You’ve decided to make a career transition from your corporate life into a self-employed consultant. However, trying to set up the legalities and marketing tools of your consulting business and simultaneously signing on new clients can seem overwhelming and take up a lot of your time.
However, it’s essential to realize that sometimes new consultants will put important things to consider at the bottom of the priority list when they should be near the top. New consultants can avoid common mistakes by knowing what other areas of the consultant business need attention while making clients happy.
Common Mistakes New Consultants Make
New consultants’ mistakes can result in a negative financial situation and will impact time spent with severe inefficiency. As a new consultant, it’s best to note these mistakes and how to avoid them. Here are some of those mistakes:
- Not having a written contract
- Not staying within the boundaries of a written agreement.
- Not financially preparing for the future
- Not devoting a portion of the time to marketing and networking
- Not selecting a specialty
- Not continuing to educate yourself in your specialty choice
How to Avoid These Common Mistakes
Now we will go through these mistakes one by one and talk about how to avoid each one.
Start All Business Relationships with Written Contracts
Some think that a handshake or an oral agreement is enough. Others believe they will scare a client off with a written agreement. But, the reality is that the best ongoing relationships with clients are started with a written agreement.
There are consulting agreement templates that will show you how to write a consulting agreement that instills protections for you and the client. Here are some things that the sections of the contract should include:
- Your name, address, and contact information
- The client’s name, address, and contact information
- The date the work will begin
- A description of the service that you will provide
- The payment amount and how frequently will you be paid
- Late payment penalty terms
- Contract length
- Intellectual property contingency terms
- Agreement terms violation remedies
- Dispute resolutions
- Any other requirements that you or the client must have
- Inform the client of which state laws will apply to the contract
Stay Within the Boundaries of a Written Contract
New consultants will allow clients to change the terms of an in-progress contract because they think doing extra work or taking adjusted payment terms may keep the client happy and result in subsequent business. But, in reality, not staying within the boundaries of the written contract will sap your financial and productivity resources.
A written contract is not just a piece of paper to be filed in a drawer. Both parties must work with each other in the confines of what is written on that piece of paper. For example, the service provided section should contain specific job scope descriptions. If the client asks for more than what is written within this section, either a new contract has to be drawn up with new payment terms, or it needs to be pointed out that it is not included in the job scope of the agreement.
Careful Financial Planning
While earning an income, new consultants tend to ignore the financial obligations they may face in the future. Taxes, insurance and a retirement plan, should be considered when you start your consulting business. Here are some tips for financial planning:
- Put 30% of what you earn in an account for the taxes you will eventually have to pay.
- Remember to pay quarterly taxes when they are due.
- Insurance such as health, disability, malpractice and liability will have to be considered.
- Set up a SEP IRA, a 401K or other equivalents for your future.
Always Devote Time to Marketing and Networking
Another mistake new consultants make is when they sign on new clients and are busy with the jobs at hand, they forget that they must also continually devote time to marketing and networking. The clients you are presently working with may not be there in the future for whatever reason, so you must continue to seek new clients even when your schedule is full.
Devote Energy to One Specialty
Selecting one specialty in the consulting business and focusing on just that specialty will grow your reputation as an expert. If you’re focused on the specialty of your choice, you become better educated and can claim more experience in that particular consulting field. Here are some of the consulting sectors that you can select to become immersed in:
- Strategy
- Human Resources
- Information Technology (IT)
- Operations
- Management
- Financial
Continually Educate Yourself in Your Chosen Specialty
Once you have your specialty selected, continually educate yourself throughout your career as a consultant on the up-to-date information, techniques or technologies of that specialty. Your consulting career may falter if you try to use old methods to solve new problems.