I believe that every mature professional should have your own consulting company, to serve as credentials when unemployed or looking or a job, and to be a Plan B in your career. It also covers employment gaps in your resume. The earlier you start your company, the more credible it is. But it’s never too late to start.
The key benefit of setting up your own consulting company is that you can interface with potential employers as a professional peer rather than as a job applicant. As a consultant, you are able to reach out to the hiring manager, while as a job seeker, the organization tries to limit contact through the HR department. Engage peer-to-peer with a potential hiring manager by offering your services on a consulting basis. Showcase your skills with insightful questions, knowledge of the industry, insights you can share from similar companies or industries, and of course many hours of research to really understand potential pain points that you can address and provide valuable suggestions or comments.
In the great majority of cases, you won’t ever generate any revenue through your company, and probably won’t need a sale tax certificate, occupancy permit or FEIN, as you will file taxes under your own Social Security number.
In most states, you don’t need to file for an LLC or incorporate if you use your own name and operate as a sole proprietorship. You may want to apply for a Fictitious Name Certificate for your business if you choose a name other than your own name. Check out the page on Corporations on your local state Secretary of State webpage for rules on sole proprietorships and taxation as these vary state-to-state. I am not a financial or legal advisor, so you should seek professional help in this area.
You’ll need business cards, and a simple 4-page website, and you will want to list all your former employers and any customer your served in that capacity under your Experience or Credentials page. You can do volunteer or pro bono work through your company, and list them as clients. And there are great tax benefits for working out of a home office.
You may end up finding clients to help through your consulting, and can add them to your client base, and showcase work you have done for them. It can add to your credibility, confidence and your bank account. Establish a reasonable consulting rate of perhaps $100 per hour, and quote a fee based upon expected hours worked. It can be project-based, a monthly retainer, or an open billing arrangement. You have little to lose, and a lot to gain.
You may be approached by young start-up companies seeking your help to get them to the next stage. They probably have a great idea and no money, and will ask you to work for free. It’s a better use of your time than watching TV all day if you are unemployed, and can contribute to your retirement if you do have a job. But realize that less than 10% of start-ups make it, so your efforts may be in vain. On the other hand, you can add the company to your client list, and you will have something interesting and forward-looking to talk about with other professionals or on a job interview.
Negotiate your consulting rate at the beginning, and the number of hours you can dedicate to the project. You can say something like, “My consulting rate is $100 per hour, and I can dedicate 10 hours a week for the next 5 months to help you get up and going. That’s 200 hours, or the equivalent of $20,000. I know you can’t pay that, but let’s make an agreement that if the company is successful, or gains equity investment or other financing, my consulting fees will be converted to equity at the value of $20,000. If the company doesn’t make it for any reason, then you owe me nothing.” In this way you have a piece of the pie if the company is successful. Make sure you write this agreement up in a simple contract, and add that any continued involvement in the company will extend the agreement on a pro-rata basis at the monthly rate of $4,000 per month. You may end up working more than 10 hours per week, as start-ups can be all-consuming, but at least you will have established your value and you have an agreed-up equity role. Don’t invest your time without the agreement, or you will probably end up regretting it.
Whether you use your consulting company to leverage you way to a great corporate job, or as a way to establish your Plan B, you have nothing to lose and potentially everything to gain.
© Diane Huth All rights reserved