New To Consulting Presentation
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Copyright © 2008 MBO Partners. All rights reserved.1
It’s Your Talent – Own It!Making the Transition to Independent Consulting
Gene ZainoPresident and CEO, MBO Partners
Copyright © 2008 MBO Partners. All rights reserved.2
Overview
The Entrepreneur Pros & Cons of being in
business for yourself Is consulting right for me? Big vs. Small
Business Structure 1099, sole proprietor ? S-Corp, C-Corp, LLC, PER ? Self-employed tax benefits
Sales & Marketing Finding work Marketing your services Networking and backlog
Compliance, Insurance and Accounting Tax administration Business insurance Cash flow: Billing,
collections, expenses
Copyright © 2008 MBO Partners. All rights reserved.3
Is Consulting Right for Me?
Successful independent consultants have tenacity,
determination, talent, and an entrepreneurial mindset.
Copyright © 2008 MBO Partners. All rights reserved.4
Some Key Success FactorsCore competencies of Independent Consultants
Defined, verifiable expertise
High integrity
Comfortable with marketing and self promotion
Able to establish and develop high quality, enduring relationships with clients and other professionals
Can easily identify opportunities and then sell themselves and their ideas
Copyright © 2008 MBO Partners. All rights reserved.5
More Key Success FactorsCore competencies of Independent Consultants
Apply knowledge and experience to add value to clients
Create strong references (happy clients)
Pursue a pipeline of potential new assignments without compromising existing client work
Assemble a strong support team to minimize their time on financial, legal and business administration activities
Copyright © 2008 MBO Partners. All rights reserved.6
The Oxford Dictionary
Oxford defines Independent as follows:
“Not dependent on or controlled by another person or thing.”
Copyright © 2008 MBO Partners. All rights reserved.7
The Independent LifestyleBenefits of the consulting lifestyle
Flexibility and Control You are your own boss Deliver your work, your way Manage your work / life
balance
Autonomy Build the skills you want to
develop Pick the projects you want Avoid “office politics”
Financial Rewards Profit from owning your talent Leverage your experience Own valuable relationships Launch pad to big business
Copyright © 2008 MBO Partners. All rights reserved.8
Why the Time Is Rightfor an Independent Career
Build career resilience duringuncertain economic times Diversify your career portfolio Create a “go-to” network of
relationships Maintain an infrastructure that
generates constant flow ofchoices and opportunities
“All eggs are NOT in one basket”
Copyright © 2008 MBO Partners. All rights reserved.9
“The federal government is facing some extraordinary workforce challenges and will need to draw on the best talent from
both government and government contractors.”
John PalgutaVice President for PolicyPartnership for Public Service
Client Opportunities at the Federal Government
Copyright © 2008 MBO Partners. All rights reserved.10
Nearly 60% of Federal employees are over age 45.
550,000, 1/3 of the federal workforce will retire in the next five years.
- Office of Personnel Management, 2007
“Dual compensation restriction” bars retirees from drawing a full annuity while employed with the Federal Government even on a time-limited or part time basis.
– Partnership for Public Service, 2007
The Demographics Are In Your Favor
Copyright © 2008 MBO Partners. All rights reserved.11
Competition for Talent is Heating Up Throughout the United States
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2002 2006 2010 2014 2018 2022 2026 2030
Labor NeededLabor Available
Copyright © 2008 MBO Partners. All rights reserved.12
Migrating to anIndependent Career
Set up shop at home A quiet place with internet access
Set up your consulting parameters Where do you want to work? When do you want to work? How many clients do you want? Stay as soloprenuer or big
consulting firm? Build a 12 to 36 month plan
Start planning while you are generating other income
Copyright © 2008 MBO Partners. All rights reserved.13
Migrating to anIndependent Career
Hone your assignments to improve your marketability Add experience that will be in demand Learn which industries or areas will have largest need Focus on assignments that are your strengths Mold your skills to what will increase your value and set
you apart
Copyright © 2008 MBO Partners. All rights reserved.14
Migrating to anIndependent Career
Do you have ideas for your first contract? Anyone you can approach? Maybe lower your rates for right assignment in order to build
reference base equity You can always raise or lower rates on future assignments
but what you need is to get started
Copyright © 2008 MBO Partners. All rights reserved.15
Build Your Brand Identity
Build marketing materials List your skills and credentials Create a small list of interesting projects (case studies) You will need both a Resume and Services brochure
Position yourself as an expert Offer free advice via online discussion boards, blogs, or articles
Use the internet to build online profiles: Linked In www.linkedin.com MBO Partners www.mbopartners.com
Email everyone you know and provide them with your profiles and materials Follow-up personally with key business relationships
Copyright © 2008 MBO Partners. All rights reserved.16
Stay Connected
Network with friends, past employers, professional associations
Read professional journals to keep up on trends
Attend conferences and workshops
Collect business cards and follow up
Connect with colleagues
Find a mentor or two
Copyright © 2008 MBO Partners. All rights reserved.17
Market Yourself“Directly” to Organizations
Find the appropriate contacts Use corporate web site to
identify opportunities Locate names of HR contacts
and recruiters from job postings Develop rapport with internal
recruiter Promotion notices in local
business publications
Copyright © 2008 MBO Partners. All rights reserved.18
When to Use Recruiting Firm(Staffing Company)
Only when you can’t find project directlyImportant tips: Let them know you’re knowledgeable Protect the integrity of your resume Protect your references Protect your freedom to work directly
(do not sign broad non-competes) Establish a corp-to-corp contract (or
use a PER.. More later)
Copyright © 2008 MBO Partners. All rights reserved.19
Legal StructuresChoosing a Legal Framework for Your Business
Sole Proprietorship
• 1099 Status• Personal assets at risk• Income taxed on 1040 Sch C• Large Clients prefer to avoid • Highest risk of audit
C-Corporation
• Personal asset protection• Taxed at Corp separately• Double taxation•Unlimited shareholders•Very investor friendly• Moderate risk of audit
S-Corporation
• Personal asset protection• Income taxed on 1040 Sch C• Avoids double taxation• Limited shareholders• Investor friendly• High risk of audit
Limited Liability Company
• Personal asset protection• Income taxed on 1040 Sch C• Avoids double taxation• Limited shareholders• Easier, but investor un-friendly• High risk of audit
Copyright © 2008 MBO Partners. All rights reserved.20
Business InsuranceWhat you need to protect your business
Workers Compensation Compensation if injured at work
General Liability Protects business assets in the event of personal injury or
property damage
Professional Liability (Errors and Omissions) Protects business assets in the event of errors or omissions
Copyright © 2008 MBO Partners. All rights reserved.21
Vendor QualificationsHow to get on the list
The Vendor List Getting on is no small feat GSA for government work Supplier qualification assessment
for large companies, consulting firms and integrators
Some Qualifiers Years in business Financial strength Legal structure Business insurance
Security Clearance Who will hold your clearance?
Copyright © 2008 MBO Partners. All rights reserved.22
AccountingGetting systems in place
Invoicing Hourly, by the project, by the piece Monthly or project-based billing Collections
Expenses Some may be billable to clients Out-of-pocket, tax deductible
Tax Management You may need to file quarterly estimated taxes Self-employment taxes for 1099s
Management Options Software, e.g. Quickbooks Hired accountant Portable Employer of Record – manages back office (more later)
Copyright © 2008 MBO Partners. All rights reserved.23
Tax DeductionsMaximizing your tax benefits
Home office Percentage of mortgage, utility bills Office supplies, computer equipment
Travel and Entertainment Mileage to business meetings, on-site assignments Out-of-town travel to conferences, etc. Meals and entertainment for business
Out-of-Pocket Medical Expenses for you and your family not covered by insurance Must meet threshold, or use PER
Education Conference and seminar fees Continuing education related to industry
Dependent Care Child care or elder care expenses
from eligible, certified providers
Copyright © 2008 MBO Partners. All rights reserved.24
Employee Benefits Medical, dental, life, disability
Group versus Individual program Group means guaranteed coverage
Retirement 401(k) program or SEP Tax deferred Roth option
What About You and Your Potential Staff?
Copyright © 2008 MBO Partners. All rights reserved.25
There Are Other Options
Consulting companies
Staffing agencies
Portable Employer of Record firms (PER)
Copyright © 2008 MBO Partners. All rights reserved.26
Understanding a PER:It’s Your Business, Make the Most of It
Take everything you love about consulting… Operate as your own boss Pick your own engagements Set your own rate and terms Work multiple projects Build project teams Maximize your tax benefits
…and add: Complete back-office support Improved cash flow Affordable group benefits Free GL, E&O, and crime bond Personal account service An “in” to huge clients Online system to track it all
Copyright © 2008 MBO Partners. All rights reserved.27
What % of billing rate is kept? 100% 40% - 70%92-96%
Level of reclassification risk? High None (if W-2)None
Find projects yourself? Yes NoYes
Deduct business expenses? Yes NoYes
Deduct medical expenses?* No NoYes
Who handles financial admin? Self Staff/Cons CompanyPER
Who carries business liability? Self/Corp Staff/Cons CompanyPER
When do I get paid? Upon client payment Bi-weeklyUpon client payment**
Overall benefits quality? Varies Low to mediumHigh
Benefits cost? Very high Low to mediumMedium
Who absorbs employer payroll tax? Self/Corp Staff/Cons CompanySelf/PER
Personal audit risk? High LowLow
Credit profile? Weak Weak to GoodExcellent
Staffing/Cons.1099/Self-Incorp.PER
Who handles client billings and collections? Self Staff/Cons CompanyPER
Comparing the Alternatives
*Assumes under 7.5% of annual AGI in medical expenses** May qualify for advanced financing
Copyright © 2008 MBO Partners. All rights reserved.28
Is Consulting Right for Me?What it takes to be the best of the best
Entrepreneurial Mindset It’s all up to you Your success is measured by the success of your clients Drive, dedication, and talent will ensure your success
Specialized Skills and Knowledge You must have specialized skills and knowledge Experience, insights, and connections that will help businesses
Business Sense Running a business is more than just being good at what you do Organization, back office management Marketing yourself
Copyright © 2008 MBO Partners. All rights reserved.29
The MBO Difference:Run Your Business within Our Business
Safe, client-friendly W-2 tax status Tax benefits better than 1099 or Corp No more quarterly estimates Lose the “shoe box” of receipts Audit risk dramatically reduced Improve credit score
Maintain full autonomy Run your own division within MBO Your clients, your rates, your P&L MBO umbrella carries all privileges of
large-company employment Extend benefits and payroll to staff
Copyright © 2008 MBO Partners. All rights reserved.
MBO Partners13454 Sunrise Valley Drive, Suite 550
Herndon, Virginia 20171
1-800-220-0469www.mbopartners.com