Starting a Consulting Business

This document is a guide prepared by the Canada-Saskatchewan Business Service Centre and is intended to provide you with general information and suggested resources to assist you in researching your project.  The extent to which this information will apply to you is dependent upon the circumstances related to your project.

For further information on individual topics identified herein, contact the respective governing body or the Canada-Saskatchewan Business Service Centre.  Because this document is only meant as a guide, the Business Service Centre will not accept responsibility for business decisions made based on the information provided.

Before proceeding, reference should be made to the Business Start-up Info-Guide, which covers the basic steps involved in establishing a new business in Saskatchewan; as well as the document titled A Current Index of Business Fact Sheets. These fact sheets cover a wide variety of business topics.  Be sure and also request the Sources of Information and Required Licenses for your area or view these on our Business Fact Sheets Web site.

TABLE OF CONTENTS

• Industry Overview
• Licenses and Regulations
• Managing Your Operation
• Associations and Contacts
• Resources
• Recommended Books in Our Library
• Video Collection

INDUSTRY OVERVIEW

What is a Consultant?
A consultant is an independent contractor who sells professional expertise in a particular area of specialization. A consultant assesses situations, analyzes information, and presents proposals for action. The consultant then performs the proposed work for a fee within an agreed time frame (short-term or long-term). Depending on the specialization, the consultancy field can be highly competitive. Recent trends in downsizing and restructuring have resulted in increasing numbers of qualified people who have started their own consultancy businesses.

Do You Have What It Takes?
When you become a consultant, you take the leap from employee to entrepreneur. You are starting a real business which requires a complex blend of:

• "Expertise" - your unique skills are your businesses products;
• Knowledge in business and management practices including accounting, selling, organizational and time-management skills;
• Self-awareness, inner drive, perseverance, confidence, and the ability and willingness to work independently for long hours, often sacrificing personal time;
• People skills, in order to establish, expand, and sustain client relationships. You must be able to gain a thorough understanding of a client's needs by being sensitive, perceptive, and an attentive listener to what is said and not said during discussions. You must then establish trust by following through on all commitments with exceptional, quality work, in an atmosphere of confidentiality.

Who Hires Consultants?
Business, government, and non-profit organizations hire consultants for their expertise, and to help them identify, analyze, and solve problems. Consultants offer "outsiders" unbiased perspective, and allow other employees to carry on with daily business. In general, consultants are hired to:

• Conduct research, analyze and summarize data; predict trends;
• Create or improve designs and processes; recommend changes;
• Evaluate designs and processes, communicate ideas, or motivate employees; and
• Identify ways to save money, or to obtain funding or financing.

What is the Process?

1. Entry and Contracting
Setting up the first meeting, exploring the problem, determining the client's expectations, defining your own expectations, and deciding whether you are the right person for the work,

2. Data Collection and Diagnosis
Analyzing who will be involved in defining the problem, the methods to be used, the data to be collected, how long the project might take, and assessing the corporate culture.

3. Feedback and Decision to Act
Identifying and working with different forms of resistance, reducing large amounts of information into a manageable number of issues, presenting data comprehensively, and making appropriate decisions on how to proceed.

4. Implementation and Evaluation
Being involved as trainer, coach, analyst, trouble-shooter; designing measurement systems to track progress, running meetings, and promoting change.

5. Proposals
To establish a clear understanding between both parties, consultants prepare written proposals to describe what they can do for particular clients. The proposal is usually written after meeting with the client. In one or two pages, proposals contain sections such as opening statements, disclaimers, work objectives, action steps, responsibilities of each party, time schedules and fees, expected results, and concluding statements. For further information regarding suggested contents and formats, refer to some of the many books on developing proposals. (Please refer to the section below titled Recommended Books in Our Library).

6. Contracts
An accepted proposal leads to a contract, a written agreement which provides a framework within which obligations, rights, and remuneration's are clarified. Disclaimers should be clearly stated in all contracts. Contracts may be brief and informal, or lengthy and formal. Many contract books provide samples of contract styles. Consider consulting with a lawyer, especially if a contract is complex, or if you are selling "advice". In brief, there are two kinds of contracts:

• Letter of Agreement
  A simple contract summarizing the agreement, including the nature of the work, method and time of payment, start and end dates, resource material and personnel supplied by the client. The letter is forwarded for approval and signature.
• Formal Contract
  A formal contract is used if the project is complex, if financial costs are high, or if there is a financial commitment to suppliers or sub-contractors.
• Fees
  Consultancy fees must cover not only the time spent on a project, but also the time needed for marketing and administration, and to pay for things such as equipment, overhead, and insurance. Your fees depend on a number of factors, such as your experience, the current market rate, and the urgency of the project. Do your research - find out what your competition charges and avoid undercharging. Agencies and clients use price as a screening device for quality consultants. They are unlikely to believe that the best consultant charges minimum fees.

Consulting Opportunities
Experts have outlined seven different opportunities that exist for the consultant. When these situations are apparent, there is generally a need for a consultant. These seven areas are:

1. Technical Aid
Short-term assignments for the purpose of helping businesses find solutions to problems of a technical nature represent the largest market for consulting services today. Consultants who provide technical assistance often work as supplement to or extension of a company's own staff, who are experts in the field in question.

2. Political Liaison
This is a specialized public relations function. Most organizations find themselves being heavily monitored by groups and associations that, although external to them, influence their operations.

3. Turnaround
The Turnaround consultant deals primarily with the problem of low cash flow. At one time or another, many organizations face a decrease in readily available funds, either through their own doing or some unpredictable outside force.

4. Specific Skills
The Specific Skills consultant is the person who can evaluate a particular kind of situation and find a workable solution.

5. Capital Raising
Most organizations need increased capital. Smaller organizations often require assistance for growth and expansion purposes. There is a big demand for specialists skilled in fund-raising.

6. Bail Out
A bail out consultant is retained by an organization with a problem that should have been handled by an employee. The bail out consultant comes in to save someone's neck, or to save an entire department.

7. Government Compliance
There has been a rapid increase in the number of regulations that an organization must adhere to. This requirement for compliance has put many industries in need of consultants. A government-relations consultant must stay on the cutting edge of new laws and regulations.

Marketing/Advertising
Marketing can be the key to a consultant's success. The right kind of marketing and the right amount, can develop into a stream of new clients and contracts. In fact, 25% of a consultant's time should be devoted to several marketing methods:

• Scan consultancy opportunities advertised in newspapers and government award publications;
• Register with business directories and government resource lists. Contact agencies, contract officers, human resources personnel, and large consulting firms who are known to receive consulting contracts;
• Network with others and develop a wide range of contacts who are willing to refer clients to you. Keep in touch personally;
• Join professional and trade associations to meet others in your particular area of expertise and to exchange information about your business;
• Develop newsletters, brochures, or flyers to keep your business in view with former and prospective clients. Attach them to proposals, mail them after receiving requests for information, distribute them at seminars or presentations;
• Send specialized mailings to executives who have recently moved into new positions, either within their present organizations or in new companies; and
• Write and send news releases or articles of interest to prospective clients. Once you have identified prospective clients and potential opportunities, you must then 'sell' your skills to these clients. This in itself is a critical and complex part of a consultancy business. If necessary, seek training in the selling process.

Internet
A Web site should have details to describe the location (your address, telephone and fax numbers, and directions on how to get to your location), hours of operation and anything else you think may be of interest to potential customers. However, once you launch a Web site, you must update it on a regular basis.

For further information regarding Advertising, see the document Signs And Your Business, the document Plan Your Advertising Budget, the document Advertising Do's And Don'ts, or the document Ways To Promote Your Product Or Service.

Online Small Business Workshop  
Marketing Basics listed in Session 2, covers the basics from developing your customer profile to promoting your business.

The federal Competition Act governs misleading advertising and deceptive marketing practices for all businesses in Canada. The Act defines which marketing practices are illegal and the process of complaint investigation. For more information see the document Competition Act - Misleading Advertising and Deceptive Marketing Practices or refer to the pamphlet on this subject administered by Industry Canada - Misleading Representations and Deceptive Marketing Practices or visit the Competition Bureau Web site.

Market Research
Successful businesses have extensive knowledge about their customers and their competitors. Acquiring accurate and specific information about your customers and competitors is a critical first step in market investigation and development of a marketing plan.

In developing a marketing plan, your primary functions are to understand the needs and desires of your customer, select or develop a product or service that will meet customer needs, develop promotional material that will make the customer aware and ensure product or service delivery.

For further information regarding marketing see the document  Market Analysis,  the document Guide To Market Research and Analysis, the document Marketing Plan Outline, or the document Recommended Information - Demographics/Statistics.

For more information on marketing and advertising refer to our web site: Links Sectors  and Business Fact Sheets.

LICENSES AND REGULATIONS

One area of rules and regulations that all new businesses must comply with is that of licenses and regulations. When creating a business, the entrepreneur must contact the municipality involved, along with the provincial/territorial and federal governments.

Each municipal government has the authority to issue its own business licenses within its jurisdiction. Since there is no uniformity throughout the country regarding municipal licenses for businesses, you should consult with the appropriate local officials to determine whether your business will be affected by local regulations and licensing requirements. Businesses (including home-based businesses) must also meet the zoning by-laws that control property uses in their municipalities.

You can get permit, license and regulation information by contacting your province/territory, local city hall, town or village office or rural municipal office. Contacts for local, provincial and federal governments can be found in the government listings of your telephone directory.

MANAGING YOUR OPERATION

Insurance
Upon deciding to establish a Consulting business, you should obtain the expertise of an insurance agent regarding insurance coverage for your business. If you own, rather than lease your place of business, you will need insurance coverage for your property. Also, regardless of property ownership, you will require insurance protection for your furniture, fixtures, office equipment, etc. Some of the other areas you should be concerned about are liability coverage against mishaps, damages or lawsuits resulting from business operations and business interruption insurance.

The following list is included to remind you not to overlook the complex areas of business insurance. It is best, however, to discuss your specific requirements with your insurance agent.

Basic insurance:

• fire insurance (extended coverage on buildings and contents);
• liability insurance;
• burglary protection (theft coverage);
• dishonesty insurance (covers thefts by employees).

Accounting/Bookkeeping
A good record keeping system should be simple to use, easy to understand, reliable, accurate, consistent and designed to provide information on a timely basis.

The legal requirement concerning financial records specifies only that they be a permanent, accurate and complete record of your daily income and expenses. There are many types of record books and bookkeeping systems available. For example:

• double entry bookkeeping;
• commercial bookkeeping systems;
• one-write systems;
• computerized systems;
• single entry bookkeeping.

For further information see the document Basic Bookkeeping, or the document  Bad Cheque Control.

Selecting Professional Services
The use of professional services is essential to the success of a small business. Professionals can provide knowledge and expertise in the areas where you may have little. They can round out your management team to ensure your business is operating efficiently.

As an entrepreneur, there are four main areas of professional services with which you may consult:

1. lawyer (contact a lawyer about legal issues);
2. insurance broker;
3. accountant;
4. banker - for tips and pointers on dealing with your bank, see the document Dealing With Your Banker & Other Lenders.

Furnishings and Equipment
The type, size and kind of service will determine the type of equipment you will require. For assistance in this area, you may get the advice of a sales representative or consult trade publications and manufacturers' Web sites that list equipment and its cost to you. An important factor to consider when choosing equipment is the after-sales service and repair and their affordability.

Used Equipment - Consider buying used equipment as a cost-saving measure. Sources of used equipment could be a business that is closing or dealers in second-hand equipment. The drawback to this approach is that, often, there are no guarantees with the purchase.

Leasing Equipment - Another alternative is to lease equipment to help keep start-up costs down. To obtain financing for capital leasing for new or used equipment for the creation of your business, see the document Capital Leasing Pilot Project.

For more information on parts and materials, overhead, stock control and pricing, see the document Business Plan For Small Service Firms.

Setting Up A Pay System
Pay administration is a management tool that enables you to control personnel cost, increase employee morale, and reduce workforce turnover.

Checklist For Profit Watching
Making a profit is the most important -- some might say the only objective, of a business. Profit measures success. It can be defined simply: revenues - expenses = profit. So, to increase profits, you must raise revenues, lower expenses, or both. To make improvements, you must know what's really going on financially at all times.

ASSOCIATIONS AND CONTACTS

Membership in an Association may be an option for those owners that wish to belong to an association:

Association of Independent Consultants
15 Wilson Street
Markham, ON LP3 1M9
Tel: 416-410-8163, 905-410-8163
Fax: 905-294-9435
E-mail: info@aiconsult.ca
Web site: http://www.aiconsult.ca

Canadian Institute of Management
SASKATOON/REGINA BRANCH
P.O. Box 8055
Saskatoon, SK S7K 4R7
Tel: 306-644-1988
Fax: 306-343-4481
Email: saskatoon-regina@cim.ca
Web site: http://www.cim.ca

For further information regarding Associations, see the document Selecting a Business Association .

RESOURCES

Financial Performance Indicators
The CSBSC subscribes to this licensed database, published by Statistics Canada, which is used to determine the relative profitability of a particular industry in Canada/Saskatchewan and to compare financial ratios and balance sheets of a particular company with the industry average. See description under Industry Overview in this document to determine which type of business you will operate.

Contact the Canada-Saskatchewan Business Service Centre to obtain these reports.

Small Business Profiles - Performance Plus
Performance Plus provides detailed financial and employment data on small businesses by industry for Canada, the provinces and territories. The Profiles have been produced every two years since 1985, with 1997 being the most current reference year available. The data provide performance benchmarks for the financial planning of start-up and established small and medium sized businesses.

KOB Files
Saskatchewan Industry and Resources created "kinds of business (KOB's)" that include information on many different types of businesses. This information includes: product sources; fixture & equipment suppliers; trade shows; trade associations; trade journals; and other market data sources. Choose a KOB from the Table of Contents at the Kinds of Business Web site.

The CSBSC also has files started on various kinds of business topics such as restaurants, bars, coffee shops. Information located in these files includes possible suppliers, statistics, sample business plans, etc. To access the information in these files please come into the office and request the KOB file or speak to a Business Information Specialist.

RECOMMENDED BOOKS IN OUR LIBRARY

Canada-Saskatchewan Business Service Centre resource library search engine - Saskatoon Reference Library.  Once you have located a particular resource you think might be useful, please contact us at the CSBSC office and we will discuss the material with you.

Some books of interest may include:

Start and Run a Profitable Consulting Business
BUSINESS CONSULTING .001S
International Self-Counsel Press Ltd., November 1996

Business Planning Guide Consulting Business
BUSINESS CONSULTING .002S
Entrepreneurship Institute of Canada, 1987

Flawless Consulting - A Guide to Getting Your Expertise Used
BUSINESS CONSULTING .005S
Jossey-Bass Pfeiffer, 2000

10 Hottest Consulting Practices What They are, How to get into Them
BUSINESS CONSULTING .007S
John Wiley & Sons Inc., 1995

Marketing you Consulting and Professional Services
BUSINESS CONSULTING .008S
John Wiley & Sons Inc., 1990

How to Become a Consultant
BUSINESS CONSULTING .011S
Entrepreneur Inc., 2000

Consultant's Handbook
BUSINESS CONSULTING .019S
Adams Media Corporation, 2001

PROPOSAL WRITING:
Winning Proposals How to Write Them and Get Results
BUSINESS PROPOSALS .001S
International Self-Counsel Press Ltd., 1995

How to be Better at Writing Reports and Proposals
BUSINESS PROPOSALS .007S
Clays Ltd., 1998

The Consultant's Guide To Proposal Writing
BUSINESS PROPOSALS .005S
John Wiley & Sons, Inc., 1998

Proposal Development How to Respond and Win the Bid
BUSINESS PROPOSALS .002S
Oasis Press, 1998

Guidelines for Preparing Proposals
BUSINESS PROPOSALS .004S
CRC Press, 1991

VIDEO COLLECTION

Canada-Saskatchewan Business Service Centre resource library search engine can be viewed at the Saskatoon Reference Library Web site.

Once you have located a particular resource you think might be useful, please contact us at the CSBSC office and we will discuss the material with you. Material is available to view in our Saskatoon office or regionalization site where available. Videos and audio cassettes may be loaned out to residents in the Saskatoon area.

We have many videos available in the following categories: aboriginal, customer service, sales, marketing, training, entrepreneurship, business planning, financing, e-business, starting a business, business skills, home-based, management, intellectual property, trade, quality, computer skills, and miscellaneous. Search the A/V Library on our web site for descriptions.

For further information regarding starting a business, contact the

Canada-Saskatchewan Business Service Centre
#2 - 345 3^rd Avenue South
Saskatoon, Saskatchewan
S7K 1M6
Phone: 306-956-2323
Toll-Free: 1-800-667-4374
E-mail: saskatchewan@cbsc.ic.gc.ca
Web site:http://www.cbsc.org/sask/

THE INDIVIDUAL/BUSINESS/CORPORATION/PARTNERSHIP (HEREINAFTER REFERRED TO AS THE CLIENT) ACKNOWLEDGES AND UNDERSTANDS THAT THE CANADA-SASKATCHEWAN BUSINESS SERVICE CENTRE DOES NOT WARRANT OR REPRESENT THE ACCURACY, SUITABILITY OR APPLICABILITY OF THIS INFORMATION AND ASSUMES NO RESPONSIBILITY OR LIABILITY FOR THE USE THEREOF BY THE CLIENT AND ANY THIRD PARTIES AND THAT THE INTERPRETATION, USE AND APPLICATION OF SUCH INFORMATION SHALL BE THE CLIENT'S SOLE RESPONSIBILITY.

DISCLAIMER
Information contained in this document is of a general nature only and is not intended to constitute advice for any specific fact situation. Users concerned about the reliability of the information should consult directly with the source, or seek legal counsel.

Links Policy
Some of the hypertext links lead to non-federal government sites which are not subject to the Official Languages Act and the material is available in one language only.