How To Launch A Small Consulting Business
(By Elizabeth Tuico) More people are asking me how I started Rebel Road Creative Corporation. The following post outlines the steps I took to launch my small consulting business:
Validate your idea
What do you want to do? Take time to evaluate the competition. Make sure your idea and expertise are strong enough to compete. More than 50% of small businesses don’t make it to year three.
Be Prepared to Leave Your Current Situation
Working for yourself is exciting and empowering. It’s also scary. Even with proper planning, there will be slow times. To better prepare:
Save at least a year of living expenses in cash.
Determine how you will obtain health insurance.
Write a Business Plan
What services will you offer? What will you charge? Clearly define three to five service lines. Don’t throw the kitchen sink at potential clients. You’ll need to experiment and see what resonates with your target audience. (Of my original service lines, only two remain active.) Determining what you charge can be tough. Ask: a) competitors for their rates; and, b) colleagues what they pay for services. Examples of business plans can be found here: Write your business plan (sba.gov)
You still need to consider your exit strategy even though your business hasn’t opened yet. Do you want to eventually sell it? Or gradually wind down as you approach retirement? Will you hire employees? How will you pay them (W2 or 1099)?
Get Your Paperwork In Order
1. Select your business structure and company name. Do an online search to determine if your company name is unique in your state.
2. Register your business. A registered agent is a person or company who agrees to accept legal mail (known as “Service of Process”) on behalf of your business in case your business gets sued. I hired Washington D.C. Registered Agent to file my paperwork. They wrote and filed my articles of incorporation and bylaws with the District of Columbia government, and applied for my business license. I paid $369 for this initial set up service, and $49 a year for their registered agent service. They also remind me to pay $300 every other year to the District of Columbia for my business license. You can find registered agents in every state.
3. Apply for federal and state ID numbers with the IRS.
4. Open a business bank account.
5. Depending on your services, you may need business insurance.
Learn more from the Small Business Administration: Small Business Administration (sba.gov)
Manage the Business
It’s important to stay compliant with your state’s regulations. And pay your taxes! Your business must meet its federal, state, and local tax obligations to remain in good legal standing. Your business structure and location influences how your business is taxed. As the employer and employee, you pay all social security and Medicare taxes (in addition to state and federal). Taxes are tricky so consult an accountant. Learn the basics here: Pay taxes (sba.gov)
Build Up Your Reserves
Build up cash reserves for the slow times and when you want to go on vacation. If you don’t have employees or passive income, you don’t earn money if you don’t work. Sufficient cash reserves allow some flexibility.
Being your own boss is rewarding. However, it takes careful planning to launch a successful small consulting business. Do your homework, and put a plan in place before taking the plunge.
Note: If you want to freelance, starting a business isn’t necessary. You can use your social security number, and get paid as a 1099 contractor. But consider:
1. Opening a separate business bank account.
2. Using accounting software to send out invoices and track expenses. I like FreshBooks (affiliate link).
3. Finding an accountant to advise you on estimated quarterly taxes.
4. Earmarking 20-25% of your earnings for taxes. (I have a separate savings account just for tax payments.)
Check out the Freelancers Union website for resources, discounts and relevant information for independent workers.
This insightful post from Creately provides templates and tips on Making a Business Plan Presentation.
Clients in the A/E/C (architecture/engineering/construction) and tech industries turn to Rebel Road Creative for marketing ideas, training and content creation. Looking for a spark to light up your business? Get in touch.
