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How to Start a Consulting Business in OntarioLast Verified:
2006-04-12
The following document was prepared by the Canada-Ontario Business Service Centre (COBSC), a single point of access to information on federal and provincial government programs, services and regulations. It is designed to provide an understanding of potential license, permit or registration requirements when considering the establishment of a consulting business in Ontario. Although many of your questions will be answered in this document, the list of resources given here is not exhaustive. Need more information? Click: Canada-Ontario Business Service Centre Some of the organizations listed below are not subject to the federal Official Languages Act or the French Language Services Act of Ontario. Their services may not be available in both official languages. TABLE OF CONTENTS1. Basics to Getting StartedStarting a business can be a rewarding undertaking, but it comes with its challenges. Before starting a business in Ontario, it is wise to do your research. Ask yourself if you are truly suited for entrepreneurship and understand that significant effort may be required. You should thoroughly enjoy the field you are getting into and you must believe in your service; it may consume much of your time, especially in the start-up phase. There are several issues to consider such as regulations, financing, taxation, managing your business, advertising and much more. For further information: 2. Industry OverviewWhat is a Consultant?A consultant is a professional who sells expertise in a specific area (or areas) to clients, providing them with assessments on their practices, helping them identify problems and solutions, and advising them on possible courses of action. Consultants act most commonly as advisers, but they may also be employed to address any other type of situation where their specific experience and knowledge is required. For instance, a consultant could be asked to implement his or her recommendations, provide training sessions on his or her area of expertise, take part in the planning of a corporation's strategy, design promotional material, evaluate bookkeeping methods, etc. In fact, there is no sphere of activity that is exclusive to consultants or any sphere of activity from which they are expressly excluded. From branding and marketing programs and services to designing new packages, they are a cost-effective alternative for operations that have not yet reached a point where they need to hire a full-time employee but do need periodic expert assistance. Consultants can work:
Consultants are normally employed on a contractual basis; however, within some firms, consultants may be hired on a permanent basis until their engagement is over. Afterwards, they are made available to hiring firms. Within small consulting firms, it is more likely consultants will be hired as contractors, and their employment will be terminated when the project ends. The same applies to independent contractors. Your Consultancy is a BusinessIf you want to establish yourself as an independent contractor or a contractor working within an organization where some form of employer/employee relationship already exists, it is important to remember that owning your own consulting business is precisely that, owning a business. This means you will need to go through the same start-up processes that any other entrepreneur must go through: business registration, acquiring a business number, dealing with business taxes, etc. Planning Your BusinessWhat is a Business Plan? Why Do I Need One? For further information: Interactive Business Planner (IBP)The IBP is a computer software program that uses the capabilities of the Internet to assist you in preparing a 3-year business plan for a new or existing business. The IBP will help you write your business plan, provide a format for writing your business plan, and take the information you enter and prepare financial projections for you. For further information: 3. RegulationsKnowing the rules and the regulations that apply to your area of expertise is necessary. The amount of regulations that you need to know depends, as might be expected, on your field of activity. Also, keep in mind that some projects may require you learn about rules and regulations you do not already know something about. Keep up to date on amendments to legislations that affect your business. Municipal RegulationsWhen starting your consultancy, keep in mind that specific municipal requirements may apply, depending on the city where your business will be located. 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. For further information: The Smoke-Free Ontario ActAs of May 31, 2006, the Ontario government is prohibiting smoking in all enclosed workplaces and enclosed public places. The legislation will also strengthen measures to ensure only those 19 years of age and older can buy cigarettes and will phase out the display of tobacco products, with a complete ban beginning May 31, 2008. For further information: 4. FinancingThe Canada-Ontario Business Service Centre has created documents, which provide an overview of some of the main financing options for individuals starting and operating a business in Ontario, including programs offered or supported by the government. For further information: Canada Small Business Financing ProgramBusiness Financing Program can assist new and existing small businesses with annual gross revenues not exceeding $5 million (excluding farming and charitable or religious enterprises) in obtaining term loans and capital leases of up to $250,000 to help finance fixed asset needs. For further information: Sources of FinancingSources of Financing is an Internet resource for locating traditional and alternative sources of small business financing. This site provides interactive access to objective information on appropriate forms of public and private sector sources of debt and equity financing: For further information: Sources of Micro-Credit Financing"Micro-credit" can be defined as small loans made to individuals to undertake self-employment or to start small businesses. This type of financing may be provided through a number of different sources including independent non-profit organizations, community economic development programs, commercial financial institutions, etc. For further information: 5. Managing Your OperationDealing with Business TaxesAll businesses must be aware of the various taxes that may apply to their product or service. Depending on the type and location of products or services being offered, federal, provincial and/or municipal business taxes may apply. For further information: Income Tax InformationBusiness owners must be aware of the requirements of Income tax that may apply to their product or service. There are different tax implications for incorporated and non-incorporated businesses. For information specific to your organization you should consult an accountant or financial professional. For further information: Below are links to publications that cover some of the general tax requirements for business owners in Ontario. Ontario Small Business Guide Employer Health Tax Guide for Employers (EHT) For further information: Retention/Destruction of Books & Records Voluntary Disclosure InsuranceInsurance needs for businesses vary greatly. It is best to choose an insurance agent or broker familiar with your size of business and, in particular, an agent familiar with your type of operation. If you don't have an insurance agent, consider asking other business owners in your area to recommend one. 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:
Insurance needs naturally vary from one consultancy to the other, depending on your field of activity. It is best to choose an insurance agent or broker that is familiar with your field of expertise. As a consultant, liability coverage will be vital. Note: Your professional association may have information about insurance packages specifically tailored for your needs. It is best, however, to discuss your specific requirements with your insurance agent. Marketing/AdvertisingWord-of-mouth advertising and good public relations are often the best ways of promoting your business. Depending on your market and its size, also consider flyers, business cards, brochures, newspapers (especially for holiday promotions), radio, TV, the phone book and the Internet. Also bear in mind that a satisfied customer is good advertising. Referrals are also a valuable way of making customers aware of your products or services. A Web site is also a good marketing tool. It should have details to describe the location (your address, telephone and fax numbers, and directions on how to get to your establishment), hours of operation, services offered, credentials and anything else you think may be of interest to potential customers. However, once you launch a Web site, you should update it on a regular basis. Participating in community events is another way of advertising your business. You may also hold events that will promote your business. No matter how you choose to market your business, it is wise to track how your clients became aware of your establishment - this may help determine your future advertising strategies. For further information: The Online Small Business Workshop - The Marketing Basics section covers the basics from developing your customer profile to promoting your business. For further information: The federal Competition Act governs misleading advertising and deceptive marketing practices for most businesses in Canada. The Act defines which marketing practices are illegal and the process of complaint investigation. For further information: Market ResearchSuccessful 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, and ensure that the product or service can be provided effectively at a profit. For further information: Contracts and ProposalsConsulting contracts may vary widely in their format and their length, depending on the nature and the complexity of the project. There are standard articles to include in written contracts: the name and the location of the parties involved, the date the contract is signed, an offer, an acceptance of the offer, consideration (i.e. the benefit accruing to the parties), signatures of the parties, etc. A written contract helps to avoid misunderstandings, to outline the terms of payment and to protect you in case of disagreements with your client on the nature of the assignment. If you do not possess the legal expertise to draft legal contracts that include all mandatory provisions, you should seek advice from a lawyer. For further information: Clients and ProposalsVirtually all sectors of business call upon the expertise of consultants, so don't be too restrictive. Your clientele may consist of organizations from both the public, the private and the non-profit sectors. To identify consulting opportunities, look for advertisements on Websites, in newspapers, magazines and trade journals. Public SectorGovernments are important clients for consultants. Most contracts are from solicited proposals, but you can submit an unsolicited proposal and try to get the contract directly, or you can sub-contract with other companies who have been awarded the contract. When seeking consultancy opportunities with governments, make sure you look through electronic tendering services. The Ontario Government uses MERX, while the Federal Government uses MERX, Business Access Canada and SourceCAN. MERX - The Electronic Tendering Service For further information: Business Access Canada For further information: SourceCAN For further information: ProcurementSelling to the Ontario Government means supplying a large marketplace. Businesses of all sizes and types can be successful vendors to the government. The Management Board Secretariat, Procurement Policy and IT Procurement Branch (PPITPB) is responsible for the development of the government's procurement policy framework, the preparation of requests for proposals and negotiating and managing government-wide contracts for information and information technology. PPITPB provides strategic procurement advice, training and services to government ministries and agencies and supports supplier development and the ongoing implementation of Ontario's interprovincial trade agreements. PPITPB online Ontario Opportunities MARCAN bidsCanada.com ProposalsWhether you are responding to a call for proposals from the public, the private or the non-profit sector, there will be selection procedures to follow. These procedures will vary from one organization to the next, so gather all the required information before submitting your proposal. The following are a number of areas you should be aware of when pursuing a contract for service. The appropriate professional services, such as legal counsel should also be sought out and utilized.
Selecting Professional ServicesThe 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. Professional services often used by entrepreneurs may include:
For further information: Accounting/BookkeepingA good record keeping system should be simple to use, easy to understand, reliable, accurate, consistent and designed to provide information on a timely basis. For further information: Setting-Up a Pay System For further information: Setting the Right Price For further information: Profit Watching For further information: Employing peopleWhat are the rules on working conditions in Ontario? For further information: Related Legislation FeesConsultants work for a fee. Pricing of their services will influence consumers and consequently the total revenue of their consultancy. In the end, the right price for the services of a consultant is the price that the consumer is willing to pay. For this reason, correct pricing decisions are a key to success. For further information: As a consultant, there are many ways to set your fees: by the hour, by the day or by assignment. When you are quoting, make sure you include in your fee not only the cost of your labor, but also your daily overhead for the duration of the project, the indirect and direct expenses you will incur, as well as a profit margin. You want to build in your fee enough money to cover the operating costs of your business and the time you spent on marketing your services, maintaining your skills and administration. Do not bill clients exclusively on the basis of the time spent delivering your services. From your clients' perspective, you are an authority on a subject matter that is important to their operation; set your fees accordingly. However, when setting your fees, make sure you find the right balance between overcharging and undercharging: your business must be profitable, but your fees should not be scaring clients away. Research what your competition is charging to see if you are asking for too much or not enough. Many factors influence the worth of your services. When setting your fees, take into consideration the following:
*This paragraph adapted from How to be a Consultant, Canada-Manitoba Business Service Centre, Western Regional Office, Manitoba Industry, Trade and Mines. For an example of a basic proposal for tender, see the document Basic Proposal for Tender . 6. AssociationsAssociation of Independent Consultants (AIC) For futher information: Association of International Consultants (AIC) For futher information: Canadian Federation of Independent Business (CFIB) For further information: Ontario's Public Buyers Association (OPBA) For further information: 7. Resources and Web Sites of InterestStrategis Business and Consumer Site Labour Market Information Statistics Canada
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