Starting a consulting or service business is different – and simpler – than starting most others. These types of businesses usually involve an individual performing services for clients. Most of the time the individual just works out of his or her home, often with no more tools than a computer and adding machine.
A key prerequisite to a strong consulting or service business is being able to perform your particular service effectively. You also need contacts to generate the work. You must get out the message to an audience that you’re ready to perform your service for a fee.
Finding a way to differentiate your service from the many others performing it in your specific market is often a major challenge. If you can’t find a way to do this, your income is restricted to the established rate for your service in your market and your ability to increase revenue is constrained by the number of hours you are prepared to work in a given day.
If you can differentiate your service by offering a superior guarantee or better terms and commitments, as examples, then you may be able to charge a premium for your service and earn a better return for your time (see Market Differentiation).
Another way to improve earning capacity is to hire people to perform the service through your business while you will earn a portion of the fees they generate. The key to this business plan is the same, but more critical: you must be able to differentiate your business and generate enough revenue to keep employees occupied, while having the skills and contacts necessary to find the right people to perform the service.
Since the large majority of consultants and service providers are individuals with few invoices per month, business success is not as dependent on record-keeping. The only variable to track is usually hours performed for jobs that are billed at an hourly rate. You must ensure that all billable hours are tracked and billed correctly. Often consultants bill by the day or even the month, which further reduces the importance of this type of record-keeping.
In general, we find that simple is best when it comes to consultants and service providers. The owner can keep track of business expenditures by setting up a separate credit card to be used just for business purposes.
For record-keeping, all the owner needs is a summary of the 12 monthly credit card statements for income tax reporting. All income is deposited into the business bank account and the only checks issued are to the owner for his salary and one check per month for the payment of credit card expenses.
Please see our new business offer to assist you in setting up this kind of business.