Starting a Consulting Business - Nuts & Bolts Tips for the Basics You Need

Here are nuts and bolts tips for some basics to get your consulting business up and running fast.

* Form of Business. Depending on the type of consulting business that you want to operate, you may wish to run the business as a "sole proprietorship" or as a legal entity such as a corporation, legal partnership (such as a limited partnership or “LP”), or a newer type of entity called a limited liability company (also known as an “LLC”). You should talk to a lawyer or accountant for advice on choosing the form of your business. There are also online services that can help you form a corporation, partnership or LLC.

* Liability Insurance. You will want to obtain basic commercial general liability insurance to cover personal injuries or property damage caused by operation of your business. This type of policy also may cover loss or damage to the contents of your office (such as loss of a personal computer). You may need a commercial insurance policy even if you are doing your consulting work from home. In addition, certain consultants may need to obtain malpractice or errors and omissions (“E&O”) insurance. E&O insurance can be more expensive (e.g., more than $5,000 per year). Ask a commercial insurance agent for advice and quotes for rates.

* Health Insurance. Insurance for health issues is often a hurdle for persons leaving a job to become an independent consultant. With some research and planning, this should not be an obstacle. You may need to obtain your own health insurance policy, or rely upon the health insurance of your spouse. Consulting firms that have employees generally can purchase group insurance plans. For details, talk to a local health insurance broker or search and compare health insurers and plans online.

* Office. Your choice of an office will depend on the type of clients that you have and what you need to provide services to them. Many consultants today do not need an expensive office. They just work from home, because most of their work is done by telephone, by computer, or with on-site visits to clients. However, think carefully about whether you are suited to working at home or in a small office with no one else around. Compared to a traditional job environment, this can be very freeing, or very lonely. Also, pets and young children can be noisy at home. You might want to share an office with other consultants or business people, or rent an office from one of the many "turn-key" temporary office providers.

* Business License. Your town, city or county probably will require you to obtain a business license for a modest fee. You need to decide on the location of your office in order to get the license. In addition, if you are in a regulated profession (such as lawyers, doctors, or architects) or industry (such as finance, real estate or mortgages), you may need additional professional licenses or certifications.

* Consulting Contract. Using a written consulting contract is essential to protect you and your business from liability and misunderstandings, and to help you get paid for your work. Most consultants can get by using form contracts prepared or reviewed by a lawyer. They then customize the business terms and project description for each specific client. Pricing can be on a time-and-materials, fixed fee, or even commission or contingent fee basis. It is also important to protect your rights to your work, so that you can reuse it in other projects or for other clients as needed.

* Finances. This is another hurdle for new consultants, but it shouldn’t be. For a small consulting business, there is little capital investment and no inventory, so finances are fairly simple. Software or online services can be real time-savers, and help you delay or avoid adding staff. Some consultants use spreadsheet software, while others will use accounting software. These permit simple tracking and billing on a time or project basis. If your consulting practice requires detailed tracking of lengthy time sheets or numerous fixed fee projects, you may want a more powerful (but more difficult to learn) time tracking and billing program. Other consultants will prefer a traditional bookkeeper instead of using software.

Use these tips to help you plan your consulting business quickly and get it off to a fast start.