Starting your own business

01 March 2021

Eira Hammond ChFCIPPdip, independent consultant and payroll headhunter, Eira Connect, part of Eira Consulting Limited, addresses the issues of whether being a payroll consultant is right for you

Consulting has changed a bit over the last twelve months or so, especially with the delayed introduction of IR35 in the private sector. It is assumed that consultancy referred to in this article is outside scope of IR35.
There are loads of myths surrounding consultants and many of these statements have made me smile over the years, including the following which I’ll return to later:

consulting is what to do if you’re out of work
consultants get to keep all the £s they make
consulting is glamorous
consultants go to exotic places
consultants are their own bosses
consultants have no personal life.

Most of the above are partly true, but before you consider embarking on a career as a consultant it’s only fair you see the full picture.

Why be a consultant?
You could be consulting for a large organisation and want to start your own business or maybe you are a bit of an entrepreneur and want to start your own consultancy practice? Perhaps you’ve retired and want to continue to offer your payroll expertise in a part-time capacity. It could be that you are currently looking for your perfect permanent role, but until that comes along you’ve decided to do some interim work. Another way of trying out consultancy is by doing some small projects in the evening or during your weekends to earn some extra money. Whatever the reason, you must always remember that as well as doing the consultancy projects, you will also have to administer your business, including sales, payroll, marketing, email communication, accounts and all the other tasks that are involved when running your own business.

Is consulting right for you?
Once you have your goal, then you need to really look at your skills and experience and consider whether consultancy is right for you. Consider the following.

Do you have the entrepreneurial spirit?
Are you self-disciplined and can maintain focus?
Are you astute in business issues?
Are you willing to work hard and make sacrifices for your business?
Have you got good communication skills: listening, writing and speaking well?
Are you convincing, confident, influential, credible?
Do you have good salesmanship, and are you a good negotiator?
Are you analytical, and quick to frame issues?
Are you good at facilitating meetings?
Can you bring/add/generate value, rather than just perform tasks?
Are you diplomatic?
Do you have a sense of humour?

If you can answer ‘yes’ to all of these questions – and you are self-assertive – you may be ready! But, are you ready financially?
This is one of the difficult things you need to be brutally honest about. How long could you make it with no income? Do you have enough savings to live for six months or a year? Could you manage when there are dry spells and no work? Are you deeply in debt now? How is your credit? What if you get sick? These are really important but very difficult questions to answer, so it’s crucial to be honest with yourself and be realistic.

Getting started
There are a few options in the UK when starting your own business including being a sole trader, partnership or having your own limited company. The GOV.UK site has some valuable resources to help you choose which option is best for you, so I’m not going to recommend as it really does depend on a lot of factors.

Start with a business plan which should include: company overview, structure, values, services, your specialty or niche experience, and your credentials, references and awards. These are the things that will drive your market research and help you decide on your target market, and how you are going to achieve your projected sales.

Once you have your company set up it’s time to start marketing yourself to find your first contract. It would be good to have a unique brand, so a logo and business card are good tools to have but it’s nice not essential to invest in a business website.

Other ways to market yourself could include:

speak at industry events
write articles, newsletters in magazines or Linkedin
build relationships
obtain testimonials
network regularly
social networking
attend – even display – at trade shows or exhibitions
serve on committees, and volunteer at events.

Your first contract
All contracts require a proposal, which could also be called a statement of work or contract agreement. This will generally be a summary of your agreement that defines the project objectives, outlines the timing, states the accountability, the conditions of work, hours and fees etc. It’s also good practice to include measurements for progress, a high-level timeline, methodology – an outline of steps, objectives, terms and conditions and acceptance – and sign-off.

Part of the proposal will include details of your fees – the most difficult thing of all to set. You need to establish your value or worth so think about your expertise, experience, talents and skills. How much competition is out there going for the same roles as you? Sometimes pure survival gets in the way and consultants end-up offering to do work at a lower rate than they’d like just to guarantee getting the contract. In my own experience, I try to judge setting the fees based on the type of work being undertaken; so, the more complex, pressurised and high level the role, the higher the fee – but generally fees should be up for negotiation.

Administrative tasks
There are many administrative tasks to complete during the set up and running of your consultancy business. Insurance is the most critical to get in place before you start your first contract. In the UK, the recommended insurances for independent consultants are professional indemnity and public and products liability, both up to £2,000,000. These will generally cover you for negligence, in case you fail in duty of care to your client, offer incorrect advice or make a mistake in your work. Public and products liability is useful if you are likely to meet customers in the public domain; indeed, some customers ask for both of these insurances to be in place.

You may also wish to purchase some health insurance to cover you should you be unable to work due to ill health, as a consultant will generally not receive any sick payments from the customer.
As well as insurances, you may wish to consider the services of an accountant to support you with running the financial side of your business, and even running your payroll. Don’t forget you will be very busy being a consultant, marketing yourself and keeping up your learning and personal development, so it may be a good investment to get someone to support with this area of your business to allow you to concentrate on working full-time.

...think about some specialised training...

Work location
With the constant legislative updates and rules around working in an office, the life of a consultant is considerably different to where it was a year ago. Most interviews are being held remotely, and most workers, including consultants, are working from home.

Dedicating a formal office space in your home will help ensure you can leave the office and close the door as you would if you were in an office location. If you have to rely on a corner of a room, this will also work, but if you have family using the same space you will need to ensure you can work uninterrupted; it’s important to show you are professional at all times, and that includes on Zoom calls!

Next steps
When taking regular contracts, it’s important to keep learning and improving. If you are a member of the CIPP you have to maintain continuing professional development, so attending webinars, conferences and reading magazines etc all help. But if you want to consider increasing the scope of the consultancy services you offer to customers, perhaps you could think about some specialised training, such as project management, leadership training, sales skills or some further technical training, perhaps in one or more of the payroll systems currently utilised in the UK. Many contract roles ask for expertise in different systems, so that would be something useful to consider.

Summary
In response to those statements at the beginning:

Consulting is what to do if you’re out of work – Well, only if you have the skills and the financial backing to make it work.
Consultants get to keep all the £s they make – If you’re a limited company you are still on the payroll for your company and are liable for the usual payroll deductions, plus VAT and corporation tax, and payments to yourself to cover when on holiday and sick.
Consulting is glamorous – Yes, some of us have been lucky to stay in beautiful hotels with room service, executive lounges and spa facilities from time to time, but we have also lived in tiny, crummy bedrooms in hotels in dark city streets, with no room service for weeks on end with limited internet.
Consultants go to exotic places – Yes, some of us have had the opportunity to travel around the world with consultancy roles and see some fabulous places, but these opportunities are rare!
Consultants are their own bosses – In terms of paying yourself through your limited company payroll, then yes, but you are still ‘in employ’ with a customer and are usually bound by the organisation’s policies and management.
Consultants have no personal life – That depends on how much you choose to work in your own time. It’s easy to get bogged down working long hours, especially if you’re working from home or stuck in hotel rooms, or if you have meetings across different time zones.