Making the shift from full-time to freelance/contract

You seem to have things well in hand. Congratulations!

My suggestions on building a successful consulting practice:

1)Make sure that your scope of services is well-defined and something that you can do very well on your own (at least at first.) My observation is that the best consulting specializations are things that clients are unable or unwilling to do for themselves, and for which they have a repeating need. Often such specializations are technical in nature.

2)Make sure that your target market or markets are well-defined and in need of the services you provide.

3)Pricing can be a challenging aspect of solo consulting. Are you able to charge on an hourly basis, or are you charging a set fee to accomplish a specific task or suite of services? The first structure is more advantageous to you; the latter (growing more common) is more advantageous to the client. Build overhead and downtime into your fees. All out-of-pocket expenses (eg travel fares, materials) should be reimbursable or incorporated into your fees. Look online for fee models.

3)Most solo consultants must spend *at least* 30% of their time building a book of business— often more in the early days. Ideally, your clientele will generate repeat business and will grow by word of mouth. If this is not the case, you need to rethink your business model. You will do better as an independent consultant if you genuinely enjoy marketing your work and building and serving a clientele.

4)Find a good accountant and let this person guide you concerning your deductible expenses and your record-keeping. You will need to have a reliable system for documenting your business revenues and expenses and an understanding of what you can deduct under current law. If you will be working out of a home office, ensure that it is set up in compliance with the tax laws so that you can take advantage of the home office tax deduction. Be prepared for the strong possibility that you will have to pay estimated quarterly tax returns. Alternatively, if you do not pay quarterly estimates, you will have to make a single estimated payment in January for the preceding year, with a final return filed in April. You will also be responsible for your own Social Security and FICA payments.

5)Your LLC need not be incorporated in your state of residence. Delaware is one of the states whose LLC requirements are the least arduous. Consult a small business lawyer for help with filing the necessary papers. You will need a separate bank account for the LLC.

6)Establish easily administered systems for submitting quotes/proposals and bills to clients.

7)Are you covered under a spouse’s health insurance, or do you need to find your own? The National Association of the Self-Employed can provide guidance on this front.

8)Many solo consultants find that their assignments and cash flow follow a feast and famine pattern, at least at first. Be prepared for the possibility of alternating busy periods and dry spells. This will ideally even out as your practice grows.

Again, congratulations on what you have accomplished in setting up your practice and best wishes for your continued success.