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How to Start a Consulting Business in OntarioLast Verified: 2010-06-01

TABLE OF CONTENTS

1. Basics to Getting Started2. Industry Overview3. Regulations4. Financing5. Managing Your Operation6. Associations7. Other Resources

1. BASICS TO GETTING STARTED

Starting a business can be a rewarding undertaking, but it comes with its challenges.Before starting a business in Ontario, it is wise to do your research. There are severalissues to consider such as regulations, financing, and taxation, managing your business,advertising and much more.

For further information: see the documents:

Business Start-Up Info-GuideFinancing for Starting a Business Info-GuideTaxation Info-GuideEmployment Regulations Info-Guide

2. INDUSTRY OVERVIEW

What is a Consultant?

A consultant is a professional who sells expertise in a specific area (or areas) to clients,providing them with assessments on their practices, helping them identify problems andsolutions, and advising them on possible courses of action. Consultants act mostcommonly as advisers, but they may also be employed to address any other type ofsituation where their specific experience and knowledge is required. For instance, aconsultant could be asked to implement his or her recommendations, provide trainingsessions on his or her area of expertise, take part in the planning of a corporation'sstrategy, design promotional material, evaluate bookkeeping methods, etc.

In fact, there is no sphere of activity that is exclusive to consultants or any sphere ofactivity from which they are expressly excluded. From branding and marketingprograms and services to designing new packages, they are a cost-effective alternativefor operations that have not yet reached a point where they need to hire a full-time

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employee but do need periodic expert assistance.

Consultants can work:

for large consulting firms;for boutique firms (i.e. small specialized firms);as independent contractors;as contractors working within an organization where some form ofemployer/employee relationship already exists (this depends on the statutes andregulations of the organization, as well as its needs).

Consultants are normally employed on a contractual basis; however, within some firms,consultants may be hired on a permanent basis until their engagement is over.Afterwards, they are made available to hiring firms. Within small consulting firms, it ismore likely consultants will be hired as contractors, and their employment will beterminated when the project ends. The same applies to independent contractors.

Your Consultancy is a Business

If you want to establish yourself as an independent contractor or a contractor workingwithin an organization where some form of employer/employee relationship alreadyexists, it is important to remember that owning your own consulting business isprecisely that, owning a business. This means you will need to go through the samestart-up processes that any other entrepreneur must go through: business registration,acquiring a business number, dealing with business taxes, etc.

Planning Your Business

What is a Business Plan?

A business plan is a recognized management tool used by successful and/or prospectivebusinesses of all sizes to document business objectives and to propose how theseobjectives will be attained within a specific period of time. It is a written document,which describes who you are, what you plan to achieve, where your business will belocated, when you expect to get under way, and how you will overcome the risksinvolved and provide the returns anticipated.

Why Do I Need One?

A business plan will provide information of your proposed venture to lenders, investors,and suppliers to demonstrate how you plan to use their money, and to establish a basisfor credibility of your project. This plan will serve as a guide to the various areas thatyou as a manager will be concerned with. As you work through this plan, adapt it toyour own particular needs.

Business Plans - Templates and Samples

There are many organizations and business websites that provide free templates,writing guides and sample plans. You can also find companies that sell business plansoftware to assist you in preparing your plan.

3. REGULATIONS

Knowing the rules and the regulations that apply to your area of expertise is necessary.The amount of regulations that you need to know depends, as might be expected, onyour field of activity. Also, keep in mind that some projects may require you learnabout rules and regulations you do not already know something about. Keep up to dateon amendments to legislations that affect your business.

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Business Regulations Info-Guide

This document will assist you in navigating federal, provincial and municipal regulationsthat apply to a number of industries and businesses in Ontario.

For further information:see the document Business Regulations Info-Guide

4. FINANCING

Canada Business Ontario has created documents, which provide an overview of some ofthe main financing options for individuals starting and operating a business in Ontario,including programs offered or supported by the government.

Financing for Starting a Business Info-GuideFinancing for Established Businesses Info-Guide

5. MANAGING YOUR OPERATION

Dealing with Business Taxes

All businesses must be aware of the various taxes that may apply to their product orservice. Depending on the type and location of products or services being offered,federal, provincial and/or municipal business taxes may apply.

For further information:see the document: Taxation Info-Guide

Other Resources:Ontario Ministry of Revenue: 1-866-668-8297Small Business Tax Help (MOR)

Canada Revenue Agency: 1-800-959-5525Canada Revenue Agency (CRA)

Insurance

Insurance needs for businesses vary greatly. It is best to choose an insurance agent orbroker familiar with your size of business and, in particular, an agent familiar with yourtype of operation. If you don't have an insurance agent, consider asking other businessowners in your area to recommend one.

The following list is included to remind you not to overlook the complex areas ofbusiness insurance. It is best, however, to discuss your specific requirements with yourinsurance agent.

Basic insurance:

fire insurance (extended coverage on buildings and contents);liability insurance;burglary protection (theft coverage);dishonesty insurance (covers thefts by employees).

Insurance needs naturally vary from one consultancy to the other, depending on yourfield of activity. It is best to choose an insurance agent or broker that is familiar withyour field of expertise. As a consultant, liability coverage will be vital.

Note: Your professional association may have information about insurance packagesspecifically tailored for your needs. It is best, however, to discuss your specificrequirements with your insurance agent.

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Marketing/Advertising

Word-of-mouth advertising and good public relations are often the best ways ofpromoting your business. Depending on your market and its size, also consider flyers,business cards, brochures, newspapers (especially for holiday promotions), radio, TV,the phone book and the Internet. Also bear in mind that a satisfied customer is goodadvertising. Referrals are also a valuable way of making customers aware of yourproducts or services.

A web site is also a good marketing tool. It should have details to describe the location(your address, telephone and fax numbers, and directions on how to get to yourestablishment), hours of operation, services offered, credentials and anything else youthink may be of interest to potential customers. However, once you launch a web site,you should update it on a regular basis.

Participating in community events is another way of advertising your business. You mayalso hold events that will promote your business. No matter how you choose to marketyour business, it is wise to track how your clients became aware of your establishment- this may help determine your future advertising strategies.

For further information: visit the website: Preparing a Marketing Plan see the document: Marketing and Sales

The federal Competition Act governs misleading advertising and deceptive marketingpractices for most businesses in Canada. The Act defines which marketing practices areillegal and the process of complaint investigation.

For further information:visit the website: Competition Bureau

Market Research

Successful businesses have extensive knowledge about their customers and theircompetitors. Acquiring accurate and specific information about your customers andcompetitors is a critical first step in market investigation and development of amarketing plan.

In developing a marketing plan, your primary functions are to understand the needsand desires of your customer, select or develop a product or service that will meetcustomer needs, develop promotional material, and ensure that the product or servicecan be provided effectively at a profit.

For further information:see the document: Market Research and Statistics

Contracts and Proposals

Consulting contracts may vary widely in their format and their length, depending on thenature and the complexity of the project. There are standard articles to include inwritten contracts: the name and the location of the parties involved, the date thecontract is signed, an offer, an acceptance of the offer, consideration (i.e. the benefitaccruing to the parties), signatures of the parties, etc. A written contract helps to avoidmisunderstandings, to outline the terms of payment and to protect you in case ofdisagreements with your client on the nature of the assignment. If you do not possessthe legal expertise to draft legal contracts that include all mandatory provisions, youshould seek advice from a lawyer.

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The Office of Small and Medium Enterprises

The Office of Small and Medium Enterprises provides two types of support for thoseSMEs wishing to do business with the government. The Office assists SMEs as theynavigate the government procurement system and is working within the government toensure the procurement system treats SMEs fairly.

For further information:visit the website: Office of Small and Medium Enterprises

Clients and Proposals

Virtually all sectors of business call upon the expertise of consultants, so don't be toorestrictive. Your clientele may consist of organizations from both the public, the privateand the non-profit sectors. To identify consulting opportunities, look for advertisementson websites, in newspapers, magazines and trade journals.

Public Sector

Governments are important clients for consultants. Most contracts are from solicitedproposals, but you can submit an unsolicited proposal and try to get the contractdirectly, or you can sub-contract with other companies who have been awarded thecontract. When seeking consultancy opportunities with governments, make sure youlook through electronic tendering services. The Ontario Government uses MERX, whilethe Federal Government uses MERX and Business Access Canada.

MERX - The Electronic Tendering Service

MERX is an Internet-based electronic tendering system that advertises governmentcontracting opportunities to potential bidders across Canada.

For further information:visit the website: MERX

Contracts Canada

Find out how you can become a supplier of goods and services to the Government ofCanada.

For further information:visit the website: Contracts Canada

Procurement

Selling to the Ontario Government means supplying a large marketplace. Businesses ofall sizes and types can be successful vendors to the government.

The Supply Chain Management (SCM) is responsible for the development of thegovernment's procurement policy framework, the preparation of requests for proposalsand negotiating and managing government-wide contracts.

Through its website Supply Chain Management (SCM) provides strategic procurementadvice, training and services to government ministries and agencies and supportssupplier development and the ongoing implementation of Ontario's interprovincial tradeagreements. The SCM also lists other public sector organizations' calls for proposalssites and other electronic tendering services on its web site.

For further information:visit the web site: Supply Chain Management (SCM)

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MARCAN

MARCAN is a window to tender notices for procurement opportunities within theCanadian public sector.

For further information:visit the website: MARCAN

bidsCanada.com

bidsCanada.com helps you sell to the Canadian public sector by providing free e-mailnotification and search capabilities of the most recent business opportunities includingTenders, Requests for Proposal, Requests for Quotation and other contracts.

For further information:visit the website: bidsCanada.com

Proposals

Whether you are responding to a call for proposals from the public, the private or thenon-profit sector, there will be selection procedures to follow. These procedures willvary from one organization to the next, so gather all the required information beforesubmitting your proposal. The following are a number of areas you should be aware ofwhen pursuing a contract for service. The appropriate professional services, such aslegal counsel should also be sought out and utilized.

Site:Where the work is to be done?What size of area?What type of work?

Insurance:General liability insurance coverage!Amount?

Contact:Ensure you have a contact to clarify anddiscuss services with.

Contract time:When do you start and when is thecontract over?

Qualifications:What methods are used to determine yourqualifications and/or your employees?

Subcontractors:Note - be sure you are aware ofsupplementary conditions or specificationsrelating to subcontractors.

Examination of contract documents andsite:It is up to you to examine documents andvisit the site.

Omissions:If you think some term or condition ismissing or there is a discrepancy, bring itto the attention of the owner.

Federal, Provincial and Municipal laws:It is important that you understand andcomply with them in the performance ofthe work.

Addenda:Before submitting your tender prior to theclosing, check to see if any changes havebeen made to the tender.

Bond:What size ($) and type of bond isrequired?

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Selecting Professional Services

The use of professional services is essential to the success of a small business.Professionals can provide knowledge and expertise in the areas where you may havelittle. They can round out your management team to ensure your business is operatingefficiently.

Professional services often used by entrepreneurs may include:

lawyer;insurance broker;accountant;banker.

Accounting/Bookkeeping

A good record keeping system should be simple to use, easy to understand, reliable,accurate, consistent and designed to provide information on a timely basis.

Setting-Up a Pay System

Pay administration is a management tool that enables you to control personnel cost,increase employee morale, and reduce workforce turnover.

Setting the Right Price

Setting the right price can influence what consumers will buy, which in turn affects totalrevenue and profit. In the end, the right price for the product/service is the price thatthe consumer is willing to pay for it. Hence, correct pricing decisions are a key tosuccessful management.

Profit Watching

Making a profit is the most important -- some might say the only objective of abusiness. Profit measures success. It can be defined simply: revenues - expenses =profit. So, to increase profits, you must raise revenues, lower expenses, or both. Tomake improvements, you must know what's really going on financially at all times.

Fees

Consultants work for a fee. Pricing of their services will influence consumers andconsequently the total revenue of their consultancy. In the end, the right price for theservices of a consultant is the price that the consumer is willing to pay. For this reason,correct pricing decisions are a key to success.

As a consultant, there are many ways to set your fees: by the hour, by the day or byassignment. When you are quoting, make sure you include in your fee not only the costof your labour, but also your daily overhead for the duration of the project, the indirectand direct expenses you will incur, as well as a profit margin. You want to build in yourfee enough money to cover the operating costs of your business and the time youspent on marketing your services, maintaining your skills and administration.

Do not bill clients exclusively on the basis of the time spent delivering your services.From your clients' perspective, you are an authority on a subject matter that isimportant to their operation; set your fees accordingly. However, when setting your

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fees, make sure you find the right balance between overcharging and undercharging:your business must be profitable, but your fees should not be scaring clients away.Research what your competition is charging to see if you are asking for too much ornot enough.

Many factors influence the worth of your services. When setting your fees, take intoconsideration the following:

rarity - knowing how rare knowledge is drives the value higher. Keep in mindthough, that once your knowledge has been shared or sold to someone else, thevalue begins to dilute.accuracy and dependability - if the information/solutions that you are selling haveconsistently been accurate and measured to be of substantial value, you cancharge more because the risk is less for buyers.market rate - in some cases the buying markets have already defined the goingrate through supply and demand. For example, seasonable high demand maycause you to increase your rates; conversely, during low demand periods youmay reduce rates to keep cash flow coming.initial rates - having already determined what your competition is charging, youmay alter your rates to reflect your newness in the market. You are in essencetrading rate for reputation. You need completed projects to gain credibility andpresence in the marketplace. Being cost competitive may give you an edge ingaining those first few contacts.predetermined price - a defined project may have a fee or stipend alreadyoutlined.cost plus - determine what your costs are, including external expenses andoverhead; multiply that amount by the percentage of profit you wish to make.That percentage may be used on the industry average.*

*This paragraph adapted from How to be a Consultant, Canada-Manitoba BusinessService Centre, Western Regional Office, Manitoba Industry, Trade and Mines.

6. ASSOCIATIONS

Association of Independent Consultants (AIC)

The Association of Independent Consultants (AIC) helps potential clients findspecialists, experts and contractors in many fields. The AIC holds educationalnetworking meetings, workshops, and their website has articles on consulting, adiscussion board and a searchable database of consultants.

For further information:please call 416-410-8163visit the website: Association of Independent Consultants

Association of International Consultants (AIC)

Association of International Consultants (AIC) provides companies and internationalinstitutions with highly qualified experts for assignments of varying length on shortnotice.

For further information:visit the website: Association International Consultants

Canadian Federation of Independent Business (CFIB)

CFIB represents more than 100 000 owners of small and medium-sized businesses,distributed across all industry sectors and all regions of Canada. CFIB's advocacy isbased on the strong feedback it receives from its members, and it has a high profile in

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Date Modified: 2009-11-27Top of Page

Important Notices

government, in business and among the general public.

For further information:visit the website: Canadian Federation of Independent Business

7. OTHER RESOURCES

Industry Canada

Labour Market Information

Statistics Canada

Business Information by Industrial Sector

Related Reading

Business Guides

NEED MORE INFORMATION?

Click: Canada BusinessCall: The Business Info Line, a collaboration between ServiceOntario and IndustryCanada, at 1-888-745-8888Visit: Find a Community Partner Location near you

DISCLAIMERS

Information contained in this document is of a general nature only and is not intendedto constitute advice for any specific situation. Users concerned about the reliability ofthe information should consult directly with the source, or seek legal counsel.

Some of the organizations listed above are not subject to the federal Official LanguagesAct or the French Language Services Act of Ontario. Their services may not be availablein both official languages.