Your business plan is almost completed; you know what services you are offering, where you’re offering them, with what type of organizations you want to work, now WHO is going to do the work?

One of the reasons many people get into consulting is because they are tired of dealing with office politics and enjoy working alone. However, other people find that they need the team spirit of working with others and want to have someone off whom to bounce ideas. So one of your first decisions is do you want to solo or be part of a team? If you like working independently, having low overhead and not being responsible for others, perhaps the solo practitioner is the best option for you. However, this option does not leave room for growth. You can only handle so many clients by yourself, and you cannot offer a full range of services unless you are good at everything. (Few of us can make that claim!)

Before you find yourself in a situation that is beyond your control, you may want to set goals for yourself. How much money do you want to make? How many hours do you want to work? What are the services you can offer if you work alone?

If you decide to work alone, you need to set parameters that you can live with and build a good pool of consultant colleagues to whom you can make referrals when appropriate to do so.

If you opt for being part of team, there are several options—finding a business partner, hiring staff, or working with subcontractors.

Remember that a business partnership is like a marriage—you need to have a “courting” and an “engagement” period before you take that final step into a permanent relationship. And, although I have not seen statistics to prove this, I am willing to bet that the “divorce rate” among business partners is close to or exceeding the divorce rate among married couples. Having a business partner (or partners) does provide some advantages that employees or subcontractors do no offer, such as the ability to fund the company with more than one source, the ability to share concerns and profits equally with another person, and the ability to present the image of a larger company. You should talk to a business or legal advisor about the various forms of business structures before deciding if you want to be a sole practitioner, partnership or corporation.

If you want to be the sole owner of the company but still want to have a staff, you can either hire additional staff or work with subcontractors. Again, there are advantages to each. Staff, in general, is more loyal and dependable because you are paying their salary and can determine their hours, assign and supervise their work and can fire them when needed. However, the disadvantage of having a large staff (or even any staff) is that their salaries are due even when there is no work! So be cautious about hiring too much staff. On the other hand, often times a sole practitioner can better utilize their time by hiring staff. One thing I learned early in my business was that I could spend 20 hours a month doing payroll, taxes and purchasing or hire a staff person to do that and spend those 20 hours marketing my business instead.

Subcontractors can be an attractive option because you only pay them when there is work to do. Again, legal advice should be sought to make sure you understand IRS guidelines for subcontracting work. These guidelines may also apply to your own work for a client who considers you a subcontracted employee. You may have an array of subcontractors with different skills that can help you provide full service without hiring extra staff. Another advantage of subcontracting is that you don’t need to worry about paying taxes and benefits.

Financing Your Business
Now to that dirty part of our business--how do we finance it? First, you need to develop realistic budget. Personnel expenses are usually the biggest chunk of your budget. Whether you are paying staff, subcontractors or just yourself, you need to consider not just the salary you will paying, but payroll taxes, health benefits, social security etc. See an accountant to help you determine what the real costs of personnel are. A good rule of thumb for personnel expenses is that an employee or subcontractor should be generating three times the amount you pay them in income. For example if you are paying a subcontractor $25 an hour you will probably need to charge the client $75 an hour for the work that subcontractor is doing—another third of the fee is for overhead, and the last third will cover your time for oversight of the project and profit.

You also need to budget for office expenses, rent and utilities if you are working outside your home. Even if you decide to set up a home office, there will be additional expenses for telephone and postage etc. And don’t forget marketing expenses and professional education for yourself and your staff. Those are all costs of doing business.

How do you finance the start up and continuing costs of doing business? Often small business owners use their credit cards or personal line of credit to finance their start up costs. Many times banks are unwilling to consider at micro-loans. However sometimes you can get a bank to consider this option.

Once you have your business established for a year or two, you should consider getting a business line of credit to cover you over slow times. One thing about consulting is that there are always peaks and valleys to deal with. It is generally either feast or famine and you will need some source of funding to get you through lean times. If you are applying for a line of credit for the business, you will need financial statements and a good business plan. Your local Chamber of Commerce may offer to match up entrepreneurs with venture capitalists, so you might want to investigate that option. Local chambers and universities also often provide small business incubators. If you are a minority business owner the options may be even better for you.

No matter what decision you make to staff and finance your business, a good business plan is an essential first step.