Quick tips for the sudden consultant

Given the churn that’s going on now in technical fields, there are likely millions of formerly employed people who have been laid off and are asking, “Should I become a consultant?” This also applies to people who’ve retired or left a long-term job and aren’t quite ready to hang it up completely. If you’ve got a unique set of useful skills (or a desperate need to generate revenue), dust yourself off and consider a consulting career.

There are plenty of sites that give you emotional and motivational advice about setting yourself up as a consultant. They can help you figure out what you’re good at how to merchandise and price your work. This post is not about that. It’s about a few easy decisions you can make now that will help you get more business and make more money.

9 quick tips for the sudden consultant

Take a moment and consider which of these might help you out.

1. Update your LinkedIn — strategically. The obvious advice is to connect on LinkedIn with as many of your former colleagues as possible — and you should certainly do this. But you might not realize that the LinkedIn’s algorithm will tell almost all of your contacts about your new job as soon as you post it. This is a one-tie opportunity; don’t waste it. Make sure you update your connections first, then invent a consulting organization (“Johnson Associates” or the like) and change your job and title to President of the consulting company. It doesn’t matter that the company doesn’t exist yet. This is your way to remind all your contacts that you’re putting out a shingle. Include a description with the kind of consulting work you imagine doing; you can always change it when you figure out the details.
2. Make an online presence and connected email address. It’s extremely easy to reserve a domain name and build a simple website on it, with a description of what you do and a contact form. And it’s far more professional to set yourself with an email from that domain (mine is josh @ bernoff.com) rather than a generic gmail address (johnsonassociatesmail@gmail.com).
3. Post regularly. You need a way to remind people that you’re out there. They’ll forget — until the moment when they realize, “Hey, I need that person’s help.” The best way to remind them is to post regularly on a LinkedIn, Substack, or a blog. Just write about what’s happening in your space and what you think about it. When you start a LinkedIn Newsletter (which doesn’t have to be about news, that’s just what they call it), it immediately tells all your contacts about it — which is a great way to remind all those contacts that you’re out there. For most consultants, posting every other week is sufficient. After all, what else do you have to do?
4. Set yourself up as an LLC and get a business taxpayer ID. Register yourself with your state as an LLC, open a business bank account, and then apply to the IRS to get an employer ID number (EIN). When you get consulting work, you’ll need to provide that number on IRS form W9. I found that far more comfortable than giving all my clients my social security number. And registering yourself as an sole-proprietor LLC (limited liability company) and keeping that work separate from your personal accounts helps protect your assets by making sure that any liability associated with your work is limited to your business.
5. Don’t forget to pay quarterly estimated taxes. At a job, you just set your withholding and forget it until tax time. When you’re self-employed, withholding is your job. I’ve seen otherwise highly intelligent new consultants realize only at tax filing time that they were supposed to make estimated tax payments — and if you fail to do that, you’ll have not just a surprising year-end tax bill, but penalties from the IRS. Set up quarterly estimated state and federal tax payments that, combined with your already withheld tax from the job you left, will equal or exceed the tax that you paid last year. (Consult a tax advisor for more precise advice.)
6. Set aside time to market yourself. It’s weird being on your own – in theory, you could just peruse social media and watch TikToks all day long. That will leave you feeling useless. Instead, if you want work, you need to make getting that work part of your job. Set at least two or three hours a day for work time, which means reaching out to contacts and posting content.
7. Create space for your work, too. If you can set up a dedicated room for work, you’ll have two benefits. First, you can psych yourself into the attitude that when you’re in that space, you are supposed to be working. And second, if you use an enclosed space exclusively for work, you can claim it as a home office, which is a nice tax deduction.
8. Figure out what you can write off as business expenses. Subscriptions, memberships, software fees, internet access used for work, mobile phone fees used for work, and other expenses that you’ve been paying anyway can now be accounted as expenses for your business. Just make sure they are things that are legitimately and solely work-related.
9. Look into a solo 401(k). Once your business gets up and running, there’s a great investment strategy available to you. A solo 401(k) works like an IRA, allowing you to put money aside, deduct it from your taxes, invest, and pay no taxes on the appreciation. But depending on the level of profit in your business, you can typically put aside far more money than the single-year limits on IRAs, including moving money from your other investments into this retirement account. The exact amounts you can reserve will depend on how much profit your business makes. Again, consult a tax advisor, and then work with an investment company like Fidelity to set up the account properly. If you don’t need money immediately and you already have investments that aren’t in a retirement account, this move can greatly reduce your tax bills.

You may be tempted to get software like QuickBooks to help run your business. If that works for you and you don’t mind paying the fees, go for it. But in the 11 years I’ve been a consultant, I’ve cleared almost $2 million dollars using nothing but an invoice template from MS Word and a spreadsheet to keep track of who I’ve billed and how much. The marketing and tax strategies I just outlined were all I needed.