How and When to Raise Your Consulting Rate

How and When to Raise Your Consulting Rate

The easiest time to raise your rate is on the cusp of something new — a new year, a new project, a new client. With the new year just a few weeks away, now might be the time. This article offers ideas of how to do this, as well as some sample language to use when notifying your clients.

How to determine your new rate

Unfortunately, there’s no one-size-fits-all formula. Instead, I suggest triangulating on a rate that seems fair. Look at several different numbers and then decide. Here are four suggestions.

First, make a ballpark guess of what you think your new rate should be. For example, if your rate is now $150 an hour, what do you think is a logical next step? $175? $165? Jot it down.

Second, calculate a percentage increase. The amount might be 3% or 5% annually. Or maybe you need to make up for two or three years without a rate increase, and a 10% or 15% increase seems appropriate. Do the math a few different ways and see how these numbers play out. In my example of $150 hourly, a 5% annual increase works out to $157.50 for year one, $165 for year two, and $172.50 for year three. 

Read More

What To Do If Your Client Doesn't Pay

What To Do If Your Client Doesn't Pay

It was bound to happen. After 15 years and hundreds of contracts, I finally had a client that didn’t pay, and didn’t pay, and didn’t pay. For six months there was one lame update after another. “We’re working on it,” or “We’ve switched to a new process.”

Yesterday, my bank finally received the wire transfer. Here’s my story, what I learned along the way, and steps you can take if you find yourself in the same situation.

Read More

Website or No Website? Answers and Help for Independent Consultants

Website or No Website? Answers and Help for Independent Consultants

As a self-employed consultant do you really need a website?

I’m asked this a lot, particularly if a consultant gets most business from referrals or they contract through agencies or boutique firms. Besides, it’s highly unlikely that a prospective client is going to stumble upon your website and decide to hire you. Surely creating a website is a waste of time and money, right?

I used to say that if you had a really strong LinkedIn profile and you keep your network warm, you probably didn’t need a website. Indeed, I know dozens of independent consultants making six-figure incomes without one.

Now, however, my answer is, yes, absolutely, you need to have a business website. Here’s why:

Read More

How Tax Reform Affects Independent Consultants

How Tax Reform Affects Independent Consultants

Everyone has questions about the sweeping tax reform that became law at the end of last year. As a coach and champion for independent consultants, I went on a fact-finding mission to answer two important questions: 

  1. Are self-employed consultants still better off being paid on a 1099 tax basis as a business or on a W-2 tax basis through a third party?
  2. Is there a tax advantage to how independent consultants structure their businesses — as a sole proprietor, LLC, S corp or C corp?

Here’s what I learned after too many hours of research and talking with two CPAs and a lawyer. (Disclaimer: I am neither an accountant nor a tax lawyer, so I’m not qualified to give tax or legal advice. I’m simply trying to help self-employed consultants understand how the changes in tax law may affect them, so they — you — can have a more productive conversation with your tax professional.)

Key Findings

A. The answer to my first question is yes. It’s still better to be paid on a 1099 tax basis because you can still take business-owner tax deductions, possibly in addition to the new 20% deduction (more on that below), and you can still take advantage of better retirement options like a SEP-IRA to lower your taxable income. (See “Friends Don’t Let Friends W-2”TM for more information.)

Read More

How Diligent Biz Dev Led to a Six-Figure Consulting Project

How Diligent Biz Dev Led to a Six-Figure Consulting Project

Recently I helped a consultant land a $420,000 consulting contract. That’s not a typo. It’s an 11-month project for one consultant: $320k in consulting fees and another $100k for travel expenses. I’ve excluded my company’s agency fee in these numbers; the actual budget was a bit larger.

Clearly this was a big win for the consultant. The client was pleased too since a global consulting firm working with his company quoted $660,000 for the same project. (See my related article, “Quote Your Rate with Confidence.”)

A project this big doesn’t just fall out of the sky. Why did the client contact me for help? The short answer: business development. The long answer: diligent business development that built a relationship over time. Rather than any one particular thing I did, it was simple actions over the course of five years. Those actions cultivated a trusting relationship with the client and, as a result, he was comfortable reaching out to me for help.

Read More

Why Friends Don't Let Friends W-2

Why Friends Don't Let Friends W-2

As an independent consultant, does it matter how I get paid?”

Absolutely! In the U.S., being paid on a 1099 tax basis as a business instead of on a W-2 tax basis like a temp worker makes a huge difference to your profitability for two key reasons:

  1.  You pay less tax.
  2.  You save more for retirement.

Here’s how I figured this out.

Several years ago, as an independent consultant I did my taxes two ways using TurboTax® software. The first used my legitimate tax return that showed I was paid on a 1099 basis. In other words, I had received 1099 tax statements from my clients for that tax year; I did not have any W-2 tax statements. On this tax return, I took standard business deductions (for example, for my home office, supplies, and mileage), and I factored in my retirement contribution to my SEP IRA (Simplified Employee Pension).

Read More

Self-Employed? Lower Your Tax Bill!

Self-Employed? Lower Your Tax Bill!

Tax season is probably the most important time for independent consultants to think like business owners. This especially means being smart about how we handle our money. Our motivation is simple: pay as little tax as possible, ideally without triggering an audit. We all should be asking ourselves (and our accountants) this question:

As a business owner, what can I do to lower my tax bill? 

The answer is to maximize your tax deductions for this year and take steps to reap tax saving benefits every year. This article touches on the first and explores the second in depth.

For the Near Term: Take Standard Business Owner Deductions

You don’t have to have a legal business structure like an LLC or S-corp to take advantage of standard business-owner tax deductions. Sole proprietors qualify for deductions too, even if you only consult part time.

Read More

Why and How Personal Branding is Vital for Independent Consultants

Why and How Personal Branding is Vital for Independent Consultants

Everyone in business recognizes strong brands and understands their importance. Coca-Cola. Nike. Apple. These brands represent certain values. Their branding helps drive sales by keeping their products or services fresh in the consumer’s mind.

Independent consultants need to think the same way. You need to be top-of-mind when the need for your expertise pops up so the client thinks to call you, or their colleague thinks to refer you.

In our field this is called personal branding. It’s not about creating a fancy logo or website; it’s about being known for something and consistently emphasizing your expertise. It’s about your reputation. It’s about your image, how you’re perceived in the workplace and online. It’s how you promote yourself and “go to market.” And it’s an ongoing effort.

Personal branding is not just some touchy-feely, trendy idea, or something that just happens. It takes conscious thought and repeated attention.

 

Read More

For Independent Consultants, Business Development = Relationship Development

For Independent Consultants, Business Development = Relationship Development

The biggest stressor for self-employed management consultants is business development: how to cultivate meaningful regular work. It’s vexing for a variety of reasons. First, consultants are good at helping clients solve problems but usually aren’t trained in sales or marketing. Second, when knee-deep in projects and facing deadlines, consultants are hard-pressed to find time to publish thought-leadership articles or create, launch, and manage marketing campaigns.

To meet the challenge I recommend changing your frame of reference. Instead of thinking of how companies or consulting firms typically handle business development, use an approach more like how we work as individuals and soloprenuers. Take for example real estate agents, who are experts at keeping their names fresh in people’s minds:

  • At least once a week I get a postcard listing recent home sales in my neighborhood.
  • Once a week I get an email with an interactive map showing which homes in the city closed escrow and at what price.
  • Once a month I get a memo pad with the realtor’s name, photo, and area of expertise.
  • Once a quarter I get a postcard of upcoming social and sporting events in the city.
Read More

Your Consulting Niche vs Jack-of-All-Trades Myth

Your Consulting Niche vs Jack-of-All-Trades Myth

Many people who embark on the independent professional path think they should define their services broadly so they will look like a good fit for many projects. The exact opposite is true.

My company represents self-employed professionals across the country, and over the last seven years I have interviewed, coached, or worked with more than 200 independent management consultants. Thanks to all these interviews and projects, I am convinced that the people who always seem to have work are those who “own” a particular consulting niche or service area.

Let’s look at some examples.

I know a highly talented professional with over 20 years of experience with several Fortune 500 companies. Several years ago, my company agreed to represent her. She believed in the jack-of-all-trades myth: she would get more work if she described her expertise in a variety of ways. Here is a verbatim snippet from her résumé at the time:

Read More

What Legal Business Structure Do Consultants Need?

What Legal Business Structure Do Consultants Need?

This is one of the questions I get asked most frequently by independent management consultants. Unfortunately, it’s also one of the hardest to answer because every person’s situation is different and there are multiple factors to consider. While this article will help you think through the various factors, here is the short answer: 90% of the self-employed consultants I know are set up as either a sole proprietorship or a single-member LLC.

Why is this decision so important? Although it can be a boring subject, your business structure will have significant implications, including:

Taxes. Not only how much or how little you pay but also the ease or complexity of preparing your taxes.

Lawsuits. We live in an extremely litigious society and need to consider asset protection; this is why business insurance is also an important consideration.

Image. Potential clients will perceive you differently if you have “LLC” or “Inc.” as part of your business name. More about this below.

Read More

Independent Consultants: Excellence Begins Here

Independent Consultants: Excellence Begins Here

Have you ever dreamed about starting something and the idea just won’t go away?  You give yourself all sorts of reasons not to pursue it.

“I don’t have time.”

“Someone else has probably already done it.”

 “It’s too big. I’ll never be able to accomplish it.”

“I can’t commit to another thing!”

Or in my case, “I hate to write.”

But the idea still won’t go away.

Now, you start thinking about all the reasons you should do it. As you talk yourself into it, the idea spawns scores of related ideas, and you can’t not do it.

So here I am, launching this blogwhich will help you become a better management consultant and solopreneur.

Read More