#199 - Moving from Corporate to Consultancy? These are the most common questions I am asked.
Ready to leave behind the corporate grind and become your own boss?
You’re not alone!
Over the last year, I've seen a big increase in clients seeking my guidance as they set up their own businesses. They come from various industries, each with unique skills and backgrounds, but they’re all asking the same question: "How do I successfully make this leap?"
I absolutely love answering this question and helping budding business owners feel confident and secure as they set out on their journey. Which is why today I’m breaking down what you need to consider from a legal perspective when moving from corporate to consultancy.
1. Your Business Structure:
Choosing the right business structure isn’t just a box to tick; it’s a foundational decision. I see a lot of people jump in as a sole trader to 'test the waters’, thinking they can reassess later. But I can't stress enough how important it is to get this right from the start! Each option carries its own set of risks, so it's crucial to understand which path suits your industry and personal goals best. I know it can feel overwhelming, so get help from a knowledgeable business lawyer or accountant to work out what will work best for you!
2. The Necessity of Insurance:
The question isn’t whether you need insurance or not (you do), but what kind of insurance you need. Insurance protects your enterprise from unforeseen liabilities, and some larger clients wont work with you if you don’t have it. Connect with a reliable insurance broker to work out what policies suit your needs. They can walk you through the nuances of different policies and help you choose the best fit without relying on anonymous online templates.
3. Guarding Your Intellectual Property:
When you're taking the plunge to start your consultancy, it's vital to consider your intellectual property (IP). What ideas and materials are you bringing into your new business, and are they truly yours to use? Beyond identifying what you can legally use, we must also look at how best to protect your IP. By setting clear parameters for sharing and using your IP, you can prevent conflicts and ensure your ideas remain yours
4. Regulatory Compliance:
Don’t underestimate the importance of regulatory compliance, particularly if your industry demands specific licences or certifications. In the corporate world, these were often managed for you, but now it’s your responsibility. Be sure to fully understand your obligations to avoid any unwelcome surprises.
5. Client Service Agreements:
Many new business owners feel uneasy about presenting their own agreement, wondering if they should simply use the client’s, but this is a recipe for trouble. Work closely with your business lawyer to craft an agreement that reflects your business ethos and protects your interests. It should detail service scope, payment terms, confidentiality, IP usage, and termination conditions.
6. Pitfalls to watch out for:
Never rush into accepting revisions to your agreement just to secure a client. Take the time to seek legal advice and understand the implications fully.
Beware the handshake agreement! It doesn’t matter if they’re a stranger or a long-time friend, every client should go through the same onboarding process to ensure nothing falls through the cracks.
Steer clear of using template agreements that might not suit your business. They might seem cost-effective at first, but tailored documentation is the way to ensure comprehensive protection.
So remember, transitioning from corporate to consultancy is a significant move, and it's perfectly normal to seek guidance on this path. If you’ve still got questions or want more tailored advice, reach out. I'm here to help you make this journey as smooth and successful as possible!
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[00:00:00] Tracey: Welcome back everyone to another episode of the Rise Up in Business podcast. Thank you as always for joining me. Over the last 12 months, I have seen a real increase in clients reaching out to me, wanting to set up new businesses, coming from the corporate background, some of the larger consulting firms wanting to go out on their own and do their own consulting.
[00:00:42] Tracey: There's a range of different industries, a range of different skill sets, but the genesis is the same in terms of. I'm leaving corporate, I'm going out on my own. I am so delighted to chat with these business owners about all the things that they need to think about from a legal perspective, because it can be overwhelming.
[00:01:01] Tracey: And part of what I do is demystify the legal obligations around this and flip the script so that rather than feeling overwhelmed and inundated with all of the different moving parts legally. We flip it, we crystallise it, we clarify what needs to be attended to, and we use it to empower the business owner.
[00:01:24] Tracey: And I love that so much. So if you're thinking about leaving corporate or if you recently have this episode is for you. In this episode, I'm going to dive in and share with you exactly what it is that I share with these lovely clients who reach out to say,
[00:01:40] Tracey: Hey, Tracy! What do I need to be thinking about now that I'm going out on my own? Let's dive in. The very first thing I talk about with these clients is business structure. Business structure is something that in my experience is often overlooked because people think I'm just going to give this a crack and see if it works, see if this is any good.
[00:01:57] Tracey: I'll worry about the business structure later. Please don't do that. Most commonly, new business owners are choosing from two structures, sole trader or a company. I get that it can be confusing, but if you've got the right team around you, that is the right business lawyer and the right accountant, this doesn't need to be a complex or overwhelming conversation.
[00:02:19] Tracey: It's really important that you understand the options you have when you're starting your new consulting business, because some have more risk than others. And if you are in a high-risk industry, if your business is high risk, it's so vital that you set yourself up with full protection from the beginning.
[00:02:35] Tracey: And more often than not, that's going to mean a really in-depth conversation around the company structure. With your business lawyer and your accountant, a sole trader might be absolutely fine for some business owners. No problem at all. My point is don't ignore this consideration, have the conversation and make a really intentional decision based on what's right for you and your business.
[00:02:56] Tracey: So business structure is the first thing. The second thing I'm only quickly going to touch on this is insurance. My goodness. I'm asked, Tracy, do I need insurance? the answer is yes, it's hell yes you do. It's not, do I need insurance? It's what insurance do I need? So insurance is a really important factor in your risk mitigation strategy.
[00:03:20] Tracey: Don't overlook this. Don't think she'll be right. I'll deal with it later. Often some of the larger clients that you'll be engaged by anyway will have it as a requirement. Of engagement that you provide them with your certificate of currency of at least public liability and professional identity. But insurance is something that ought to be considered right up there next to your business structure.
[00:03:42] Tracey: If you don't have a broker, reach out. I'm so happy to share details of the broker that I use and that looks after so many of my clients. She is so good. At supporting business owners and meeting them where they're at to explain the different insurances, the needs, the cover, the exclusions, all the things.
[00:03:59] Tracey: What I always say to clients is my best advice is not to buy insurance online. You don't know what's excluded. You don't know if you're covered for all of the things you need to be, have the conversation with a broker. That is my hand on heart, best advice or guidance I can share with you when it comes to insurance.
[00:04:18] Tracey: There's two other key matters that I raise with new business owners right at this point, before we get into talking about the client service agreement or the consulting agreement. And that's because these are so important. One is intellectual property. Start thinking about what intellectual property you will be bringing to the table in your new role with your new business.
[00:04:37] Tracey: And this is really important, particularly for those business owners who are bringing knowledge and material from their previous space. So we have to think of it in two ways. One, what you're bringing, is it your IP? Are you allowed to bring it over? Are you allowed to use it? We need to consider that.
[00:04:55] Tracey: And secondly, we need to start thinking about protecting it. Protecting your IP. How are we going to share it? How are we going to deliver it? What type of parameters are we going to put around the use of our IP when we're in our new space with new clients in the new business? So IP is something I flag right up front to say let's give some thought to this because we need to consider it carefully.
[00:05:17] Tracey: To get it right and to make sure it's reflected right in your consulting agreement. And then the fourth thing that we talk about right at the front is regulatory compliance. So depending on your industry, get really familiar with your licensing obligations, your industry memberships, whatever the standards are, continuing professional development. Every industry is different. And sometimes what I've noticed is that the business owners who are stepping out of the corporate, aren’t quite as comfortable in terms of the knowledge and understanding of their own individual requirements for their licensing or their certificates or their memberships as what they should be because the corporate, the business where they were took care of it all.
[00:05:58] Tracey: So there are four things that I flag up front as worth Time and careful consideration, business structure, insurance, intellectual property, and regulatory compliance. So they're the four. once we've talked about that, the very logical next step, which is my love is talking about your contracts.
[00:06:16] Tracey: your client service agreement or your consulting agreement, whatever you want to call it. This part seems to make people a little uncomfortable because they think, “Oh gosh, I feel like it's a bit forward of me. If I have an agreement ready to go, shouldn't I just ask my new clients for a copy of theirs?”
[00:06:32] Tracey: And if you're a long-time listener, you will have heard me say on previous podcasts, hell no to that. You are a professional back yourself, make sure you have your consulting agreement. Or whatever version of the title you want to call it, you can call it anything else, your client agreement, your consulting agreement.
[00:06:50] Tracey: You want to make sure you have that drafted and tailored to your business. So it suits how you want to operate. So that when you're going out to market, whether you're submitting a tender or whether you're putting proposals or quotes out there, but when you're going out to market, you have your consulting agreement or your services agreement ready to go completely professional.
[00:07:10] Tracey: So the experience for the client is seamless. Here's my proposal. Fantastic. Here's my service agreement. It's a continuity of professionalism. It's all branded. It looks like you. It sounds like you. It covers everything that's needed to be covered to make it really easy for the client to engage you. So I'm going to talk about what goes into that in a moment, but one I just want to pause and answer this question.
[00:07:34] Tracey: Sometimes clients have said to me, I have my agreement, and I love it and it's great, but I'm working for a big client. They've now given me theirs. Two things, Tracy. One, is that okay? Can I sign theirs? And two, do I issue them mine as well? Really great questions. And so I just want to share this because I know that this will come up so often for listeners.
[00:07:55] Tracey: First of all, if you are considering being engaged by doing work for a larger client and they have theirs, sometimes that's just the way it is. You can ask, I've got my own. Can I issue you that? Sometimes I'll say, yep, great. Sometimes I'll say no, our policy or practices that we only use ours. That's not uncommon.
[00:08:13] Tracey: That's fine. From there, though, you need to review it or engage your business lawyer. This is something I do often for my consulting clients. Engage your lawyer to review it for you to make sure the terms are, in essence, consistent with how you like to operate, but also to make sure there's no red flags and to make sure you're aware of the essential elements of the agreement.
[00:08:34] Tracey: What are you being contracted to do? How are you being paid? What's the delay provisions? What's the termination provisions? What liability clauses are there and what warranties are you giving? So it's okay if you're going to use a client agreement, but you need to make sure you're carefully reviewing it and you're comfortable or you're having your business lawyer review it for you and seek to negotiate any terms if there's a few things that need ironing out.
[00:08:55] Tracey: So that's the answer to the first question. The answer to the second question, do I issue them mine as well? No, you don't. When you're being engaged or doing work for a client, you only need one contract. One. So it's either yours or theirs, not both. So hopefully that helps, because I get asked that a lot.
[00:09:13] Tracey: So let's dive into one of my favourite topics, which is your client engagement framework. So how do you engage with your clients? What does your service agreement, or your consulting agreement need to focus on? The very first thing I ask my clients to get clear about here is how are you going to go out to market?
[00:09:36] Tracey: Are you going to prepare proposals or are you going through a tender process? Most of the time, my clients are in the first camp, which is I prepare proposals. I go out, I pitch, then I put a proposal or a quote together. I spend a lot of time on the proposal. It's fabulous. It's branded, it contains all the details, and I'm so proud of it.
[00:09:59] Tracey: I love hearing that. I love it. The key then, when we're developing your client service agreement, is to make sure that it is consistent with the way you've developed the proposal. So the language needs to be consistent. The details need to be consistent. Your client service agreement, or your consulting agreement, will need to cross reference beautifully with that proposal.
[00:10:21] Tracey: So language around, these are the services. Completion dates, commencement dates, delays, extension of time, variation provisions, warranties, all the language needs to be consistent. So if you're working with a business lawyer, any business lawyer, what they should be doing is making sure that they're working from your proposal as well, or that they've got your proposal and they're cross referencing it when they're designing for you.
[00:10:45] Tracey: Your service agreement. So one of the first things I say to my clients once we've talked about this is start putting something together if you haven't already, but most of the time they have because it's a really exciting part. show me what you've got. Let me give you some comments or feedback if I need to.
[00:10:59] Tracey: Let me design your service agreement to make sure that there's continuity here and that these two documents can be read together. So that's the first thing I say about that. On the flip side, some clients will say, actually, I don't want to do a proposal and a separate terms and conditions or a separate service agreement.
[00:11:16] Tracey: That's fine. That's fine. I want it all in one. So I want to have the agreement with the client's name on it, with the proper execution blocks. I want to have a schedule in there with all the details of what I'm going to do. And my process Tracy is going to be, I'm going to go out to market. I'm going to have meetings and I'm going to.
[00:11:33] Tracey: Wine and dine. And I'm going to share the love with what I do. That's how I'm going to engage my clients. That's how I'm going to get them to want to work with me. Great. It works for some people. Absolutely. If that's the case then, and you're telling me that you want to secure the deal. Or secure the intention to do the deal.
[00:11:52] Tracey: We'll talk about handshake deals in a second. Then what you're saying to me is you want to do that. And then you want to go to the client with one document, which is entirely comprehensive. It's got everything. So it's an agreement. It's got their name, their details. It's got all of the details of what you're going to do, your services, your pricing, your timeframes, all in the one document with your services, the service terms and conditions, and they're going to sign off on it and you're going to get started.
[00:12:18] Tracey: So that both of those. Options are slightly different, but this is one of the conversations I have up front with people who are leaving corporate to go to start their own business because the client engagement framework is really important. So the first thing we need to think about is, well, how are you going to do it?
[00:12:33] Tracey: How are you going to market? How are you proposing jobs? What are you putting out there? How are you converting clients? So we have that conversation. From there, I can work with you or your business lawyer, but from there, the work starts to develop the service agreement. And some of the key things that you must think about when you're developing your service agreement is the scope of services, as much detail as possible so that you are setting yourself up to avoid as much as you can misaligned expectations with your clients.
[00:13:04] Tracey: Remember, it's a new business or a relatively new business if you've just started. Word of mouth is really important. Happy clients are really important. So it's important that you not only meet their expectations, you exceed them. And the critical framework for that, or critical platform for that I should say, is your service agreement and or your proposal.
[00:13:24] Tracey: So making sure it's outlined really clearly from the outset what you're doing. I also then encourage a section or exclusions. What are you not doing? Let's make it clear. Let's avoid scope for misaligned expectations. The next one is your payment terms. Make absolutely sure it is really clearly outlined in your agreement how you will be issuing invoices, When those invoices will be issued and what your payment terms are.
[00:13:50] Tracey: The next one is variations, because we all know that once we get in and start work, the client can change their mind or they can want to add things on, or they want to pivot or take a different direction. Well, this is great. Can we also do that? Absolutely. We want to encourage that, but we need a framework for dealing with those variations so that one, you’re not expected to work for free.
[00:14:12] Tracey: And so too, we can get you paid on time and the clients not surprised when they receive your invoice. So the variation framework is really important.
[00:14:20] Tracey: We will absolutely deal with intellectual property. We will have given it a lot of thought by now. So we know. That what you're sharing is yours, that you're not in breach of any prior intellectual property obligations from previous businesses. But we want to give some thought to how are we sharing this with the client and what can the client do with this and what can't they do with this.
[00:14:41] Tracey: And that's all set out in the intellectual property clause. The next one to make sure it's included is confidentiality. As we all know, it is so important, that our clients are aware that anything that we are exposed to or any knowledge that we come into possession of throughout the course of the engagement is held confidential, that you're a professional and that you will honour those confidentiality obligations.
[00:15:04] Tracey: It's absolutely helping build trust and it's giving the client peace of mind. Your warranties and limitation of liabilities are really important. And that's the second last thing I'm going to talk about here. I could go on and on, but these are the key things to think about. What warranties are you giving?
[00:15:17] Tracey: What are you promising? Make sure you're really intentional here and that you're very aware of what warranties you are providing, because these are promises to do certain things and to deliver certain things. So be really mindful in relation to warranties and make sure you're comfortable with the way you're limiting your liability.
[00:15:34] Tracey: This is something that's often negotiated in my experience with the client, either when they're using your agreement or when you're using theirs. It's a clause that's really important to both parties around what's my protection and where does the liability end. And the very last thing I want to mention.
[00:15:50] Tracey: For the sake of this episode is termination. It's so important that we have an exit strategy. Anytime we enter into anything, my kids even know that I say it that often. It's almost like a mantra around here. Just because we want to know if we're locking ourselves in and we're committing, how do we get out?
[00:16:07] Tracey: What if it doesn't work? What if it's not a good fit? What if it goes pear shaped? What if it needs to come to an end? What if there's a breach? What is the termination provision to include? How do we address all of those things? And that's a conversation that needs to be had and carefully tailored to suit the way you wish to operate with careful consideration of the services that you'll be providing.
[00:16:28] Tracey: So those are the key things that we start with when we're developing your client service agreement. And you can see why those things are so important, because this document, your client service agreement, or your consulting agreement. If designed well, can be one of the most powerful tools you have in your business to set you up for success with clients, manage expectations, exceed expectations, get paid and ultimately grow your business.
[00:16:57] Tracey: So it's really worth spending the time to get that right. Now, the last thing I want to share in this episode so that it can be as helpful as possible for you setting out or embarking on your new venture is the common pitfalls that I see. I wanted to share just a couple with you so that you're aware.
[00:17:17] Tracey: At the outset of things that I see commonly that can go wrong. The first thing is not understanding changes that are requested to your agreement. So when you issue your beautiful new service agreement, consulting agreement to your new clients,
[00:17:33] Tracey: you were so keen to secure this client and move forward. A pitfall that I see too often is that enthusiasm derails the time that's needed to consider revision requests. So rather than taking the time to say, let me just get legal advice on that, let me chat to my lawyer or just give me a couple of days and coming to talk to your business lawyer to really understand what's asked, business owners go, yeah, no worries.
[00:17:57] Tracey: Let's do it because you're so keen to get it across the line. So that's a pitfall. So I would say, don't do that. Always pause, take a breath, allow yourself time to get advice, to fully understand what you're agreeing to. That's the first thing. The second thing is the danger of handshake agreements. And this is so common when.
[00:18:15] Tracey: Business owners are leaving corporate going out on their own because there's preexisting relationships. Sometimes they're even semi friendships. So I'm now pitching to this client and I know this person really well. It'll be right. I trust them. We don't need an agreement. Let's just shake hands and get cracking.
[00:18:34] Tracey: And lordy me, red flags everywhere on that. You are doing not only yourself a disservice, but the client a disservice for all the reasons I've just talked about in terms of why that client service agreement or consulting agreement is so important. To set you up for success with clients, to manage expectations, and to not just meet, but exceed those expectations.
[00:18:57] Tracey: You simply cannot do that if you don't have those boundaries in place, if you don't have that framework in place, which is the agreement. The service agreement. I've seen it too many times where misaligned expectations arise because people trusted each other. We've known each other for such a long time, but things become derailed.
[00:19:16] Tracey: And that's not because anybody is a bad person. And that's not because anybody has set out to do the wrong thing by anybody else. It is genuine. Hand on heart misunderstanding from both parties. And the sad thing is that could have been avoided with the proper documentation in place. So my advice here, my absolute hand on heart advice here, is have the same client engagement process.
[00:19:39] Tracey: So the same onboarding process, For all of your clients, for all of your beautiful clients, whether you have a pre-existing relationship with them or not, adopt the same process because that's how you stop things falling through the cracks. That's how you avoid the common pitfalls that I see when expectations are not aligned.
[00:20:01] Tracey: The very last thing I want to touch on, because it does come up particularly with the new business owners is the danger of using templates. I have spent time in this episode and on so many of my podcast episodes, sharing with you why I say DIY is for bunnings, not for illegals. And why I say stay as far away from templates as you possibly can in your business, because we don't know what we don't know.
[00:20:25] Tracey: We don't know if the template is going to serve us just because someone else uses it for their business. Doesn't mean it's right and we don't really know the intricacies of how they operate. So we don't know if we're operating the same. The short version is no. I've not got any happy stories to share with you when a client reaches out to me and says, Hey, I've got this template and now I'm in a pickle.
[00:20:45] Tracey: Can you help me? I don't have any happy stories to share where I can say to you and gosh, that templated document was excellent. I just don't. They're reaching out to me because they're in a pickle because things have gone awry because the documentation. More times than not, the documentation wasn't where it needed to be.
[00:21:00] Tracey: Thee thing with templates is you're not going to know if it does what it needs to do until you're in hot water. And by then it's too late. So no shortcuts here. No templates, no cookie cutters, no shortcuts here. Do it once, do it properly is my view. My absolute hand on heart view.
[00:21:17] Tracey: And I say it over and over when I'm asked. It's a hard no from me when it comes to templates. And just from listening to this, this episode alone, you can understand why, because I've shared with you the importance of getting that service agreement right for your business, having it tailored for your business.
[00:21:33] Tracey: there's just no substitute for preparation. That's the truth. So set your beautiful new business up for success, give intentionality to the things that really matter. The most important document in this business is going to be your client service agreement or your consulting agreement, whatever you decide to call it.
[00:21:49] Tracey: Take the time to get that right and get your advice from the right people. And in this case, that'll be your business lawyer and your accountant. I really hope you have found this episode to be of value. And I really hope that I've answered all the questions that are rolling around in your head. If you're in that space of thinking about just to, or I just have.
[00:22:09] Tracey: Left corporate to set up my own consulting business. I am so happy to help answer questions. So if this is you and you've got more questions, please reach out. Please reach out and ask the question. Very active on Instagram. You can find me over on LinkedIn or reach out via the website and book in a time to chat.
[00:22:27] Tracey: I'm so happy to share as much value as I possibly can to set you up for success on the journey. And if you're listening to this and you know others, you've got business friends or colleagues who are. Thinking about going from corporate to consulting or recently have, I'd love it if you'd share the episode, because I would really love the podcast to be able to help as many business owners as absolutely possible.
[00:22:48] Tracey: As always, thank you so much for listening. I'll catch you next time.
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