The biggest impediment to starting a consulting business is fear. For most of us, the thought of giving up the security of a regular paycheck activates our survival instincts and brings terror to our hearts. But this fear is mostly psychological. Though there is some risk involved in striking out on your own, you can always go back to a "real job" if things don't work out. Remember: no risk, no reward. The rewards of a successful consulting business are great, but achieving that success requires complete commitment. Don't think of consulting as just getting consulting work; you are creating a complete business. You will not only be the consultant doing client work, but also the president, VP of sales and marketing, chief financial officer, and janitor of your company. As for the fear, once you are established you will feel more secure with a diversified client base than you ever did working for a single company.
Starting a consulting business is as hard as finding your first job. Once you have your first job, there are either opportunities to leverage it to find the next job, or time to line up something else. As for the beginning of your consulting business, the safest approach is to arrange it while you are still employed full time. Maybe your employer is willing to let you go to a part-time position. This gives you some reliable cash flow while giving you time to develop your consulting business. If you're worried about your employer's reaction, realize that he or she may be happy to have you part time if the alternative is losing you entirely.
Another possibility is to get your first consulting job with your existing employer. If that's not possible, concentrate on contacts and companies you already know. You will find it hard to get work from people that don't know you until you are somewhat established.
There are a number of practical considerations in starting a consulting business, such as insurance and taxes. These are not insuperable obstacles, but they must be addressed. I recommend that you find a good accountant who can advise you on record- keeping and tax issues. Meet with the accountant early on, but use the him or her sparingly thereafter and take advantage of inexpensive but powerful software for your day-to-day needs. I use Quicken for tracking all my expenses.
Keep all receipts related to your business, and set up a separate credit card and checking account as well. Look into whether you'll need state or city business licenses. Get health insurance and remember that you can extend the plan you have now in your current job. Disability insurance is also a good idea. Look into a self- employed retirement plan (a SEP-IRA, for example). These are simple to set up and as effective as a 401k plan. Get business cards, once you finish agonizing over your company name. Get an Internet domain name. Create a simple Webpage as your resume; you can expand upon it later. You should also develop a network of other consultants for advice on these items. What's great is that you have complete control over all of these matters, and once they are in place, they don't need much attention.
There have never been as many resources for consultants as there are now, especially on the Web -- FreeAgent is a good example. There are also numerous books on the subject. Think of becoming an expert at being a consultant as one of your first consulting assignments.
To start your business, you need to establish yourself, so expect to work very hard initially. Do excellent work for your early clients and you can expect lots of repeat business in the future. The longer you work at your consulting business, the easier it gets. Not only will you become more proficient with the overhead items, but you will have an increasing range of avenues for securing work.
In my next column, I'll discuss finding work in greater detail.