Nearly all of the entrepreneurs we met built a brain trust and strategic partnerships, even if they were operating a solo company. If they were growing a larger business, they also built a team of full-time partners.

Building your brain trust

The larger your brain trust, the more successful you’ll be in your business. So how do you find these people? I’ve put together a simple process from the hundreds of entrepreneurs I’ve interviewed over the years.

Step 1:

Complete a detailed inventory of the critical skills needed in your business. For example, some businesses are very la­bor intensive, while others are sales intensive; some require manufacturing and quality control, and others require eCommerce, information technology, and social media.

Step 2:

Conduct an honest evaluation of your own skills relative to the critical skills needed in your business. In other words, what are your strengths and weaknesses relative to your profile of required skills? Knowing this will help reveal the gaps you need to fill with advisors and team members.

Step 3:

Select one or two primary mentors who know you well and are willing to help. These are often friends, family members, or colleagues who are willing to take your calls and meet with you regularly. It’s best if they understand business, have a large pool of contacts, and are passionate about what you are doing.

Building your core team

My wife, Mary, and I ran our business — a frozen dessert shop — by ourselves until we had three stores and 30 employees. Although we had three great store managers, it was clear we’d eventually need more coverage in the field than we could provide. So we sat down and discussed the characteristics of a great general manager. This person had to “get” teenagers, enjoy working with them, be firm but fair, and be a great teacher and motivator. It sounded like we were looking for a scout master. Mary and I both thought of Gregg Morrow, he was super with young people, a key requirement for the role.

He was also honest, intelligent, hard-working, and savvy with technology. The problem was, Gregg had a good job 3M, and we were sure he wouldn’t be interested in the job. So we used him as our ideal persona in our search for a general manager. A few months later, we still hadn’t found anyone who measured up to Gregg, so I visited him at his office. He listened to my story and thanked me for thinking of him. Then he told me no.

A year later, we had five stores and 60 employees. I needed a general manager now more than ever, so I went back to visit Gregg. He had watched our progress during the past year and was intrigued with our growth. He decided he wasn’t going to change the world at 3M. He wanted to have more influence on young people and the community, and our position was now a good fit for him.

Gregg learned the business quickly and took our company from five to more than 60 stores. He was a phenomenal partner for eight years until we sold the company.

Just like our experience with Gregg, the entrepreneurs we interviewed over the past year chose team members primarily based on character. Since many of them run smaller companies, they can’t afford to have noxious people in their organization. They tend to look for decent people first and skills second. When you only have five or six people in your company, you can’t bury a difficult person deep in a corporate structure. So quality of character has to be a major emphasis when finding team members.

Most important, your team members should be passionate about your purpose, share your values, and fit the culture you’re trying to create. Nothing is more exciting than like-minded people enjoying the entrepreneurial experience together. And a highly motivated team with a common purpose will always go farther and faster than any individual working alone. So the best hiring strategy for an exciting company is purpose first, character second, and finally, skills third.

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Post from Entrepreneur

For some, the constant reminders of limited runway and odds being stacked against them unravel their sense of certainty and cause second guessing. Others overconfidently march forward, without paying respect to the mines hidden in their path.

A great mentor is the solution to help illuminate the path while alerting you to unforeseen dangers.

One of the few certainties in the entrepreneurial journey is that you don’t know what you don’t know. At Boxbee, we had several of the common problems that startups eventually encounter: scaling, hiring, competitive threats, etc., but we have dealt with them because they were anticipated.

The items we were blind to: our initially incorrect positioning in the market, the time it would take to actually establish operational efficiency and how our metrics would fair in the changing venture capital landscape, were anticipated from our mentors after they took an unbiased look at the business from the outside. Without them, we would not have anticipated these dangerous obstacles that could have caused the company to go under.

How to identify a mentor

Being able to accept that you will need some guidance is the first step to growing your company with certainty and an anticipation of risks.

Entrepreneurs too often try to reinvent the wheel and ignore guidance from experts. There’s a tendency to believe that a technology-enabled service or product is original and even revolutionary, when in reality, components of the problem have been solved in some way or another in the past, and there’s a mentor to help you avoid mistakes.

Logistics/supply chain-intensive companies such as FedEx and Apple have solved much of Boxbee’s logistical, supply chain and labor challenges, which is why we sought out mentors such as FedEx’s cofounder, Roger Frock, and Apple’s former vice president of the online store, Mike Janes. Both have helped us anticipate obstacles in our business model and operations.

Research related, successful organizations and find someone you respect and that fits your criteria, someone who has done what you’re going through. Identify multiple mentors, as one mentor will not have encountered all the same problems you are bound to run into.

How to approach a potential mentor

The reason many entrepreneurs miss out on having great mentors is because they are afraid to simply reach out to the person. Most people don’t do this because they’re concerned that these people are too busy and important to consistently donate time, but you’ll find that they’re flattered you’ve asked them for help and would relish at being partially responsible for your success.

Ask your mentor prospects for a meeting, whether in an office environment, over drinks or at a coffee shop. Communicate your goals for the meeting and identify some key areas in which you wish to seek their advice. Flattery will also go a long way — mention why you admire them and why you feel they would suit you as a mentor. Don’t be discouraged if someone says no to your first request. Great mentors are pursued, not found.

Questions to ask a mentor

Once you have a mentor in place, you’ll want to prepare for your first meeting so you don’t waste their time. Prepare a list of questions, topics or subject matters that would be good conversation starters and help cover what you’re hoping to learn.

Here are a few questions to get you started:

• What is the most important thing I should be doing that I’m not doing now?
• What are the critical things we need to get right?
• What are the big risks that we should anticipate?
• Do I have the right team?
• How do you spend most of your time?
• What are your most successful habits?
• Who else should I be surrounding myself with?

Pay attention

The great advice you are going to get from your mentor can come from your questions, but much of what you learn from them will be through absorption of their habits and mannerisms.

Being closely surrounded with mentors has changed how I approach all sorts of situations: what to say to the top executives to guarantee a meeting, how to build a strong network and use it regularly to strategically grow the company, how to start every day by visualizing and rehearsing events, how to constantly push everyone around me to their full potential, how to maintain confidence and cope with tremendous uncertainty and bad news.

These are not things that one learns from management books or exercises. You must surround yourself with people frequently and consistently enough to a point where you naturally absorb these behaviors.

It’s important to remember that mentors will not solve problems for you. A true mentor will cause you to ask the right questions that help you get to where you want to be and they’ll call you out when they know you’re accepting less of yourself, your vision or your team. They’ll help you frame your problem and they’ll help you check the assumptions and belief systems that are holding you back so you spend less time spinning your wheels and wasting precious capital.

So get out there, accept criticism, ask questions, absorb new habits and take business advice from seasoned vets. You’ll be thankful you did.

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Post from Entrepreneur

However, none of us knows everything about growing and managing a business. Sometimes it makes sense to seek the counsel of others, but who is right for you and your business? When selecting a consultant, follow these five simple, but important, guidelines:

1. Unimpeachable character

First and foremost, an effective consultant must be a person of the highest character. He or she must be the consummate professional. The consultant must be willing to put the best interest of the client ahead of their own.

For example, the consultant must be willing to tell clients things that they need to hear, but may not want to — even if doing so means that the consultant loses business. The consultant must care deeply about her or his clients.

2. Solid experience

A good consultant should have experience with the challenges or opportunities you and your company are facing. She or he may not know your specific company or industry, but you and your people know your company and your industry quite well, don’t you? What the consultant brings to the table is experience in addressing the types of issues you face.

3. Creative problem-solving skills

You will want the consultant you engage to be an outstanding problem solver. After all, you are hiring a consultant to help you solve problems (or take advantage of opportunities).

Marvin Bower, the patriarch of McKinsey & Company, essentially founded management consulting and in the process grew the firm from a fledgling enterprise to a global operation.

He outlined his criteria for an outstanding consultant.

“Mental equipment — the successful consultant has outstanding analytical skill and the ability to synthesize his thoughts readily in reaching conclusions,” Bower wrote. “He is a quick and effective learner — imaginative and creative.”

When choosing a consultant, make sure to hire superior problem solvers.

4. Outstanding communication skills

A good consultant should be articulate. He or she should possess unusually strong communication skills, both orally and in writing. Of course, communication is a two-way street. Perhaps more important than her or his ability to speak articulately and write eloquently is the ability to listen.

No matter how smart a consultant is, she or he won’t be able to help you improve your business until they fully understand the challenges you face. This will never happen until the consultant listens to you.

5. Excellent interpersonal skills

Simply put, for any consultant to be successful in helping your company, a trust-based relationship is going to have to develop. You will need to be comfortable revealing the intimate details of your business. The relationship between consultant and client is not unlike the relationship between a doctor and patient.

Without complete candor, the consultant will be hindered in his or her effort to help your business. Chose a consultant with whom you can develop this kind of professional relationship.

The right consultant can create tremendous value. The wrong consultant can destroy value. Following these five guidelines will help ensure that you engage the right firm or individual.

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Post from Entrepreneur

Time has flown since I packed up my little corporate office and called it quits, but at the same time, I feel like I’ve packed in about 10 years’ worth of learning. Here are my biggest lessons from my first year flying solo.

There are no vacations

Don’t get me wrong — I travel pretty frequently. I’ve think I’ve taken more trips in the year since I quit my nine-to-five than the five years before that.

That said, I’m never truly disconnected. I’m always watching my email — nights, weekends, holidays, you name it — because there’s no one else to man the ship. I can alert clients that I’ll be traveling, or that I’ll have limited availability, but if something comes up, it’s all on me to make sure things are taken care of.

It’s okay to turn down clients

I learned this the hard way, as I’m sure anyone who works with clients does. In the beginning, you never want to turn down work. It feels so wrong when your next meal depends on it.

But there are some projects that you can tell aren’t for you right from the start — whether it’s the work or the client themselves. Sometimes, a client with an awesome personality can make a boring project worthwhile and vice versa, but if both the client and the project seem lackluster, it’s okay to pass.

Say no to meetings

For whatever reason, the rest of the working world seems to love them, even for things that could easily be addressed via email (or even text!).

If you don’t keep a handle on meetings, they’ll quickly eat up your entire workday. I’m learning to block off hours of uninterrupted work time where I don’t take any calls or meetings — no exceptions.

It’s not personal. It’s business.

Being in business for yourself calls for some tough decisions, and not all of them will be pleasant for the person on the receiving end.

Maybe it’s a woman thing. Maybe it’s just a nice person thing. I still struggle with making decisions I know someone else isn’t going to like. You have to make them, though, and you have to remember that it’s not personal. It’s business — and it’s up to you to stay in business.

Plan for time spent on minor tasks

If I had a nickel for every time I “looked over something real quick…”

In reality, you should have more than a nickel — you should have the proper hourly pay for all the client work you do, even the small stuff. I’ve learned that those quick tasks like proofreading emails and hopping on conference calls really add up. Find a system that works for you to keep track of them, and charge accordingly.

Pay attention to red flags

One year in, and I’ve already got some client horror stories. In retrospect, the red flags were there — and I should have cut bait when I saw them.

It’s the client who calls you at 6 a.m. and 10 p.m. at night for things that could easily wait until business hours.

It’s the client who hires you for your specialized skills — search engine optimization, content marketing, whatever — then argues with you over how to do it best.

It’s the client who belittles you, threatens you or curses at you.

Pay attention to red flags and the gut feeling in your stomach. Walk away sooner rather than later.

It’s incredible what you do yourself

Being on my own has forced me to learn so many skills I never thought I’d have (or need), like how to build a website or how to calculate estimated taxes or how to funnel a Red Bull. Wait, what?

Most of this learning was done out of sheer necessity, because I didn’t have the money to pay someone else to do it. I’m now convinced there’s no task I can’t handle, which is both a blessing and a curse.

Outsourcing is key

At the end of this first year, my biggest takeaway is that if I want to grow into a full-fledged business, I’ve got to outsource — whether that means taking on an intern, using some freelancers of my own or hiring a part-time employee. It’s one of the main pain points I plan to tackle during year number two.

Are you a new freelancer or about to take the leap? What have you learned in the process?

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Post from Entrepreneur

These are not all bad behaviors to have, especially for high-performing individuals. This is a space in which we thrive. However, it is only a matter of time before the impact and pressure of these activities show up in our behavior. This is why coaching for high-performing individuals who work in innovative and fast-paced businesses is a great fit.

First of all, let’s define coaching, as it means many things to many people. Many times a certain technique that is referred to as “coaching,” isn’t really coaching at all; it’s actually counseling or feedback.

Now more than ever, there is a great opportunity to bring coaching into organizations. According to Gallup’s study on the global workplace, only 13 percent of employees worldwide are engaged at work or are psychologically committed to their jobs and likely to be making positive contributions to their organizations. Therefore, many team members are “not engaged.” If this is the case, then why not integrate coaching into your talent management strategy?

Not only will it increase employee engagement but will help achieve other talent development goals such as developing certain competencies like problem-solving, strategic thinking or filling your talent pipeline with ready-now talent for upward or lateral. To integrate coaching into your talent management strategy, the following five steps should be taken:

1. Educate your leaders

Start at the top and educate your executives on the differences and benefits of coaching versus counseling. Interview them on their perspectives on coaching and assess their willingness to participate and support a coaching initiative. Explain the benefits of coaching and ask them where they see applications for coaching inside their organizations.

2. Identify coaches, participants and executive sponsors

Look for individuals and managers that can become trained to be internal coaches inside your company. These individuals may be inside your talent management and organizational development areas or could exist inside the business itself. Consider having talent management or human resources executives trained and credentialed by the International Coach Federation as professional coaches. Alternatively, you may choose to utilize external coaches.

If so, you can submit a request via the International Coach Federation Coach Referral Service website or ask colleagues for recommendations.

Simultaneously, you will want to identify candidates to participate in the coaching program. Participants should be excited to be part of the program and willing to make a commitment. Just as important as identifying the coaches and participants is to make certain that you have executive sponsorship. Determine which executives would like to sponsor the program and be a participant. Request that they support you in your coach and participant identification, marketing efforts, during participant enrollment and throughout the program’s life cycle.

3. Manage expectations

Be sure to clearly set expectations with your internal coaches, individuals being coached, the executive sponsors and, of course, your managers and colleagues. It is best to run the initial program as a pilot and build upon its success. Make certain everyone is clear on the goals of the program, time commitment and their roles and responsibilities.

4. Train

Enroll your internal coach candidates in a coach-training program that is designed to train individuals that work inside companies as a coach. If you choose to enroll internal employees to become coaches, ensure they’re being coached by a coach with experience coaching internal coaches. In addition, be sure to train the individuals who are to be coached on the role and responsibilities of the participant, while establishing a clear and consistent process for enrolling clients, coaching time and exiting clients.

5. Measure success

Prior to starting the program, determine how you will measure its success. It may be done simply by using a net–promoter score or setting up a simple impact study. (It doesn’t have to be a rigorous measurement such as ROI.) If your program is embraced and utilized (coaching clients show up and participate in the coaching), then that’s a great sign. Interviewing them or surveying them on the benefits they received is also an excellent idea. In addition, be sure to ask the managers of the program’s participants about the changes they may have noticed in their employee’s behaviors after being coached.

In a time where we’re surrounded by change and have so many demands on our personal and professional lives, the need for coaching is at an all-time high. Coaching is a model for engagement, empowerment and accountability. It teaches those being coached to be responsible and to “own” their results. By engaging in coaching, you’re making a decision to replace mediocrity with high-performance.

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Post from Entrepreneur

Motivation comes from two places — intrinsic, which comes from within, and extrinsic, which comes from external forces. As a leader, it’s easy to rely on incentives, penalties and other extrinsic motivation – “If you do X, you will get Y” — but these kinds of incentives only go so far. The best coaches on the ball field and the best leaders in the office understand that to build a truly winning culture, you need to create intrinsic motivation. Inspiring those you lead to do great work for the love of the work itself and not because they’ll receive a trophy at the end of the game or a mention in the next company newsletter.

But how do you instill that passion? Here are six lessons I’ve learned from coaches to foster intrinsic motivation in your office.

Link individual to team Growth Control Group

Motivation soars when athletes know their actions can make the difference between a team win or a loss. On the field, this can be clear cut – hustling for a loose ball can mean the difference between a turnover or a goal. At work, the link between an employee’s day-to-day work and the success of the business can be less obvious but employees must understand the importance of their contribution to the success of their department and company as a whole.

Shoot for ‘small wins’

One secret of successful athletes is their ability to break down goals into discrete parts. Instead of focusing on their dream of breaking a record, they focus instead on the small steps that will help them get there — increasing their mileage, lifting more in the weight room, even something as small as drinking more water.

Small wins allow your team to focus on making steady progress and motivate them to keep working towards the larger goal.

There’s important reasoning behind this: psychologist Karl Weick says goals can be counterproductive to motivation. People are often discouraged when confronted with a large, daunting challenge. Weick’s advice? Reframe goals into smaller challenges with visible results that he calls “small wins.” Small wins allow your team to focus on making steady progress and motivate them to keep working towards the larger goal.

Practice makes perfect

As athletes notice their skills improving, their intrinsic motivation grows and they work harder. Give your teams the chance to practice and hone their skills, whether it’s through internal training or external resources. There are so many great professional development platforms (from General Assembly to Coursera) and skill-building events available today, and making these available to your team will only bolster their performance and attitude about their work.

Build relationships

Athletes who care about their coaches and teammates become invested in their team’s success as well as their own. Great managers create bonds that spread among team members. This doesn’t mean just friending your direct reports on Facebook or taking them out for drinks. It means making a concerted effort to understand them, their strengths, weaknesses, passions and fears.

Praise the effort – not the outcome

Too much generalized praise such as “You’re awesome” and “You’re a rock star!” can actually decrease motivation.

Recognize your employees’ contributions, big and small, with positive reinforcement. But keep in mind it’s better to reward the effort than the person. Too much generalized praise such as “You’re awesome” and “You’re a rock star!” can actually decrease motivation. Researchers from the University of Chicago found that children who are praised for their performance – for example “You worked really hard” – instead of abstract personal praise such as “You are smart” are more likely to embrace challenging tasks in the future. Your direct reports aren’t toddlers but the idea is the same: reinforcing the hard work helps an employee understand what worked.

Have fun

The most motivated teams are also the happiest. But what comes first: the motivation or the enjoyment? Economic expert Andrew J. Oswald studied the impact of happiness on productivity and found that a positive mindset can improve performance. In one study, subjects were shown a video – either of comedy routines or a “placebo” video that wasn’t as funny. Those shown the comedy video were 12 percent more productive than those who saw the less funny video.

Intrinsic motivation is essential for high-performing teams. Those leaders who understand the difference between internal and external motivators and know how to harness them will have the edge on their competition, on the field or in the marketplace.

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Post from Entrepreneur

Coaches have great BS detectors that can help us learn where and how we’re lying to ourselves. They’re trained to help people grow. While most successful people work hard, had some luck and are “self-made,” all of us hit plateaus and have blind spots. Many of us have entire areas of potential that we’ve never explored or pursued. A good coach can recognize and help you address that.

Take my client, Arun Apte, CEO and founder of two bio-tech companies in India, PREMIER Biosoft and CloudLIMS.com. His businesses are growing and they are profitable. His customers share their needs with him and it allows him to address those needs and create new products, which results in even more success. Why would a guy like Arun want to hire a coach?

Get an outside perspective

“I hired a coach because I want and need accountability. I want to push myself — and that’s hard to do without someone holding me accountable,” Arun says. “I want an outside perspective. I want to learn from people who’ve helped run dozens of companies, not just two, like me. My coach has worked with hundreds of entrepreneurs over the past 15 years. He’s seen companies come and go — he knows where to look for problems and he has a knack for knowing when I’m slacking off or what I’m avoiding. It’s like hiring a secret weapon.”

Or Jeannette Bitz, chief strategist and managing principal at Engage, who says: “As a business owner, I’m focused and motivated, but I don’t always make time for strategic thinking because I’m busy serving clients.

My coach helps me take a step back and think more strategically about the business and determine how the employees and clients can best address my vision.

In one hour a week, I make significant progress on business issues and the strategies that I believe have a strong impact on the agency. It’s invaluable.”

Arun continues, “I’m often surprised by my coach’s advice and counsel. Once, when I really wanted to put in more hours, he cautioned me to think about my age and how my businesses were running and what stage of development they were in. He told me to take it easy because it’s the only time in my life that I would have the opportunity to travel and enjoy myself. He was right. I took a month off and had the time of my life. When I came back, my companies were still doing great. I’m so glad I listened to him.”

A good coach will ask you questions

Often success is elusive or simply unfamiliar — most people who experience success aren’t ready to slow down or relax because they’ve spent years building a company or a career and they habitually push themselves. A good coach can ask you questions that you wouldn’t think to ask yourself and no one else would dare ask, such as:

• What do you really want?
• What’s most important to you?
• Why are you working so hard?
• When are you going to celebrate your success and how?
• What kind of legacy do you plan to leave?
• What kind of impact do you want to make on the world?

Beyond those questions, after any successful period, it’s important to take stock, re-evaluate and decide what’s important to focus on next. With every level of success there is another level of success just beyond the horizon that requires thought, decisions and actions that a coach can help you accelerate or think through.

Athletes have relied on coaches for years to improve their games. If multi-million-dollar athletes rely on coaches to improve, why shouldn’t entrepreneurs?

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Post from Entrepreneur

Today’s Fortune 500 list is a mere shadow of what it was in 1995. In fact, fewer than 50 percent of those who were on the list in 1995 still remain today. That’s a big change in just 20 years and the evolution is continuing to happen even faster.

This change has been largely due to those aforementioned smaller companies and startups and their success holds exciting promise for entrepreneurs of the future. But what made those small startups leap to the top, while so many others grew slowly or not at all?

The key to startup success

The answer is innovation and speed. Where big corporations generally have layers and layers of corporate bureaucracy to wade through, not to mention the livelihoods of thousands of employees in their hands, and many stock and stake holders to answer to, smaller companies have always had the advantage of being able to pivot fast by making quick decisions. They’re freer to be spontaneous, and to change their business model according to the latest trends.

Technology like cloud computing, big data, and the move to mobile are helping to launch startups faster than ever before.

Being open minded, and embracing these innovative new business platforms and models, smaller companies adopt change quicker than large corporations. Small companies keep innovation at the very heart of their goings-on, using it to propel their business into the limelight, yet at the same time remaining sensitive to the needs and wants of their consumers.

How to cultivate innovation

By making creativity a building block of your business, you can encourage your employees to generate new ideas and embrace the newest technologies, enabling you to harvest better business plans and capitalize on the latest innovation in ways the big enterprises can’t. Every company wants a leg-up on the giants of the industry, but most don’t realize they already have a head start.

Creating an atmosphere of internal communication, constant connection, and positive energy, small businesses can not only begin to transform their workplace into a company of the future, but they can beat their larger competitors. Startups everywhere are opting for flexibility over the old way of doing business — encouraging employees to work from home, come up with new ideas and be an integral part of business processes instead of just a workhorse. These changes will ultimately lead to a company better able to serve evolving needs.

Why small businesses will overtake the big

The 21st century is the age of the underdog. People everywhere love nothing more than a good rags-to-riches story, and they are supporting local and small businesses more often than larger corporations. My prediction is that small businesses will continue to challenge and at times beat the large enterprises (perhaps sooner rather than later), simply because they will appeal to the consumers desire to support the up and comers, the dreamers and the entrepreneurs that are often much easier for people to relate to.

Small organizations can embrace innovation and profit from their lack of size and increased flexibility, promoting rapid growth.

A smaller staff allows for increased employee connectivity, minimizing the corporate gaps large businesses suffer from. Small companies can faster adapt to new situations and new technologies, benefits that will help them become just as successful as big enterprises — all the while retaining their edge. Not only are small companies capable of widespread success: The odds of a startup succeeding are better now than ever.

If you had any doubts about the foothold your small business has in the larger scheme of things, take a breath. Small businesses are steadily on the rise, and are projected to only get more popular in the coming years. Millennials are attracted to small, local businesses that support the community, and are pouring their physical and monetary support into startups instead of into big corporations. By encouraging innovation and embracing change, your small business can be on its way to outpacing industry big shots.

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Post from Entrepreneur

When it comes to fees, the first rule in the consulting business is to be flexible. Sometimes, you’ll find a client really wants to hire you but can’t pay your entire fee. Depending on the situation, you may want to reduce your fee, either so you can get some much-needed experience or because you believe you can set yourself up for more work in the future by working cheaper now. But don’t sell yourself short; make sure you’re paid what you’re worth, since that fee sets the tone for future fee negotiations.

At the same time, don’t try to wring out the highest possible fee from your clients. You want to be fairly compensated, but if your fee is too high, you run the risk of losing the business completely.

The figure you arrive at should include compensation for your time, and compensation for your business overhead, such as travel, office expenses and so on. But when quoting a figure, leave room for some negotiation, because sometimes clients will ask you to reduce your rates by a set amount or a few percentage points to meet their budget. Just be sure you have a bottom line figure in mind when you sit down to negotiate so you know how much wiggle room you have.

When setting your rates, you have several options, including hourly rates, per-project fees and working on a retainer basis. Let’s examine each one.

Hourly fees

Consultants often calculate a project cost based on the number of hours they expect to spend on it. To figure out an appropriate hourly rate, you can either use a source like the Careers in Business website to see what consultants earn in your area, or decide how much you’d like to earn in a year and do the math to turn that figure into an hourly rate. Experienced consultants often double or triple the resulting figure to cover overhead, benefits and other expenses; It’s reasonable for a new consultant to assume billable time will be around 50 percent, so double your rate so you’ll meet your expenses.. And if you think about it, a consulting rate of $40 to $60 isn’t out of line when you consider the expertise you’re offering.

Project rates

When working on a project rate basis, a consultant normally gets a fixed amount of money for a predetermined period of time (a situation known as “work for hire”). It can be a little tricky to determine a project rate when you first start consulting because you don’t have historical information on which to base your hourly estimate. But once you figure out how many hours you think the job will take, simply multiply that figure by your hourly rate, then add 10 percent or so to cover unexpected contingencies.

Retainer basis

Working on a retainer basis gives you a set monthly fee for which you agree to be available for work for an agreed-on number of hours for your client. This kind of fee arrangement is common for computer consultants and other providers of ongoing services. While in the ideal world you’d have a dozen or so clients who hire you and pay you a hefty sum each month, don’t get your hopes up. Most companies that hire a consultant on a retainer basis have a clause in their contract that prohibits them from working for the competition.

Working and getting paid by this method certainly has its advantages. You’re guaranteed income each month, which helps with cash flow when you’re starting out in your consulting business. Some consultants actually offer a percentage reduction in their fees if a client agrees to pay a monthly retainer fee.

Bonus options

It’s common for consultants to have some type of bonus option in their client contract or letter of agreement. A bonus may be a percentage of an amount that the consultant saves a client (if the consultant’s been hired to reorganize a department or division, for example) or the amount of money acquired for a client (as in the case of fundraising, collections or grant writing). Although it’s not always possible to work out this kind of bonus deal, it never hurts to negotiate. If you do, keep in mind that the average bonus is 15 to 20 percent of the funds saved for the client or obtained for the organization.

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Post from Entrepreneur

Are they essentially unemployed or trotting the globe advising Fortune 100 CEOs on their next strategic move?

Because the term is so ambiguous and often misunderstood, starting a consulting business can be quite tricky. I find that new consultants have difficulty articulating their business proposition and that’s certainly a recipe for disaster. At the end of the day, our job as entrepreneurs is not just helping customers understand what we’re providing but more importantly helping them see why they should buy it. If they don’t easily understand your services and feel a strong urge to purchase them, you’ll have a steep uphill sales climb at best.

So, should you abandon that consulting business idea? Not so quick. Consulting, if done correctly, can be a lucrative business for entrepreneurs – it just needs to be done correctly.

Here are three major pitfalls to avoid as you plan your consulting endeavor.

Not developing your subtitle

I’ve noticed that virtually every non-fiction book title has the same format these days: short, catchy title followed by a longer, more descriptive subtitle. (For example, Tony Robbins’ “Notes From a Friend: A Quick and Simple Guide to Taking Control of Your Life”.)

Consulting businesses can often benefit from the same strategy. Telling someone that you’re a marketing consultant may sound good, but it really provides very little information and only leaves them confused.

What’s more effective is starting with your catchy title and then following up with a sentence or two that provides a vivid description of tangible services that can serve a real need for someone.

For example, “marketing consultant focused on helping small businesses promote their products and services, so they can focus on running their business.” Yes, the second version is longer and you shouldn’t blurt it out anytime anyone asks your name, but you should be prepared to share it when you’re asked to describe it.

The simple truth is the title “consultant” is virtually meaningless and should rarely be used without any additional explanation. Develop your subtitle and use it.

Providing only services without a product

The upside of service businesses is that they require little capital expenditure and barriers to entry are low. After all, if you’re essentially selling your advice, it’s fairly easy to develop a website, hang your shingle, and find yourself in business. The downside for service businesses though is that they’re often quite labor intensive. Consulting businesses relying exclusively on services can find themselves frustrated because they are:

• Exhausted by having to physically work (or bring in other labor to work) to generate revenue
• Revenue limited by their own bandwidth and the amount of services they can provide
• Having difficulty defining and distinguishing their offerings
• Having trouble selling their services, because they’re not easily understood

A great option for many consulting businesses is to develop tangible products that can not only complement and expand service offerings, but also help them better serve their clients and generate passive revenue. Typical product offerings could include webinars, e-books or other publications, training seminars or other instructional materials and templates or guides.

Instead of focusing exclusively on consulting, think early on about what complementary products you might be able to offer.

Allowing scope creep

As a hungry, new entrepreneur, you may fall victim to scope creep. If you can smell the opportunity to win some new business, it’s tempting to push your scope of services to pursue the business. But don’t do that.

A key element of scoping your services is deciding what is OUT of scope for you. This out of scope list truly sets the boundaries of your consulting services and helps you better define your business. Write an in scope/out of scope list that clearly identifies what you do and what you don’t do and stick to it

Developing a consulting business can sound simple, but it’s really anything but. Performing the consulting work may actually be the easy part. Appropriately defining and scoping your business may prove to be trickier than you think. Don’t make the mistake of underestimating the importance of establishing a strong foundation.

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Post from Entrepreneur