Consulting For Dummies, 2nd Edition


by Bob Nelson and Peter Economy




About the Authors

Bob Nelson (San Diego, CA) is founder and president of Nelson Motivation, Inc., a management training and consulting firm based in San Diego, California. As a practicing manager and a best-selling author, he is an internationally recognized expert in the areas of employee recognition, rewards, motivation, morale, retention, productivity, and management. He is author of the best-selling book 1001 Ways to Reward Employees (Workman) — which has sold over 1.5 million copies worldwide — and coauthor of the best-selling book Managing For Dummies, 2nd Edition, with Peter Economy (Wiley), as well as 18 other books on management and motivation.

Bob has been featured extensively in the media, including television appearances on CNN, CNBC, PBS, and MSNBC; radio appearances on NPR, USA Radio Network and the Business News Network; and print appearances in the New York Times, the Wall Street Journal, the Washington Post, and many more. He writes a weekly column for American City Business Journals and a monthly column for Corporate Meetings & Incentives, among others.

Dr. Nelson received his PhD in management from The Peter F. Drucker Graduate Management Center of Claremont Graduate University in suburban Los Angeles, and received his MBA in organizational behavior from The University of California at Berkeley. For more information on products and services offered by Nelson Motivation, Inc. — including speaking or consulting services — call 800-575-5521. Visit Bob at his Web site:

Peter Economy (La Jolla, CA) is a freelance business writer and publishing consultant who is associate editor of the Apex award-winning magazine Leader to Leader, and coauthor of the best-selling book Managing For Dummies, 2nd Edition, with Bob Nelson (Wiley), Giving Back with Bert Berkley (Wiley), The SAIC Solution with J. Robert Beyster (Wiley), as well as the author or coauthor of more than 30 other books on a wide variety of business and other topics. Visit Peter at his Web site: and be sure to check out his Free Book Project at:



To the many unsung consultants who quietly dedicate their working lives to helping others reach their goals.


Authors’ Acknowledgments

We would like to give our sincere thanks to the talented consultants whose personal experiences helped bring this book to life, including Bill Eastman, Peter Psichogios, and Ray Wilson. Thanks also to Bill VanCanagan for his expert legal advice on the manuscript.

Bob and Peter are especially appreciative of all the talented folks at John Wiley & Sons, especially Joyce Pepple, Stacy Kennedy, and Alissa Schwipps for their infinite wisdom, guidance, and support on this project.

On the personal side, Bob would like to acknowledge the ongoing love and support of his father Edward, his wife Jennifer, and his children Daniel and Michelle. Peter thanks his wife Jan, and his children Peter J, Skylar, and Jackson, for love everlasting. May the circle be unbroken.


Publisher’s Acknowledgments

We’re proud of this book; please send us your comments through our Dummies online registration form located at

Some of the people who helped bring this book to market include the following:

Acquisitions, Editorial, and Media Development

Senior Project Editor: Alissa Schwipps

(Previous Edition: Pamela Mourouzis)

Acquisitions Editor: Stacy Kennedy

Copy Editor: Christy Pingleton

(Previous Edition: Tina Sims, Michael Simsic)

Editorial Program Coordinator: Erin Calligan Mooney

Technical Editor: Ray Wilson

Senior Editorial Manager: Jennifer Ehrlich

Editorial Assistants: David Lutton, Joe Niesen

Cartoons: Rich Tennant (

Composition Services

Project Coordinator: Katherine Key

Layout and Graphics: Reuben W. Davis, Alissa D. Ellet, Melissa K. Jester, Christine Williams

Proofreaders: Cara Buitron, John Greenough

Indexer: Potomac Indexing, LLC

Publishing and Editorial for Consumer Dummies

Diane Graves Steele, Vice President and Publisher, Consumer Dummies

Joyce Pepple, Acquisitions Director, Consumer Dummies

Kristin A. Cocks, Product Development Director, Consumer Dummies

Michael Spring, Vice President and Publisher, Travel

Kelly Regan, Editorial Director, Travel

Publishing for Technology Dummies

Andy Cummings, Vice President and Publisher, Dummies Technology/General User

Composition Services

Gerry Fahey, Vice President of Production Services

Debbie Stailey, Director of Composition Services




About This Book

Conventions Used in This Book

What You’re Not to Read

Foolish Assumptions

How This Book Is Organized

Icons Used in This Book

Where to Go from Here

Part I : So You Want to Be a Consultant

Chapter 1: Introducing the Wonderful World of Consulting

The Reasons for Consulting: Money, Yes . . . But What Else?

Taking the First Steps toward Becoming a Consultant

Beginning Your Own Consulting Firm

Taking Your Business to the Next Level

The Consulting Challenge Quiz

Chapter 2: Determining Whether Consulting Is Right for You

Pondering Your Preferences

Assessing Your Skills

Matching Your Skills with Your Preferences

Is Your Idea Marketable?

Do You Have What It Takes?

Chapter 3: Taking the Plunge into Consulting (Or at Least Getting Your Feet Wet)

Deciding When the Time Is Right

Preparing for Stops along the Way

Taking the First Steps

Part II : Getting Your Consulting Business Off the Ground

Chapter 4: Setting Up Your Consulting Firm

Getting Your Home Office Up and Running

Leveraging Support Services

Chapter 5: Getting a Grip on Legalities, Finances, and Ethics

Taking Care of Legal Considerations

Finessing the Financial Stuff

Doing the Right Thing: Ethics and You

Chapter 6: Setting Your Fees

Determining What You’re Worth to Your Clients

Setting Your Fees in Different Ways

Making Changes to Your Fees

Taking a Stand

Part III : The Short Course in Consulting

Chapter 7: Defining the Problem and Writing a Winning Proposal

Making the Most of Your Client Conversations

Building Partnerships with Your Clients

Crafting Winning Proposals

Chapter 8: Collecting the Client Data You Need

Identifying Key Data Sources

Getting Help from Your Clients in Collecting Data

Watch Out! Avoiding Data Disasters

Chapter 9: Problem-Solving and Developing Recommendations

Making Sense of All That Information

Problem-Solving the Right Way

Determining the Best Recommendations

Chapter 10: Tell It Like It Is: Presenting Your Recommendations

Giving Client Feedback: Setting the Stage

Conducting a Feedback Meeting

Making Great Presentations

Building Client Ownership of Your Recommendations

Chapter 11: Implementation: Making Your Prescriptions Stick

What Gets Planned Gets Done

Just Do It! Implementation Tips

Assessing the Results

Part IV : Selling Your Consulting Services

Chapter 12: The ABCs of Selling

The Classic Selling Process

Considering New-and-Improved Selling Methods

Chapter 13: Getting the Word Out: Promoting Your Business

Getting Up Close and Personal with Personal Selling

Using Fame to Build Your Fortune: Public Relations and Publicity

Paying to Put the Word Out: Advertising

Factoring In a Little Fun: Sales Promotion

Creating a Simple Marketing Plan that Really Works

Measuring Your Results

Chapter 14: Building Business and Referrals through Current Clients

Considering the Benefits of Referrals

Deciding Who to Approach for Referrals

Setting the Stage with Current Clients

How to Get Referrals

Following Up on the Referral

Chapter 15: Building Business with New Clients

Giving Your Introduction a Personal Touch

Building Relationships with Prospective Clients

Meeting Clients

Following Through Is Everything!

Moving On

Part V : Taking Care of Business

Chapter 16: Contracting for Business: It’s a Deal!

Getting the Lowdown on Contracts

Dealing with Different Kinds of Contracts

The ABCs of Contract Negotiation

Chapter 17: Keeping Track of Your Time and Money

Tracking Your Time

Billing Your Clients and Collecting Your Money

Building Better Budgets

Chapter 18: Communicating Your Way to Success

Putting It in Writing

Harnessing the Power of the Spoken Word

Chapter 19: Troubleshooting Common Consulting Issues

Alleviating Poor Cash Flow

Handling Clients Who Want Free Advice

Getting That First Sale

Dealing with Clients Who Are Slow (or Refuse) to Pay

Getting Clients to Pay You What You’re Worth

Part VI : Taking Your Consulting Business to the Next Level

Chapter 20: Building on Your Success

Tuning Up Your Growth Engine

Using Nine Keys to Unlock Success

Forming Partnerships to Build on Your Success

Giving Back

Chapter 21: Advanced Pricing Strategies

The Zen of Pricing

Taking a Closer Look at Value-Based Pricing

Considering Contingent Fees and Performance-Based Pricing

Chapter 22: Enhancing Your Image and Reputation

Creating a Professional Image

Enhancing Your Reputation

Building a First-Class Web Site

Part VII : The Part of Tens

Chapter 23: Ten Ways to Improve Your Cash Flow

Manage Your Accounts Receivable

Budget Your Cash

Push for Advance Payment

Hold On to Your Money as Long as You Can

Make Sure Your Invoices Are Right

Bill More Often

Give Prompt-Payment Discounts

Manage Your Expenses

Don’t Be Afraid to Push for Payment

Call in a Pro

Chapter 24: Ten Effective Marketing Strategies for New Business

Choose Your Targets

Discover What Works

Use Client Success Stories

Encourage Word-of-Mouth Referrals

Become a Media Animal

Hire a Good Public Relations Person

Start a Newsletter

Offer Free Samples

Be Responsive to Media

Help Clients Even If You Can’t Do the Work

Chapter 25: Ten Ways to Build Business with a Client

Always Be On Time and Within Budget

Anticipate Your Clients’ Needs (And Suggest Ways to Address Them)

Be Easy to Work With

Keep in Touch

Be Honest and Ethical

Give More than You Promise

Ask for Testimonials and Referrals

Offer Incentives or Send a Gift

Educate Your Clients

Do Great Work

: Further Reading


Anyone can become a consultant. Becoming a successful consultant, however, is a different story. Prospering as a consultant requires you to have expertise that others are willing to pay you to provide, and it requires having good business skills. Oh. And it requires some amount of motivation on your part to want to consult for others.

Writing this book was a labor of love for us. We are both consultants and have been for many years. If we don’t do a good job, we don’t get paid. And if we don’t get paid, we don’t eat. Our goal is to provide you with the skills you need to become a successful consultant, whether you’re a beginner who is just getting his business off the ground, or an experienced consultant who wants to fine-tune her already successful practice.

As you may have already discovered or suspected, consulting can be an exciting and rewarding profession — and not just in a financial sense. Working with people to help solve problems can be an immensely satisfying thing to do. Of course, in the real world, consulting involves much more than tapping your client’s head with a magic wand and watching all the problems go away.

Consulting For Dummies, 2nd Edition, is specifically written to address the unique needs of both new and experienced consultants as well as consultants-to-be. If you’re new to the business, you can find everything you need to know to be successful and in demand. If you’re an experienced consultant, we challenge you to shift your perspective and take a fresh look at your philosophies and techniques — what’s working for you and what’s not. We offer some new approaches and techniques to help you take your business to a higher level.

About This Book

Consulting For Dummies, 2nd Edition, is full of useful information, tips, and checklists that any consultant or consultant-to-be can use right away. Whether you’re just thinking about becoming a consultant or you’re already a seasoned pro, you can find everything you need to make consulting fun and profitable for you and your clients.

The good news is that the information you find within the covers of this book is firmly grounded in the real world. This book is not an abstract collection of theoretical mumbo-jumbo that sounds good but doesn’t work when you put it to the test. We’ve culled the best information, the best strategies, and the best techniques for consulting from people who already do it for a living — including us. This book is a toolbox full of road-tested solutions to your every question and problem.

Consulting For Dummies, 2nd Edition, is fun, which reflects our strong belief and experience that consulting can be both profitable and fun. Nobody said that you can’t get your work done while making sure that you and your clients enjoy yourselves in the process. We even help you to maintain a sense of humor in the face of upcoming deadlines and seemingly insurmountable challenges that all consultants have to deal with from time to time. Some days, you will be challenged to your limit or beyond. However, on many more days, the satisfaction of resolving a production bottleneck, recommending a new accounting system, or installing a new client-server computer network will bring you a sense of fulfillment that you never could have imagined possible.

The material in this book is easy to access. What good is all the information in the world if you can’t get to it quickly and easily? Have no fear; we have designed this book with you, the reader, in mind. Here’s how to find the precise information you seek:

bullet If you want to find out about a specific area, such as gathering data or setting up a home office, you can flip to that chapter and get your answers quickly — faster than you can say, “The check’s in the mail.” Let the table of contents and index be your guides.

bullet If you want a crash course in consulting, read this book from cover to cover. Forget squandering lots of money on high-priced seminars and videos or spending countless nights poring over some fly-by-night correspondence course. Forget learning by trial and error. Everything you need to know about consulting is right here.

We know from personal experience that consulting can be an intimidating job. Consultants — especially those who are just learning the ropes — are often at a loss as to what they need to do and when they need to do it. Don’t worry. Help is at your fingertips.

Conventions Used in This Book

When writing this book, we included some general conventions that all For Dummies books use. We use the following:

bullet Italics: We italicize any words you may not be familiar with and provide definitions.

bullet Boldface type: We add bold to all keywords in bulleted lists and the actual steps in numbered lists.

bullet Monofont: All Web sites and e-mail addresses appear in monofont.

Also, we should note that, in this book, we use the term consultant quite loosely. We define a consultant simply as someone who sells his or her unique expertise to someone else, often on an hourly basis. There are many different kinds of consultants, from those who advise businesses on how to become more effective to those who advise lawyers on which members of a jury they should try to remove before a trial to those who can help you set up your home computer’s wireless network.

What You’re Not to Read

While we spent hours and hours — and many late nights — writing the words you’ll read in this book, we know that you won’t want to read it all. Truth be told, it’s highly likely you won’t need to. So, we make it easy for you to identify “skippable” material by sticking it into sidebars. This is the stuff in the gray boxes that’s interesting and related to the topic at hand, but not absolutely essential for the success of your consulting business.

Foolish Assumptions

While we were writing this book, we made a few assumptions about you. For example, we assume that you have at least a passing interest in starting your own business that specializes in helping others solve their problems or capitalize on opportunities. Maybe you’re already a consultant, or perhaps consulting is something that you might like to try. We also assume that you have a skill or expertise for which your friends, relatives, or clients will be willing to pay. This expertise may be providing your advice on anything from postage stamp collections to Internet consulting to aerospace engineering services. One more thing: We assume that you don’t already know everything there is to know about consulting and that you’re eager to acquire some new perspectives on the topic.

How This Book Is Organized

Consulting For Dummies, 2nd Edition, is organized into seven parts. Each part addresses a major area of the how, what, or why of becoming a consultant — and growing your business. Because of this organization, finding the topic that you’re looking for is simple. Whatever the topic, you can bet that we cover it someplace! Here’s a quick overview of what you can find in each part.

Part I: So You Want to Be a Consultant

Consultants are many things to many people. In this part, we provide an overview of the entire book, and then consider how to determine whether or not consulting is for you, before diving into the topic of starting your own consulting business.

Part II: Getting Your Consulting Business Off the Ground

Consulting is just like any other business — there are certain things you need to do to get it off the ground and running smoothly. This part focuses on starting up a successful consulting business as well as the financial, legal, and ethical considerations that you will encounter along the way. Finally, we take a look at how to set your fees.

Part III: The Short Course in Consulting

Consulting can be done one of two ways: the right way or the wrong way. In this part, we discuss the right way. We explain how to clearly diagnose the client’s problem (and write a winning proposal), collect data effectively, and analyze it quickly and efficiently. Finally, we talk about how to give feedback to your clients and ensure that your advice gets implemented.

Part IV: Selling Your Consulting Services

To be a successful consultant, you have to learn how to sell your services (and yourself) effectively. This part considers the selling process and how to spread the word about your business. We consider how to build business through current clients, as well as how to build business with new ones.

Part V: Taking Care of Business

In this part, we dig a bit deeper into the business side of consulting, taking a close look at contracts and negotiating deals, keeping track of time and money, communicating with clients, and troubleshooting the kinds of issues and problems that every businessperson has to face from time to time.

Part VI: Taking Your Consulting Business to the Next Level

Once your consulting business is well established, you’ll want to take it to the next level to make it even more successful than it already is. In this part, we consider different approaches to build on your success, including the use of advanced pricing strategies and enhancing your image and reputation.

Part VII: The Part of Tens

Here, in a concise and lively set of short chapters, you find tips that can really launch your consulting practice into orbit. In these chapters, we address using the Internet and other publicity tools to market your services, avoiding consulting mistakes, writing proposals, negotiating contracts, and building business with existing clients.

Icons Used in This Book

To guide you along the way and point out the information you really need to know about consulting, this book uses icons along its left margins. You see the following icons in this book:

This icon points you to tips and tricks to make consulting easier.

Watch out! If you don’t heed the advice next to these icons, the entire situation may blow up in your face.

Remember these important points of information, and you’ll be a much better consultant.

These real-life anecdotes from yours truly and other consultants show you the right — and occasionally wrong — way to be a consultant.

Where to Go from Here

If you are a new or aspiring consultant, you may want to start at the beginning of this book and work your way through to the end. A wealth of information and practical advice awaits you. Simply turn the page and you’re on your way!

If you’re already a consultant and you’re short of time (and what consultant isn’t?), you may want to turn to a particular topic to address a specific need or question. If that’s the case, the Table of Contents gives a chapter-by-chapter description of all the topics in this book, and the thorough index can help you find exactly what you’re looking for.

Regardless of how you find your way around Consulting For Dummies, 2nd Edition, we’re sure that you’ll enjoy getting there. If you have specific questions or comments, please feel free to visit our Web sites at (Bob) or (Peter). We would love to hear your personal anecdotes and suggestions for improving future revisions of this book, and we promise to take every one of them to heart.

Here’s to your success!

Part I

So You Want to Be a Consultant

In this part . . .

Although the term consultant can mean different things to different people, if you’ve decided to become one, then you need to decide exactly what it means to you. In this part, we take a 50,000-foot overview of the topic, and then dig in a bit deeper by exploring whether or not consulting is right for you. We show you how to assess your own skills and preferences, and how to prepare to make the move to consulting. Finally, we consider exactly what you need to do to take the plunge into starting your own consulting business — as painlessly (and profitably) as possible.