With a growing demand for consultancy services in the US, there is ample demand for consumers to launch their own consultancy business if they possess the skills and expertise. However, just like any other business, running your own consulting business comes with its own set of risks. Protecting your consulting business often means protecting yourself and your brand, and in some cases, helps to attract customers to your business. By taking steps to ensure your consulting business is properly protected on all fronts, you are ensuring that your business has the greatest chance of surviving in the long term and avoiding a host of legal or financial challenges down the line.
Prepare For The Uncertainties That Come With Consulting
Consulting comes with a few major uncertainties, particularly if you are just starting out. For one, there is a varying timeline between landing your first consultancy client and the next – there is no defined timeline. This also affects your business’ earning potential. Consultancy businesses are often faced with fluctuating incomes, late payments, and missed deadlines. Similar to those running a seasonal business, it is wise to prepare your business and its cash flow for these uncertainties.
One way to do this is to create a clear and concise client contract, illustrating payment terms and payment structures for services rendered. Be sure to make it clear in your client contract how much you are to be paid, how often you will be paid, and if any advance payment will be required. If you are worried about what consulting client contracts look like, there are a range of client contract templates available online that can guide you. Consulting businesses should also adopt the habit of saving a percentage of each client earning as a contingency fund. These funds will come in handy during the times when client contracts are down and overhead expenses still need to be paid.
Secure The Right Insurance Package For Your Consultancy
Also, consulting businesses should add business consultant insurance to their coverage. Most business consultant insurance packages can be tailored to fit your specific industry and business. Standard business consultant insurance packages come with a Business Owner’s Policy (BOP) which combines commercial property insurance, business income insurance, and general liability insurance. The addition of workers’ compensation insurance also extends protection to your consultancy’s employees.
Businesses that provide a service or advice to consumers can face the risk of unsatisfied consumers or committing errors in the eyes of their clients. For instance, a financial planning consultant may make inaccurate projections or give restructuring advice which turns out different for a client. The increased risk of legal lawsuits and defamation of your reputation as a consultant can mean disastrous financial and operational consequences for your business.
To Protect Yourself, Protect Your Client Data
In consulting, client confidentiality is paramount. A breach of data can not only expose your consulting business to legal action but also damages your creditability in the eyes of clients. In some cases, you may also face additional financial consequences from state or industry bodies. For instance, the Health and Information Portability and Accountability Act (HIPAA) stipulates that firms must protect their clients’ health information or face significant penalties. With the heightened risk of cyber-attacks and data breaches, consulting businesses must ensure they implement strict security protocols to prevent data breaches. Simple acts like installing trusted anti-virus software on your business system and using two-factor authentication can help you keep client data safe.
Finally, don’t forget to routinely backup your client data and include cyber liability insurance in your consultancy’s insurance coverage. This way, you can be assured that your business is covered for any financial losses if it is affected by cyber attacks.
Launching your own consultancy business does not guarantee it will be a success. You may not be able to eliminate the uncertainty of the business, but you can significantly reduce it by anticipating the risks and implementing the right protection protocols.