New To Consulting Presentation

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


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


Is Consulting Right for Me?

Successful independent consultants have tenacity,

determination, talent, and an entrepreneurial mindset.


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


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


The Oxford Dictionary

Oxford defines Independent as follows:

“Not dependent on or controlled by another person or thing.”


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


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”


“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


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


Competition for Talent is Heating Up Throughout the United States

5/29/2008 OURPUBLICSERVICE.ORG

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2002 2006 2010 2014 2018 2022 2026 2030

Labor NeededLabor Available


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



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



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


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


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


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


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)


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


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


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?


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)


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


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?


There Are Other Options

Consulting companies

Staffing agencies

Portable Employer of Record firms (PER)


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


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


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


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

New To Consulting Presentation

Business

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