Setting up as a consultant. (Checklist 093).

* This checklist provides initial guidance for those thinking of setting up as a sole-trader management consultant. It concentrates solely on aspects of consultancy; more general advice on setting up a small business is covered by other checklists in this series (see Related checklists).

Management Standards

This checklist has relevance to the MSC National Occupational Standards for Management: Key Roles A and C--Manage Activities and Manage People.

Definition

A consultant provides, to clients, professional advice or services that the clients do not wish, for whatever reason, to provide for themselves.

Advantages of setting up as a consultant

By setting up as a consultant, you have:

* the ability to work on areas and issues of real interest to you

* the flexibility (within limits) to determine when and where you work

* the challenge and excitement of running your own business

* independence from other people--not having to work for someone else (apart from your clients!).

Disadvantages of becoming a consultant

You could face:

* loneliness and isolation if you set up on your own

* the lack of a regular income and other company benefits

* difficulties in separating work and home life

* a lack of job security.

Action checklist

1. Determine your area of specialisation

What kind of consultancy services will you offer? Describing yourself as a 'management' consultant is too broad if you are setting up alone. Try to determine what your market is now, what you want it to be in the future, and how you will get there. Examine your strengths and weaknesses [SWOT analysis]; choose one or two areas of specialisation based on your experience. Work out what it is that should attract clients to you as opposed to another consultant.

2. Carry out market research to decide your unique selling point(s)

Find out what opportunities there are within your chosen specialisations. These could relate to filling a gap in regional or market coverage, or providing a better or more personal service at lower cost. You will need to be able to make an assessment of:

* how much of a market there is for your specialisation and how much it is already being satisfied

* the competition, by researching their products and services and, more importantly, customers' views of them

* threats to existing markets and opportunities for new markets.

If the market looks to be small or overcrowded, go back again and consider in what other directions your knowledge or experience might be used. Be wary of trying to compete on price alone or of setting up at all if you cannot identify something you can provide that is not already being offered cost-effectively. If necessary, go through the market research process again.

3. Work out a charging strategy

Research market rates in your specialist area and the relevant geographical market--one source might be the Management Consultancy Information Service's Management Consultancy Fee Rate Survey (see Useful addresses). Offer a discount on the market rates to:

* compensate clients for the risk in employing you rather than an established firm

* reflect your lower overheads.

Do not charge too low a rate, however, as it is difficult to raise rates later if you discount too heavily at first. Remember too that clients like to feel they are receiving advice that is good value rather than cheap: clients are suspicious of cut-price consultancy.

Calculate a realistic number of fee earning days. Exclude time for holidays (including public holidays), sickness and time spent marketing your services, attending courses, etc. Calculate your fees on the basis of 180-200 working days per year.

4. Plan your marketing strategy

* List your particular selling points. Put yourself in the position of a client trying to decide whether to employ you or an established consultant.

* Register with consultancy directories and agencies.

* Join a professional organisation, a network or other professional group of consultants.

* Write papers for publication or presentation at a conference.

* Give talks to appropriate local groups.

* Get in touch with recent contacts.

5. Secure your first client

Before you do anything else, find your first client. If you do not have a contract or potential contract from a former employer, trawl every existing business contact. Securing the first client will:

* make it easier for you to market to prospective new clients

* firm up your ideas about the type of business you want to become

* provide income.

6. Write the proposal

A winning proposal needs to show:

* knowledge of and experience in the area in question

* understanding of the client's requirements

* creativity and innovation in approaching the project.

The steps to ensure a comprehensive approach include:

* beginning by showing evidence of the three factors above

* carrying out research--with key people as well as consulting relevant library information

* showing creativity--in laying out ideas and possible solutions

* detailing your Unique Selling Point--what sets you apart from the rest

* addressing the competition--not by emphasising their weaknesses, but by focusing on your strengths

* clarifying your strategy--where you will take the client and how you will get them there

* determining costs and proposing budgets

* organising the proposal so that it is a document with some bite to it

* writing a summary and putting it at the beginning

* writing objectively, clearly and simply.

Check your draft proposal with a friend or colleague if possible.

7. Negotiate the contract

The contract is the vital stage which secures your client and determines the nature of the work to be done. It will also specify how you will be paid--by performance, percentage or daily rate--and what kind of expenses will be permissible. Coming out with the contract you want is down to your negotiation skills; there are always some areas for adjustment, just as there may well be some which are non-negotiable. It is important to be able to 'read' these in advance. Don't appear greedy, but don't be a soft touch either.

8. Conduct the assignment

Key steps to success include:

* keeping to budget and time

* understanding the client's organisational culture and language

* ensuring relevant staff are involved and consulted

* holding regular feedback sessions with your client

* maintaining a professional approach.

Dos and don'ts for setting up as a consultant

Do

* Minimise your start-up costs and keep a very tight control on outgoings for at least three months.

* Put everything possible into your first contract: maintaining excellent contacts with that client is the easiest way of securing new business.

Don't

* Be tempted to set up a business or incur any costs until you have secured your first client.

* Underestimate the costs of setting up or the delays in receiving payments from clients.

Useful reading The business of consulting: the basics and beyond, Elaine Biech San Francisco Calif: Jossey Bass Pfeiffer, 1999 Successful consultancy in a week, John Wilson London: Hodder and Stoughton, 1999 Concise guide to becoming an independent consultant, Herman Holtz New York NY: John Wiley, 1999 Practical management consultancy, 3rd ed, Calvert Markham London: Accountancy Books, 1997 High income consulting: how to build and market your professional practice, 2nd ed, Tom Lambert London: Nicholas Brealey, 1997 The perfect consultant: all you need to get it right first time, Max Eggert Elaine van der Zeil London: Arrow Business Books, 1995 Starting a high income consultancy, James EssingerLondon: Pitman, 1994

Useful addresses Institute of Management Consultants, 5th Floor, 32-33 Hatton Gardens, London EC1N 8DL Tel: 020 7242 2140 Management Consultancies Association, 11 West Halkin Street, London SW1X 8JL Tel: 020 7235 3897 Management Consultancy Information Service, 38 Blenheim Avenue, Gants Hill, Ilford, Essex IG2 6JQ Tel: 020 8554 4695

Related checklists

* Performing a SWOT analysis

* Using management consulting services effectively

* Writing a business plan

* Effective business writing

* Controlling a budget

* Starting a small business

* Marketing for the small business

* Running a small business from home

* Networking

Thought starters

* What plans do you have to maintain and develop your expertise?

* What advantage can you offer over the competition?

* Think about networking with, as opposed to competing against, the competition.

Further information

Checklists are available in the following formats:

* Individual checklists.

* A complete set of 175 on CD-ROM or in hard copy.

* Checklists with permission to photocopy.

Full details of the range of checklists that are available can be obtained from:

Lavis Marketing, 73, Lime Walk, Headington, Oxford, OX3 7AD Tel: 0845 702 3736 (local call rate) Fax: +44 1865 750079 or from Checkpoint on the Chartered Management Institute's website at www.managers.org.uk