Finance - Part 2

Archive for the ‘Finance’ Category

Why build your consulting website using WordPress

Whether you are a just getting started as a consultant or whether you’re a seasoned veteran, chances are you will need a consulting website. Gone are the days where a business card will suffice when it comes to marketing your consulting business. You’re going to need a website.

The good news is that building a website is not as expensive as it used to be. And websites are becoming easier and easier to update and use.

If you are in the early stages of getting your consulting website set up, I suggest finding an IT consultant who is familiar with "WordPress" and having your consulting website built on WordPress.

What is WordPress? WordPress started out as free blog publishing software, but it is now used for more than just blogs. In fact, WordPress has been used by the Wall Street Journal, Ford, universities and many other large organizations. 

So, why build your consulting website using WordPress? Here are the top three reasons why you should build your consulting website using WordPress.

1. Inexpensive:

WordPress is free to use and inexpensive to install. Most IT consultants and firms are familiar with WordPress, and setting it up for you is a snap, which is generally reflected in the price.

Quick tip: Ensure that your WordPress site is installed on your own domain name (for example: rather than at the free WordPress blogging site (for example:

2. Easy to use

WordPress is easy to use. And its popularity ensures that there are many online tutorials available for free. These tutorials can help you learn how to update your own website without having to rely on your IT consultant for every little change, such as changing your phone number or mailing address.

3. Standardized

If, in future, you would like to change the design of your consulting website, it will be easy to change because WordPress is standardized. You can easily buy new designs for your website, which most IT professionals should be able to install for you.

Are you looking for an IT professional to help you build your consulting website using WordPress? Check out the consultant directory.

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Keys for getting clear about consulting fees

Setting your consulting fees can be a huge stumbling block. If all this is new to you, you may feel your head spin when you start looking at coming up with a fee. If you’re also dealing with a career change, a career break, cultural or gender factors, things get more complicated. Fortunately, you can use clear models and recommendations to help navigate this new path.

Career and business culture influences how you approach fees
If you’ve never had to “sell” your services before, you may be a bit wary of naming a price. Perhaps you came from a field where the thought of a fee or price never crossed your mind — a non-profit, educational, human services, government or other background. Or maybe you were in a role where you simply earned a salary and you never had to think about how your earnings related to those of the business. You might even have come from a cultural background that shies away from talking about money under any conditions. If any of those situations rings true for you, it can help to study consulting fee models so that you understand the rationale for setting your rate. Otherwise, you may feel less confident, which may lead you to discount your rates, backpedal or even come across as a bit nervous.
Gender affects the mix
A 2006 Harvard Business School study, When Gender Changes the Negotiation, found that women perform on par with men when negotiating salaries in low ambiguity industries. Low ambiguity industries are those where salary expectations are more clear to applicants. Although consulting is included as a low ambiguity industry, there’s a big difference between applying for a job and attempting to win a consulting contract. Independent consulting and freelancing – where you’re on your own — may seem far more mysterious and ambiguous.
For many people, the thought of negotiating consulting fees sounds mysterious, overwhelming and indeed ambiguous. At Consultant Journal, I get a lot of email from readers who’ve stumbled on to my site late at night, while tearing their hair out over a need to get a proposal out the next morning. If you’ve never had to negotiate a fee for your services before, it can be intimidating. If you’ve made a career change, taken a career break, just started in entrepreneurship or never gone to bat for yourself before, you may feel like you’re facing several obstacles. But with a good roadmap, you can get yourself around, over and through those obstacles and come out on the other side.

FREE OFFER: Get a copy of my famous article on consulting fees, along with a free six-part mini course – click here. It will give you a taste of what I offer in my book, Consulting Fees.

Get confident by studying consulting fee models
Take the time to explore typical models for consulting fees. When you realize the value of each hour of your time, it can help you feel more confident about asking for a decent hourly rate or project fee. While you’ll eventually want to move on to solution-based fees that really get into the value you provide, most people start out with hourly rates – and many are happy to stick with those. But you’ll find there’s a range of models for determining fees:
  1. Doubling/tripling your hourly wage – if you’d make $25 an hour in a day job, charge $50 to $75 as a consultant. Likewise, if you’d make $60 an hour, charge $120 to $180.
  2. Using a daily rate for consulting – multiple an hourly rate by the hours in a day
  3. Setting consultant fees by the project – work out a fixed fee for each project so that your client need not worry about how much a phone call is going to cost or what the end amount will be
  4. Setting consulting fees based on performance and value added – if you do this strategically, you can make a good profit, but with no control over how your client implements or manipulates your recommendations, you may not see the results you want.
  5. Setting consultant fees strategically using real-life data – a combination of working days, hours, profit margins, overhead, bad debt,
  6. Charging what everyone else charges – this is a popular tactic, but does nothing to address the unique solutions you offer
  7. Moving to Solution-based Fees – this is more complicated and means you need a solid business and marketing plan behind you, but it’s the model that will leave you with the most profit.
Take the time to really evaluate and understand common ways of calculating consulting fees. Get into the models and take an in-depth look at each one. By taking the time to understand what goes into fee negotiations, you’ll feel more confident about presenting your fees to clients. You’ll also be in a better position to handle requests to defend your quotes or cut your rates.
Build a solid marketing and business plan
If you develop your business and marketing plan so that it’s in line with your unique qualities, values and target market, you’ll build expert appeal. Confidence comes from developing marketing programs and tools that help position you (and your business) as an expert who can solve real problems for clients.
Negotiate for all your stakeholders
The Harvard Business School study on gender and negotiation found that women do better at negotiating for others than they do for themselves. HBS recommends women think of themselves as negotiating for their departments, company or customers. As a prospective consultant, you can learn from that. Think of yourself as the owner of a business and negotiate for your business and all that represents. Whether you’re “just” starting out as a freelancer or running a multimillion dollar consulting firm, you still have stakeholders. They include:
  • You
  • Your family (kids, aging parents, close friends you help out)
  • Your vendors and service providers
  • Other businesses you support through your own business
  • People in your network to whom you refer business
  • People you could or do now hire as freelancers or contractors
  • People you could or do now hire as employees
  • Those you mentor
  • Charities you support with your time and money – if you’re starving, you’ll have less time to help out
  • All the people in your industry, profession or community striving to earn respect and a living
Look at the fit between you and the client
Whether you’re consulting, freelancing, contracting, gigging or just taking on side jobs, you’re working to solve problems faced by your clients. If you really want to solve problems for clients, you need to consider the fit between your business and the client. To deliver value for your clients and be in a position to solve their problems, you need to feel like you’re in a good relationship. If you instead feel undervalued – or that you’ve sold yourself short – you’re going to be in a bad relationship. Standing up for the value you deliver to clients means aiming for a good relationship with your clients. It also means you’re seeking sustainable relationships that will allow you to keep on delivering that value (while also paying your rent and groceries or, on the other end of things, growing your business to a size where you can help other people pay rent and buy groceries).
Focus on the value you create
If you enter every business negotiation with the idea that you’re selling yourself to the client, take some time to create a little distance from your business. Focus instead on how your business will create value for the client. If you keep the focus there, your fees should matter less. Moreover, you might want to take some steps to distance your business from “you”. When you start making decisions about your business, you may find that you feel a little more free to ask for fees that better reflect the value you deliver to clients.
Get support
Reach out to others who’ve been down this path before. Colleagues, mentors, instructors and coaches can help you feel more confident about your fees. Take a course, join a professional association and go to networking events. If you feel more connected to your community, you’ll feel more valued and more connected to the value generated by the work you do. And, like the Beatles song, you’ll get by with a little help from your friends.
If you’d like more information on setting consulting fees, check out our article on setting consulting fees or take a look at our Consulting Fees Guide.

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Know what to charge? Get the expert Consulting Fees Guide here

Tax write off

Tax write off time of year again, yes it is! Tax write offs are one of the many things that rule about being a consultant, even if being a consultant is your second job.

Over the years, Consultant Journal has put together a couple of handy tax write off lists, including tax write offs (which covers the basic tax write offs) and more tax write offs (which includes a list of some of the most overlooked tax write offs).

In addition to the tax write off information in the above two lists, when considering tax write offs don’t forget that in some cases you may be able to write off both business use of your car and business use of your home.

And don’t forget those charitable donation tax receipts! In fact, you can even donate a car for an additional tax write off.

Tax write offs are a perk and they are worth keeping track of and claiming. However, don’t go nuts as a new consultant and buy too much just for the tax write offs. Like everything else in life, balance is key.

How do you keep track of your tax write offs and receipts?

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Consulting invoice format

Consulting invoice formats can affect the amount of time you spend invoicing every month. If you’re a new independent consultant who’s just getting started, it won’t be long before you realize that consultants take on many roles during the course of a month–everything from consultant, marketer, IT person, receptionist, and accountant! So it’s important to simplify and streamline as many administrative tasks as possible.

Getting paid is a crucial part of consulting, and it can be easy to push accounting-related tasks to the back-burner when you are juggling a number of consulting projects. However, choosing a consulting invoice format that is simple to replicate and quick to pull together can streamline your procedures.

If you are searching for a basic consulting invoice format, check out this basic example, which you can replicate on your own computer. In brief, in your consulting invoice format you will want to include the date, your contact info, your client’s contact info, a basic description of the services rendered, cost breakdowns (including taxes) and your terms of payment. Again, check out this consulting invoice format example for further details.

If your consulting invoice format is simple and you still find yourself behind on invoicing, consider upgrading to accounting software or sending your accounting needs to an accountant.

Depending on where you are in your consulting business, remember that it can sometimes be more cost effective to bring in another expert than to struggle with a part of your consulting business that doesn’t come naturally and takes up a lot of time.

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Side jobs and second jobs

Side jobs and second jobs are more common than you think. Side jobs and second jobs aren’t just held by those struggling to make ends meet. No, side jobs and second jobs are held by people from all income brackets, including managers, teachers, and top-level executives.

Why would employed people want to take on side jobs and second jobs? For example, you may have a hobby that costs a lot of money. But what if, instead, you chose side jobs and second jobs as your hobby? You’d be eliminating the costs associated with your hobby and replacing the costs with an income!

There are many reasons to have side jobs and second jobs:

  • To earn extra income to pay down debt, go on vacations, etc.
  • To gain experience in an industry that interests you
  • To spend your free-time in a productive way
  • To offer you job satisfaction
  • To replace a hobby
  • To work towards a transition to a full-time career change

If you’re interested in making some extra income, building your own business and working from home, side jobs and second jobs may be perfect for you. Check out this list of ideas for second jobs.

Of course, you could always consider whether you want to become an independent consultant as your side job. Consulting is a common idea for side jobs and second jobs because as a consultant you can earn a very high hourly wage. If you want to find out more about what it takes to become a consultant, check out the becoming a consultant FAQs.

Check out my book on Side Jobs:

 Side Jobs - Second Jobs, Side Gigs & Part-time Businesses Ebook

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What to do during downtime

What to do during downtime is a common question to ask after you become an independent consultant. As a consultant you may find yourself in a feast or famine work cycle where you are very busy at some times and in a lull during other times.

When in a lull you may wonder what to do during downtime. Of course, downtime can be a great time to catch up on your personal life, take a breather, ramp up your marketing, reorganize your office or catch up on old business. In fact, a friend wanted to become a small business consultant, and she now spends her downtime meeting with small business owners in her community.

But when I think about downtime I think about diversifying my income, and I tend to work on passive income projects.

Passive income is income that doesn’t require any additional work on your part. In other words, "passive" income is not directly tied to your time or energy (hence the concept of "passive" income). Generally, passive income refers to something that can be sold over and over without any additional effort on your part.

Some examples of passive income are:

  • Selling advertising on a website
  • Selling e-books
  • Selling software
  • Selling graphic design templates
  • Selling digital art, such as icons
  • Selling packaged digital goods
  • Earning referral fees

What to do during downtime is up to you. But if you know more projects are around the corner and you don’t need to be hitting the pavement marketing your services, I encourage you to think about building passive income streams.

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Kid health insurance plans

Kid health insurance plans – if you’ve got kids, you may wonder about what sort of health insurance plan you should be looking at. If you’re in the process of evaluating plans that provide health coverage for your children, consider the following:

  • Does your own plan (as a parent) cover your kids?
  • Can your kids use COBRA (in the US) to extend your plan when they turn 18 or graduate college?
  • Can you buy a short term plan to cover, for example, time when your kids are unemployed or in college?
  • Do your children qualify for State Children’s Health Insurance Program (US) or Medicaid?
  • Does your government provide health insurance?

Take a look at all factors in the plan, not just the monthly or annual fee. What’s the copay? Is there a deductible? Does the plan cover everything you need? Is it indemnity, managed care or consumer health driven?

What have you learned as you’ve looked at health insurance plans for children?

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Debt snowball method

Debt snowball method — have you heard of it? The debt snowball method is a simple debt management strategy that combines psychological motivation with an effective debt reduction strategy.

Debts can feel overwhelming, especially when you have multiple creditors each seeking their minimum payments. But the debt snowball method may help you feel in control of your finances.

In a nutshell, the debt snowball method works as follows:

  • Make all of your required minimum payments on all of your loans every month;
  • List all of your loans from lowest amount owing to highest amount owing;
  • Funnel all extra and available income to the loan on which you owe the least amount of money (Loan A). Continue doing so until Loan A is paid off.
  • Once Loan A (your smallest loan) has been paid off, choose the next smallest loan (Loan B) and funnel all available income into that debt.  But there’s one more key step…
  • Remember the minimum payment that you used to pay into Loan A, but you don’t have to pay it anymore because Loan A has been eliminated? Well, set aside that minimum payment amount, but commit that payment every single month to Loan B instead.
  • Continue until all debts have been eliminated.

The appeal of the debt snowball method is that, by choosing to pay off your smallest debts first, you see results, which motivate you to stay with your debt elimination strategy.

The debt snowball method isn’t necessarily the wisest debt reduction strategy. In fact, I generally recommend paying off loans with the highest interest rate first. However, many people choose the debt snowball method for loans that have similar interest rates.

You may want to supplement your debt reduction strategy with a second job, consulting, financial restrictions or other measures that will help you make significant inroads in your debt load.

The debt snowball method is an often-recommended strategy because of its simplicity and its efficacy. Consider all the options and then choose the debt management strategy that works best for you.

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Building credit for your small business

Building credit for your small business is important because you never know when you’ll want access to more funds, be it for expansion or to help out in a pinch. And what better time to think about building credit for your small business than now,  because credit is easier to build when you’re riding the wave of success.

Building credit for your small business is similar to building personal credit; however there are a few key distinctions:

Clear distinction between business and personal

Even if you run your business as a sole-proprietorship, be sure to clearly distinguish your business and personal finances. You’ll want to demonstrate a clear paper trail of your business’s financial transactions, including all income and expenditures. This may include opening a business bank account and even a business credit card.Having corroborating documentation is key. For instance, if you pay all of your expenses with a small business credit card, you’ll have monthly statements to document your business expenses, but you’ll still want keep receipts and invoices as well.

Business credit card

Most credit cards charge exorbitant interest rates so avoid using them to carry debts. However, business credit cards that are used frequently and paid off to zero every month can be a great way to start building business credit for your small business. Get a business credit card today and start building your credit rating.

Apply for a line of credit

Ideally, apply for a line of credit before you start your business. Remember, having access to a new business line of credit doesn’t mean you have to use it. So consider building credit for your small business now because it’s better to be prepared than to have to scramble in the event of an emergency.

Overcoming bad personal credit

Building business credit is not a substitute for a personal history of bad credit. Business creditors will take your personal credit into account, so continue improving your personal credit while building your business credit. In fact, consulting can be a flexible way to get out of debt.

Building credit for your small business

Building credit for your small business is similar to building personal credit. Show a clear history of timely payments on products like lines of credit and credit cards, and you’ll be on your way to building credit for your small business.

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Commercial Equity Line of Credit (CELOC) may help your business

Commercial Equity Line of Credit, known for short as CELOC, can help small businesses – especially start ups. A commercial equity line of credit (CELOC) allows a business to borrow money on a regular basis so that they can finance their business. Usually, you can just write out a check when you need the money. It’s an operating loan where you can just borrow what you need as you need it.

Review commercial equity lines of credit before you dive in

I’m never one to tell people to take out reams of debt. In fact, I rarely use debt for my own small business. Sure, I have a line of credit and a credit card. But I use them sparingly. Still, if you’ve got the kind of business that has to wait on accounts receivable, bring in inventory, hire people at the start of a project and so on, you may be interested in reviewing CELOCs. I know that, for myself, I’ve been in situations where I was waiting on tens of thousands of accounts receivable from low risk clients, even though I get deposits – and I’m fortunate that I don’t need to buy inventory to keep going.

How a CELOC works

A CELOC requires your company to have a zero balance (nothing owing) for a set period every year. The money you’re allowed to borrow depends on your company’s collateral – not your personal assets. Of course, this makes it a lot harder to qualify for a commercial equity line of credit. Lenders would rather be able to sell your house if you stop paying your debts!
A commercial equity line of credit is pretty similar to a home equity line of credit, except that it’s your business providing the collateral, not your home and personal assets. It can help your business deal with cash flow issues when you’re waiting on accounts receivable. It can also help you ramp up to expand into new markets or buy more inventory.

Qualify for a CELOC

To qualify for a commercial equity line of credit, you’ll need to have established good business credit. The business owners also need good personal credit and a history of income from their business. You’ll need to have been in business for a while too – at least a year, if not more. Of course, a lender will make the final decision. So do your due diligence and shop around.

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