How to grow your consulting business

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Being an independent consultant has advantages, but it also has significant limitations. Your business model is simple, and you can operate with low overhead. The drawbacks? You may be too busy to accept some assignments, and you are limited in the size and scope of projects you can take on. At some stage of your consulting career, you may want to consider expanding your business.

Doing so will give you new career growth opportunities, and may also improve your bottom line. But before you make the leap, realize that this is a complex undertaking with many repercussions. To be honest, it's a leap I have not made, though I have considered it at times. To shed some light on the topic, I interviewed some of my consulting colleagues who have recently expanded their businesses.

The most important first step is determining how you want to expand. There are two basic models. One is to hire staff as employees. The other is to enter a partnership with one or more people on a peer basis. Why would you choose one over the other? I believe the partnership model makes sense if you already have a good relationship with another professional who is potentially interested in joining you. But I wouldn't go out and recruit somebody who I didn't know. The partnership model also only makes sense for a total of two or three partners. Beyond that, the absence of a clear management structure can make it hard to make decisions. If you want to grow beyond two or three people, you should probably proceed directly to the employee model. In both cases, realize that you are going to have a fundamentally different business than your sole practice. For the remainder of this column, I'll consider the partnership model; in the next column, I'll examine the more complex case of hiring employees.

Finding a consulting partner is like getting married. Your partner had better be somebody that you trust and get along with. Need I say that potential partners need to be highly competent? You should begin with one partner and work with him or her for a while before even considering other partners. As tempting as it might be to find a partner who is just like you, that person will not necessarily be the best partner. Instead, look for somebody who complements your skills. If you are bad at developing prospects, find a partner who is good at prospecting. If you are detail oriented, find somebody who is more visionary. However, your partner should share your values, have the same fundamental philosophy, and have similar perspectives on the market you work in.

To clarify expectations and minimize the likelihood of disputes, you will want to develop an agreement with your partner. But, according to my colleagues who have gone down this road, it can take a while to determine how you best work together. So you may want a loose or even verbal agreement to begin with that you can formalize later on.

With respect to compensation, a partnership generally implies that you share equally in the profits. This might not be the case if you hire a junior partner, but I consider such a relationship to be closer to the employer-employee model. From a tax and legal perspective, during the trial period you might consider remaining as two sole proprietors. This makes it much easier to separate if things don't work out; it's like living together without getting married. But before long, it will be best to form a general partnership or perhaps to incorporate the business. Forming a partnership is easier, but incorporation will give you greater flexibility in managing finances.

You may well want to hire an assistant, perhaps on a part-time basis, who can coordinate your appointments and activities, especially if you and your partner live in different areas. The assistant can also help with the bookkeeping, though I recommend an accountant for tax preparation and financial advice.

Where possible, go to initial client meetings together, as the two of you will impress your client by your combined broader perspective. Once projects are underway, you can assign a lead person. Make sure you keep each other in the loop on important developments. If you have been working alone for a while, you may need to make a conscientious effort to keep your partner informed. Remember, you will be reinventing your business from the ground up, rethinking your marketing, your finances, and the ways in which you execute your projects. But, with your combined clout, you and your partner will be able to tackle projects that hopefully more than reward you -- both in satisfaction and in monetary compensation -- for the additional risk you are taking.

Next time: growing a consulting organization with employees.

The following books examine the legal aspects of partnerships:

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