The Cost to Get Started Consulting

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Hi there!

Before we go any further, I owe you an apology. This newsletter is about six months old, and last Friday was the first time I’ve missed an issue.

I’m sorry for that and I will endeavor to make sure it doesn’t happen again.

To begin to hopefully make amends, this post will cover one of the most frequently asked questions I get: how much does it cost to get started consulting?

The answer: not much, but there is some. Let’s talk about what you absolutely have to spend, and when you need to spend it.

Let’s dig in

The stuff you absolutely need within your first 3 months

I assume you have access to a computer and don’t need to buy one!

Item #1: An LLC or similar legal entity

It’s a cliche online: “Don’t start an LLC, get customers first, etc. etc.”

There are (maybe) some industries where that advice works. Consulting is not one of them.

Every large company will have a procurement division. That division will end up signing off on your contract.

They will blow a lid if you don’t have an LLC. Apple is not going to sign a contract with “Joe Smith” as a vendor, but they will sign on “Joe Smith LLC” as a vendor.'

If you don’t plan ever to get a big contract or want to focus on UpWork only, you might be able to get away with not having an LLC.

Estimated cost: $200

Item #2: Bookkeeping & Business Bank Account

You need a separate business bank account and bookkeeping if you have an entity.

You probably know that you’re not supposed to co-mingle funds, so I won’t bore you to tears here by talking about it :)

The one thing I will really emphasize is to spend money on bookkeeping.

It absolutely is terrible, and exceptionally costly, to try and retro-actively fix your books come tax time.

Spend the money upfront to get bookkeeping done right. No affiliation or ad here, but I use Mercury for banking and Fincent for bookkeeping. Good experiences with both

Estimated Cost: $0 for Mercury; ~$200/month for Fincent

The stuff you might need within your first 3 months

Item #3: Liability Insurance/ E&O

This is not legal advice/I’m not a lawyer/consult your lawyer :)

My guess is they would tell you to have liability insurance from the beginning.

In practice, most consultants don’t get it until a client asks for proof of insurance. This happens not-infrequently, and when it happens, you have to get it quick so you don’t lose the project.

Again-I defer to your lawyer here!

Estimated Cost: $50/month

Item #4: Contracting Software

If you do your work through a company like Catalant, they will handle contracting for you.

If you work independently, you’ll need something to draft and send contracts. PandaDoc typically works really well here (again, no affiliation!)

Estimated Cost: $40/month

The stuff you don’t need within your first 3 months but is nice to have

Item #5: Gmail Account

This is purely vanity, but it’s typically nice to have your email be sean @ the odowdgroup . com instead of theodowdgroup @ gmail . com

(I used the later for about a year and had plenty of clients comment on how I should just get the legit email).

Last I checked, it cost basically nothing

Estimated Cost: $6/month

Item #6 Industry Specific Licenses

In most cases, there are industry-specific licenses that could be useful. Maybe you do design work and need a Figma account. Or, maybe you need access to Pitchbook ($$$) or something similar.

Either way, I would classify these as nice to have. I would strongly suggest to minimize your cost basis and leverage tools you can get for cheap.

In most cases, you’ll end up using them way less frequently than you expect!

Estimated Cost: varied

Total Cost: $200 upfront + $300/month

Consulting is insane margins, >90% when you’re at scale.

However, there is some cost for when you first get started! It would be foolish of me to make it seem like there isn’t!

These are relatively low amounts, and the recurring cost each month isn’t significant compared to how much you make in just a day as a consultant.

However, this does add up to about ~$4K a year. If you aren’t sure you’re going to be able to dedicate at least some time to consulting, then it might not make sense to take on that cost!

How can I help?

If you reply to this email, it will come directly to me & I’ll respond as quickly as possible

To head off a very common question: I’m sorry but I don’t have any quickstart guides, courses, communities, or other paid resources!

What would be most helpful to read about next week?

Let me know what would be most helpful for you :)