Author Topic: Axecleaver's Steps for Starting Your Own Services Business  (Read 1408 times)

Axecleaver

  • Magnum Stache
  • ******
  • Posts: 3119
  • Location: New York
Axecleaver's Steps for Starting Your Own Services Business
« on: March 04, 2017, 03:15:04 AM »
These simple steps describe how to start a consulting business, but the rules are good for any services business.

Axecleaver's Steps for Starting Your Own Services Business
WHAT
1. Cut your minimum monthly living expenses as deeply as possible.
2. Build up a transition fund to pay your expenses for 6-12 months.
3. Write a business plan: visit www.score.org for templates.
3a. Set your services and rates (1/1000th of your annual salary is a good starting point).
4. Identify customers.
5. Set meetings to sell your services. If you sell everything you pitch, then you're not pitching to enough people. Shoot for a 25% close rate.
6. Keep your day job and deliver on nights/weekends until you have at least 20-40h/week of deliverable work sold.
7. Incorporate your business.
8. Once your day job is impacting your ability to deliver, turn in your notice.
9. Purchase insurance: errors and omissions/professional liability, general liability
10. When your sales exceed your ability to deliver, add staff.
11. Hire a payroll service, HSA and 401k providers. (Caveat: explore Solo-K and SEP-IRA if you never intend to have staff.)

WHY
1. If you run out of money, you're going back to work for The Man for the rest of your life.
2. Most consultants bill monthly at the end of the month, on net 30 terms. Clients can take up to 45 days to pay. Large checks take seven days to clear. This means a job you start working on June 1 may not make funds available to you until August 22 - nearly 12 weeks.
3. A business plan template will ask you questions you haven't thought to ask yet - what are your services and what is your rate, who are your customers, how will you market to them, what does your staffing plan look like, will you offer products or just services, what margins will you use?
4. Use every resource at your disposal to find customers: your rolodex, temp agencies, headhunters, Craigslist, etc.
5. Pipeline management is a critical skill in the  consulting business. You should be selling services at least three months out, but this takes time to develop. You should always be selling.
6. Building a reliable customer list takes time. Deliver against your core services while keeping your day job. Get used to 80-100h work weeks.
7. S-corps are popular choices for consultants because it allows you to pay yourself distributions, which avoids payroll taxes on a portion of your income.
8. Ease the transition into consulting by keeping your day job while you build your experience and customer list.
9. Protect yourself and your company with liability insurance. Many customers and prime vendors require it. Look for a million per instance in coverage as a starting point.
10. Hire staff as your company grows. Always be selling.
11. Outsource the administrative tasks that make the most sense.

Smokystache

  • Stubble
  • **
  • Posts: 231
Re: Axecleaver's Steps for Starting Your Own Services Business
« Reply #1 on: March 04, 2017, 07:00:23 AM »
Thanks for posting this. I've seen your steps before (and think they're excellent), but I think this is the perfect place for them (or perhaps they should be pinned at the top of the forum?).

KMMK

  • Handlebar Stache
  • *****
  • Posts: 1386
  • Age: 40
  • Location: Edmonton, AB, Canada
    • Your Life Money Coaching
Re: Axecleaver's Steps for Starting Your Own Services Business
« Reply #2 on: March 04, 2017, 07:03:07 AM »
I'm not sure if you are planning on writing more but I'm going to presume this is Axecleaver's advice thread and must follow.

I did my steps in a weird order. Now that I'm finally done all my education, licensing, compliance things (which are many) I'm at the sell sell sell stage. I'm looking forward to getting into the meat of the business.

SeattleCPA

  • Pencil Stache
  • ****
  • Posts: 809
  • Age: 57
  • Location: Redmond, WA
    • Evergreen Small Business
Re: Axecleaver's Steps for Starting Your Own Services Business
« Reply #3 on: March 04, 2017, 06:51:12 PM »
6. Keep your day job and deliver on nights/weekends until you have at least 20-40h/week of deliverable work sold.
7. Incorporate your business.
11. Hire a payroll service, HSA and 401k providers. (Caveat: explore Solo-K and SEP-IRA if you never intend to have staff.)


+1 on #6

Regarding #7, I'd recommend considering an LLC instead of a traditional corporation.

Regarding #11, I like SEP-IRAs too. Especially if you pair them with an S corporation...
My blog Evergreen Small Business
My free downloadable ebook: Thirteen Word Retirement Plan

ElleFiji

  • Handlebar Stache
  • *****
  • Posts: 1950
Re: Axecleaver's Steps for Starting Your Own Services Business
« Reply #4 on: March 04, 2017, 06:57:29 PM »
Posting to bookmark. Looks like I'm supposed to incorporate, and pitch more.

Are the meetings usually more valuable than marketing efforts?


Axecleaver

  • Magnum Stache
  • ******
  • Posts: 3119
  • Location: New York
Re: Axecleaver's Steps for Starting Your Own Services Business
« Reply #5 on: March 05, 2017, 07:54:54 AM »
I did an LLC too, but that taught me that LLC's don't provide all that much protection. Once your business is humming, you really need to protect it with general and professional liability insurance. In my case, they're contractually required, but at this point I'd buy them even if they weren't. You can opt to have your LLC taxed as an S-corp, but it's not exactly the same.

Quote
Looks like I'm supposed to incorporate, and pitch more.
Pitch more, yes. This addresses pipeline management, essential to services business success, which merits its own post.

Quote
Are the meetings usually more valuable than marketing efforts
Marketing and sales are two completely different things. Marketing helps you connect with people who are interested in your product. Sales is where you close the deal and position yourself to upsell.

Services business rely on strong delivery - if you deliver for your client, they will buy more of what you offer, or allow you to expand into new service lines that augment their business.

Kroaler

  • Pencil Stache
  • ****
  • Posts: 659
  • Age: 26
  • Location: Greenville, South Carolina
Re: Axecleaver's Steps for Starting Your Own Services Business
« Reply #6 on: March 06, 2017, 09:59:32 AM »
I did an LLC too, but that taught me that LLC's don't provide all that much protection. Once your business is humming, you really need to protect it with general and professional liability insurance. In my case, they're contractually required, but at this point I'd buy them even if they weren't. You can opt to have your LLC taxed as an S-corp, but it's not exactly the same.

Quote
Looks like I'm supposed to incorporate, and pitch more.
Pitch more, yes. This addresses pipeline management, essential to services business success, which merits its own post.

Quote
Are the meetings usually more valuable than marketing efforts
Marketing and sales are two completely different things. Marketing helps you connect with people who are interested in your product. Sales is where you close the deal and position yourself to upsell.

Services business rely on strong delivery - if you deliver for your client, they will buy more of what you offer, or allow you to expand into new service lines that augment their business.

Just cause the last part of the post mentioned marketing, Id like to drop this here:

https://www.amazon.com/1-Page-Marketing-Plan-Customers-Money/dp/1941142990/ref=tmm_pap_swatch_0?_encoding=UTF8&qid=&sr=

I dont own a business, but have GREATLY enjoyed this fairly short book. 

Maybe we will eventually have a suggested business books sticky...