Tuesday, December 16, 2014

7 Steps to Becoming a Consultant at 50+

     

When we think of entrepreneurs, we often picture young, tech-savvy millennials. But the face of American entrepreneurship is actually quite different. A recent survey conducted by Monster.com (link is external) found that baby boomers take more risks and start more businesses than twentysomethings. With assets such as more wealth (and less debt), wisdom, education and experience, it’s no surprise that the average age of entrepreneurs is rising.

Consulting or contracting is a particularly attractive form of business ownership to older people – you can work anywhere and start-up costs are low. According to MBO Partners (link is external), nearly 5 million baby boomers are working as independent professionals – and 83 percent of them held traditional jobs before starting their own businesses.

If you’re interested in consulting or contracting as your second career act, here are eight essential steps to getting started.

The business planning stage

Most consultants and contractors start their businesses with very little financial investment, but that doesn’t mean you can ignore the planning process. In fact, a business plan can help you focus on your goals and the route you need to take to achieve those goals while doubling your chances for success (link is external)!

If you need help with your plan take a look at SBA’s online, interactive Build a Business Plan tool.

Choose your business structure

Many consultants and independent contractors assume that they need to form a limited liability company (LLC) to operate successfully and with minimum risk. While being an LLC can protect you from personal liability for business decisions or actions of the LLC – the liability protection is limited. In fact, over 70 percent of small businesses operate as sole proprietorships – the simplest way to start a business.

A sole proprietor owns and runs the business – there is no legal distinction between the business and you, the owner. This may be a disadvantage because you can be held personally liable for the debts and obligations of the business.

Managing this and other forms of risk is an important consideration and often requires a layered approach that includes selecting the right business insurance (clients often require that consultants have a form of insurance before entering into an agreement) and consulting an expert about the best structure for your business. Read more about your business structure options.

Financing your consulting business

How much money you need depends on the cost of doing business for the first few months (before you start generating sustainable income) such as the cost of getting business insurance, utilities, incorporation fees, setting up a home office, etc.

If your cash flow predictions indicate you may not be able to cover your expenses during this period, consider your options. Many contractors get around this problem by maintaining their existing full-time job while running their consulting business on the side. If you do need to borrow money, AARP strongly advises against dipping into your retirement funds. Instead, consider other ways to finance your business.

Tax and legal obligations

Starting a business can seem overwhelming and not just because of the legal and tax obligations that you’ll encounter. During the start-up phase, it’s important to get these right.
This includes obtaining the right licenses and permits. If you intend to use a trade name or name your business something other than your own name, then you’ll need to register that name with your local government.

From a tax perspective, consultants need to take care of quarterly estimated tax payments to both the IRS and yours state revenue office.

For a complete list of the legal and regulatory “must-dos,” read “Starting a Freelance Business – How to Take Care of Legal, Tax and Contractual Paperwork”.

Setting your pricing

Consultants and contractors often undervalue their worth for a number of reasons. It can be awkward to talk about money or we underestimate how long things take us, or, worst of all, we want the gig so bad that we underprice it. To help you set your pricing, and negotiate your worth, read How to Calculate and Negotiate Your Hourly and Project-Based Pricing.

Go after your existing contacts

Your current pool of business and personal relationships will almost certainly be the source of your first clients as you start up. When I started my consulting business, my first client was my last employer. It’s been a fruitful relationship on both sides that spans over 10 years. They understand my value, trust me to deliver results and I understand their work practices inside out.
From there, network out and tap into relationships with former colleagues and industry peers. As your client base grows, hopefully these folks will also become your cheerleaders. Referrals are a huge source of business for consultants.

Marketing

While networking is important, it’s a good idea to have a marketing plan. Elements to consider include establishing a website (to build credibility, showcase work, promote testimonials and ensure you can be found on search engines). You should also work on refining your marketing message – what you do, for whom, and why you’re different from the competition. Other tactics that can help build your online profile are blogs, social media accounts, etc.


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