Welcome to the 2nd lesson in the Consulting Crash Course.
In this section we're going to cover:
Before getting into it, I'm going to say right from the start that you technically don't need any of this stuff to start consulting. Finding clients and making money is the most important goal when starting your business. You can start doing business without business cards and a website and an LLC and everything else. However, assuming that you're trying to run a decent consulting business, these are the things that are going to help you be perceived as more professional and protect yourself legally.
Business Name & Logo
One of the first items you’ll want to decide is what's your business name and logo.
You can use your own name or choose a different name for your business.
Choose something that is likely to have the domain and social accounts available. For example, our business name is D&M DevCo. We added D&M because they are our initials and it makes our name unique. DevCo.com and @devco weren’t available, but dmdevco.com and @dmdevco were. We still go by DevCo for short.
Once you have a name, you’ll want a logo that displays 2 - 3 versions of it. You'll want a long version, a square version, and an icon.
Business Cards, Website, & Resume
Business cards and a website help validate your business and build trust with potential clients.
When you meet with clients and they look you up, you want to have something that shows off your work and what you do. Your website should clearly state what you do and showcase previous or sample projects. It's common for clients to ask for a resume or a list of work, especially if you're new.
It’s important to have a professional and cohesive presence. All items should feel similar in design. Check out Canva for well designed templates.
Here are a couple resources to help set these things up:
Logo design - Looka, 99designs, Fiverr
Various well designed templates - Canva
Business cards - MOO
Website builder - Carrd, SquareSpace, Weebly, or Wix (Compare here)
Free images for commercial use - Pexels, unDraw
Example site - DevCo
The correct legal structure depends on what you want to do with your business. The main options for consulting that make sense are a LLC (limited liability company) or sole proprietorship.
We recommend a LLC because it limits your liability to the amount invested in the business. It separates your personal assets (car, house, cash) from your business assets so one can take your car/house if the business is sued for a large amount of money.
You can file an LLC yourself through LegalZoom. If you start the process and it doesn't make sense, it may be smart to talk with an attorney to make sure that you set it up correctly.
A sole proprietor means that you're just doing business under your own name and don't have a business as a separate legal entity. You are a sole proprietor by default if you haven't set up a business at all. Meaning if you make money through business means you are a sole proprietor. The big difference is that you and your business are treated as the same entity and your personal assets are not protected. This means if the business goes under and you owe somebody $2 million they can come after your personal assets like your house and car. There's no paperwork or filing fee. You can file a DBA or doing business as so that you don't have to use your own name for business. A D.B.A. ensures that no one else is doing business under your name and allows you to open bank accounts and other vital business services under your business name.
LLC - Limited Liability Company
LLC stands for limited liability company and means your liability is limited to your investment in the LLC. Basically, your business is viewed as a separate entity and your personal assets are not intertwined with the businesses assets. So if your business is getting sued for $2 million they can't come after you personally and take your house, car or other assets. Having an LLC is generally a good idea because protects your personal assets and holds more market credibility. However, there is a fee to file and it varys by state. It's $800 in California.
Document storage is another area you'll want to set up.
You will need a place where you can save various business documents and easily find them online. We use and recommend Google Drive and the rest of the G-Suite. It allows us to view, upload, or download all of our docs from any device.
Dropbox and Microsoft OneDrive are similar options.
Accounting & Bookkeeping
Accounting is the process of summarizing, analyzing, and communicating financial transactions to gauge the financial health of the company and report to relevant authorities (IRS, state).
Bookkeeping is the process of recording financial transactions, usually by entering them into accounting software or a physical set of “books.”
You want to handle the basic day-to-day bookkeeping tasks so your accountant can prepare your financial statements (balance sheet, income statement, cash flow statement) and file your tax documents.
You should be using some accounting software, like QuickBooks Online, for bookkeeping. I recommend the QuickBooks online essentials plan ($40/month) or simple start ($25/month). They usually they have deals going on for when you first sign up so it's only like $10/month. I've heard transferring from QuickBooks Self-employed is a huge pain if you need to upgrade to another plan. If you have a chance of growing, then you'll probably want a typical QuickBooks Online plan not QuickBooks Self-employed.
If you're new to this, you might be saying exactly why do I need something like QuickBooks?
QuickBooks allows you to track your customers, time, invoices, payments, and expenses. It also helps generate tax documents at the end of the year. Basically, it helps you to keep track of all things related to your business to handle your accounting and file your taxes. Plus if you ever get audited, you'll have something that you can point to where everything is saved digitally.
More on this in Accounting for Consultants.
Once you have an LLC set up you want to open a business bank account.
You'll need your EIN or employer identification number to open a business account. You get this after successfully filing for your business. You may need additional documentation to prove that your business is valid. Most of what they ask for should be included in the documents you filed through LegalZoom.
If you're sole proprietor you're not legally required to open a business bank account. However it's probably smart to open a separate checking account so you can track money from the business seperately from your personal account.
We bank with Chase. Their technology is awesome and we've had no issues. Bank of America and Wells Fargo are other options but choose the bank that is right for you.
Getting errors and emissions insurance, also known as e&o, is a very good idea.
It covers you from mistakes bad advice and copyright issues and more. It cost roughly $500 to $1,000 a year per employee.
You'll want to do your research to choose an insurance provider and here's a link for some general information on errors and emissions from progressive.
That's all for this lesson. In Consulting Pricing Strategies we'll cover various pricing models and setting your rate.
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