have), and what revenue do I need to generate?
- What overhead expenses can I anticipate?
- How does the rate I calculate compare to the going rate for services like mine?
- Will I bill hourly? Daily? By project?
- What kind of proposals or quotations are the norm? In what format? How will I cost out estimates and live by them?
- What expenses can I pass on to my clients (such as travel, perhaps)?
Goal: A business plan that passes the scrutiny of your board of advisors (or other knowledgeable and objective advisors).
A simple business plan for your consulting practice increases your probability of success, because it compels you to articulate the key success factors underlying your business.
There are many print and electronic sources available, including actual plan templates.
Here are some standard elements of a business plan. You can construct on your own.
- Business definition: Define your services, target market, and unique selling proposition.
- Fee schedule: Decide what you will charge, and why. Is there a pricing strategy that needs explanation? Can you charge your customers for results rather than billing for time expended? Can you bill for travel?
- Competition: Know who else your prospective clients are likely to consider as alternatives to you. What are your competitors’ strengths and how will you counter them? What are their weaknesses and how will you exploit them?
- Marketing and sales strategy: Decide how you will communicate with prospective clients — using the market positioning you have selected — and how you will convert them and close the sale.
- Implementation schedule: Scope out what you need to do to get your practice operational.
- Revenue, expense and cash flow projections: You may want to run these numbers, just as you would for any new venture. But know that they will change.
Questions to ask:
- Does your business idea require funding? If it does, you’ll need revenue, expense, and cash flow projections over the period of the loan.
- Does your business definition, target market, and unique selling proposition stand out clearly? If the language is vague, murky, loaded with euphemisms, you need to revise it. Get others to read it and (forthrightly) comment on it.
- How will you compete in your chosen market? On what basis? How are your services differentiated from your competition? What are the key factors that will drive your success?
- Ask yourself: would I invest in the business summarized in this plan? Get members of your advisory board review it and ask the same question. Even if there’s little monetary risk, you are planning to make a major investment of your time and energy. Objectively, it should look like the right move to you, and to others.
Goal: Establish adequate systems and procedures to get started, and know what you’ll add on as you are able.
Even a small consulting business needs systems and procedures, and the earlier you establish yours, the more prepared you will be to manage your consulting practice effectively. You should have systems and processes that track your sales efforts, work projects, and finances in a systematic way, week to week, month to month and year to year.
To ensure peace of mind and avoid problems with the IRS, meet with an accountant before you launch the business to determine if it will operate on a cash or accrual basis, set up systems and processes to manage the finances of your business. Establish a chart of accounts to identify and track expenses. Get your accountant's guidance on expenses (such as professional memberships and subscriptions) that might legitimately be run through your business. Open a business bank account. And consider purchasing some software (suggestions listed below) to keep your affairs straight.
You should also consult with an attorney on the forms of business organization (sole proprietorship, limited liability corporation, etc.), and on liability and any other issues that may be relevant. Consider whether you need insurance, such as Errors and Omissions coverage.
Will you need a website and help putting it together? Will you need a license to do business in the city or town where your business is located? Do you need to register your business and its name with the state, city or county clerk?
Many consultants start their businesses in a bedroom, but move to professional space when they can afford to. If you do not have an office appropriate to the consulting practice you have in mind, work on securing that space, and the necessary equipment and supplies.
Your board of advisors (or the consultants you contacted earlier) may help you with space and equipment decisions. They may also know where to get good prices on equipment and low cost space.
The following are some considerations. Establish systems and processes, such as:
- Recordkeeping, billing, project planning
- Correspondence, proposal development, mailings (print or electronic)
- Financial statements, tax records, cash flow
- Benefits (e. g., health insurance, disability, retirement accounts)
- Submit any required filings, and obtain any required licenses, permits, and insurance
- Acquire the necessary equipment and supplies, such as furniture, computer, printer, Internet service provider, telephone(s), wireless capability, stationery, business cards, and office supplies.
Goal: Get a paying client, then get more
Since you will need to contact prospects several times, it is important to develop a systematic way of communicating with them so they get to know your name and the nature of your business. You may also wish to use contact management software. A consistent, systematic approach to sales is the best way to expand your client base.
Your marketing materials should not just describe your business, but must speak to your clients’ needs. Like all communications, including your proposals, your marketing materials should clearly convey your unique selling proposition, and how this distinguishes you from competition.
But as good as your marketing materials are, the only thing that really matters is closing the sale. You know your services are good, but...
- Can you convince a prospective client?
- Can you resist the temptation to give away solutions before you close the sale?
- Can you overcome your client’s fear or resistance that blocks them from using you as a consultant?
- Can you ask for the order?
Questions to ask:
- What marketing materials do I need? (Possibilities: business cards, stationery, brochures, mailers, service descriptions, interactive website, portfolio, work samples, references, client list, case studies/success stories, your biography, proposal formats)
- How will I promote my business? (Possibilities: seeking a leadership position in a professional or industry association, writing articles, speaking engagements, direct mail, advertising, website)
- What marketing and sales methods will I use? (Possibilities: networking for information, leads, referrals and introductions, telemarketing, making sales calls and presentations)
- Do I know how to close a sale?
There are a number of methods available for obtaining the career information you need to make good career choices. Libraries and the Internet are usually a good starting point. But it's important to move beyond them to real-time conversations with knowledgeable people. Networking is an essential intelligence-gathering activity:
- Talk to personal contacts. Identify friends and colleagues who might have knowledge of your skills and of the kind of work you've been doing. Ask about other professions in which they see you working in the future.
- Talk to contacts in your industry. Select two or three professional contacts inside your industry. Ask them what they believe the market is like for people who do what you do. Ask them to help you assess how up-to-date you are in your own skills. Talk with them about their views on the long-term viability of your profession. Ask them to help you understand what opportunities might exist for people with your skills at both larger and smaller organizations than the one you've just come from. Ask about other professions in which they see you working in the future.
- Talk to contacts in other industries. Locate two or three professional contacts outside your industry. Ask how the work you've been doing is performed in their industry. Ask about the skills and backgrounds of people who perform that kind of work in their industry. Ask them to help you assess the impact that technology has had (or will have) on your profession. Ask about other professions in which they see you working in the future.
- Explore possible new professions. Ask your personal and professional contacts to introduce you to people who are currently in a new profession that you might be considering. Ask those people about the state of their profession, how it is changing, how technology is impacting it. Talk to them about the "barriers to entry" and what would be required for you to "get from here to there." Talk to them about the everyday experience of their work. Ask them to help you assess what roadblocks you might face in making the transition and what you might be surprised to learn once you got there.
- Use professional associations. Contact the association that focuses on your profession or the profession you're considering. Ask them what kinds of materials they publish. Many do annual "state-of-the-profession" surveys, which can be extremely valuable to job seekers who are trying to get conversant in the challenges facing their own profession, or to learn about a new profession.
Using your network is a good way to obtain salary information. Here are four thought-starters.
- Identify friends and colleagues who might have knowledge of the kind of job you're targeting. Ask them what they believe the market can bear for a particular job. People may be uncomfortable talking about you personally. Instead, describe the job you're considering and the skills it requires. Ask them if they've ever used an online salary calculator that they thought was fairly accurate - if so, which one?
- Ask your professional contacts what they believe the market can bear for a particular job. Ask them what sources of salary information or benchmarks they use to determine fair range when they have a need to fill a position.
- Ask your professional contacts how salaries in a particular industry or at a specific company compare to the norm. Gather intelligence from your contacts about overall compensation-not just salary patterns-in your target industry or company. This kind of information will help you formulate your negotiation strategy later on.
- Contact the professional or industry association whose members have the kind of job you are targeting (it may not be the one to which you currently belong). Ask them if they publish a salary survey. If they don't, ask them who does. This technique yields results almost every time!