I love the feeling of starting a new year as a business owner. It’s a moment for reflection, gratitude, and goal setting.
It’s also the perfect time to sit down and refine one last piece of annual planning: your consulting business budget.
Sure, budgeting doesn’t sound as exciting as setting goals or refreshing services. But it’s foundational to your business success. Being strategic about planning for expenses can also make a big difference in your net income by helping you find ways to earn more without working more.
Here are six top considerations for your consulting business budget:
6 Consulting Business Budgets Must-Haves
1) Budget for Taxes as a Consultant
When you’re an employee, your employer automatically deducts payroll taxes. But when you run your own nonprofit consulting business, you need to be planning for your taxes from day one. The last thing you want at the end of the year is a giant tax bill that wipes out your bank account.
To prepare, there are three times you should always budget for accounting services:
- When you are starting up or changing your business operating structure (such as creating your LLC or moving to a C-Corp).
- If you have payroll (even if you are the only employee).
- When you are filing your taxes (because accountants know all about deductions, they will ultimately save you money).
Note that income taxes will vary by city and state, as well as business structure, so getting expert advice in advance is key. For example, if you’re set up as a pass-through LLC or are working as an individual freelancer, you will need to pay self-employment tax. This 15.3% tax on your net earnings covers your contribution to Social Security and Medicare—and is payable in addition to income tax.
2) Budget for Business Registrations as a Consultant
It’s your responsibility to be sure you’ve completed (and paid for) all the appropriate registrations you need to operate your consulting business. This includes annual renewal requirements for your business and registrations related to your line of work, such as fundraising-specific registrations.
3) Plan for Hard Costs in Your Business
These are the things you absolutely must have to operate your business. For example, to communicate with current and potential clients (and do our work), you need computers, websites, internet service, software, and phone service. You also need a place to work, which could mean buying a desk for the corner of your living room or renting an office space locally.
4) Budget for Professional Subscriptions
As nonprofit consultants, we need access to professional-level tools. These are often paid for in monthly or annual subscriptions.
The bare minimum subscriptions include tools like Microsoft Office and e-signature software for sending and signing contracts. If you have a website and a mailing list (which I highly recommend), you’ll need email list management tools (popular options include Mailchimp, Active Campaign, Constant Contact, and ConvertKit). Finally, you’ll need specialty professional subscriptions. This may include fundraising and grants research databases or memberships to professional networks, like the Association of Fundraising Professionals or The Hive.
5) Consider Strategic Outsourcing
Smart outsourcing frees you up from tasks you don’t enjoy or aren’t great at. Among nonprofit consultants, the top areas for outsourcing are virtual assistants, marketing, and creating and maintaining websites. Keep in mind that the bigger your business grows, the more you may want to outsource.
6) Invest in Your Consulting Business
As a nonprofit consultant, investing in your business means investing in yourself. This could be taking courses, getting certifications (for example, the team at Funding for Good is certified in the Technology of Participation, or ToP, method for facilitation and strategic planning), or hiring a business coach.
This is another area where many people are tempted to skimp. But even if you’re on a tight budget, you can still make these investments (and they do pay off). For example, Funding for Good offers on-demand one-hour consultations for $250 each. Even a quarterly consultation could help you keep focused, avoid costly mistakes, and troubleshoot problems in real-time.
Here’s an example: I coached a client on how to raise her rates 20%—including how to communicate the change to her clients. As a result, with one of her clients, she’s now earning $4,500 extra per year without working any additional hours. All from a one-hour call.
What to do with your consulting business budget
Sometimes, once you’ve tallied up your expenses and projected your revenue, your take-home income isn’t quite what you were hoping. We’ve all been there.
If you’re looking for support in growing your consulting business revenue, we offer intensive one-on-one coaching programs for nonprofit consultants.
But also keep in mind that budgeting as a nonprofit consultant isn’t just about income. It’s about identifying areas where you can improve your efficiency (and thus grow revenue), reduce expenses, and avoid burnout.
