Have you started your 2024 consulting business budget yet?
To give you a head start, I’ve gathered some of my top nonprofit consultant budgeting tips.
Below are the six key categories where you should be budgeting for as a consultant—and where investments can actually boost your net income.
6 Consulting Business Budgets Must-Haves
1) Budget for Taxes
When you’re an employee, your employer automatically deducts payroll taxes. But when you run your own 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 pay 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 one it!), and
- When you are filing your taxes (because accountants know all about deductions, they will ultimately save you money).
Set aside money to work with an accountant to be sure you understand what income taxes you need to pay and how. Note that this will vary by city and state, as well as business structure.
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
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
These are the things you absolutely must have to operate your business. For consultants, our overhead is often very low, but we do still have hard costs. For example, to communicate with current and potential clients (and do our work) we need computers, websites, internet service, and phone lines. We 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) Use Smart Outsourcing
This is an expense many consultants don’t budget for, which is a mistake. Smart outsourcing frees you up from tasks you don’t enjoy or aren’t great at, such as building a website.
Outsourcing enables you to focus on what you do best (your unique brilliance)—which ultimately helps you earn more and work less.
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.
5) 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.
6) Invest in Your 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 recently coached a client on how to raise her rates 20%—including how to communicate the change to her clients. And it worked. Now, for one of her clients, she’ll be working the same number of hours next year—and earning $4,500 extra! All from a one-hour call.
What to do with your consulting business budget
Creating your first—or fifteenth—consulting business budget can feel overwhelming. Once you tally it all up and subtract your expenses from your income, you’re left with a much smaller number. We’ve all been there.
But budgeting smartly as a nonprofit consultant isn’t just about income and expenses. It’s about identifying areas where you can improve your efficiency and your income, without hitting burnout.
It is a great feeling when you find that budgeting sweet spot—where you’re doing meaningful work, growing your skills, and earning the income you want.