Category: Blog

After spending a couple of years working for consulting companies and working with other independents, I realized that the only way to freedom was becoming an independent consultant. Several of my friends were independent, and they managed to show me just how easy it really is (see some of my previous posts for more explanation). So I went online, started my own company, and found my first contract. it was my first step to getting me to where I am now.

My time spent doing implementations and then production support taught me a very important lesson. I have ADD when it comes to my career. I need constant change and constant challenge. So I decided to try consulting. I went to work for Deloitte for a year, and then SAP for a year as a consultant. During my time I quickly learned that flexibility was the key to be a good consultant. Being willing to jump in and debug an error, or help troubleshoot something in another area made me a better consultant every day. I found my passion in consulting, at least at that time.

I have a cool Japanese painting that I keep in my office. It translates to “Reinvent yourself, time and time again”. Best advice ever. Here’s one of my first reinventions. After spending nearly 7 years with the same company doing SAP variant configuration, I inevitably moved on. I started with a small company that was late in the stages of implementing SAP. I was quickly thrown into the mix and become responsible for SD, SM, and development. Well, needless to say, SM was something brand new for me, and development up to this time was more of a hobby. I quickly learned how to deal with Smartforms, SAPScript, ALV reports, and of course user exits. More importantly, I learned how SAP handles the service world. Trial by fire quickly showed me that I liked service more than SD just because of the large amount of interaction in the system. It’s was also proof to myself that being flexible is invaluable in any career, and you never know what you’re going to enjoy doing. To this day, I spend the majority of my time consulting SM and VC, and my new SAP applications revolve around those 2 modules. Word of advise, stay flexible, you never know where it will take you.

Inevitably, everyone always asks, how did you end up in SAP? Well, the short answer is that no one grows up wanting to be an SAP consultant. My introduction came at my first real job. I was an intern working for a telecommunications manufacturing company. They had several configure to order products and their own homegrown system to handle it. I was an engineering student that just happened to like programming. So I got a job there. Shortly after, the company decided to implement SAP (Y2K issues). I was quickly drafted onto the project and become in charge of learning SAP Variant configuration. Next thing you know several years had gone by, and become the go to guy for this stuff. Turned out that SAP problem solving was a lot more interesting than writing engineering change requests to alter a dimension on a drawing (what I would’ve been doing as an engineer). This become my reinvention of myself, and my beginning of my SAP career.

Becoming an SAP partner. This was by far the toughest thing I needed to do in the process of getting my software business under way. The overall process wasn’t too bad, but dishing out the cash was the tough part. Initially, I talked to the first round of people at SAP and started to learn the process. The first step you had to do fill out a rather long application and then to classify exactly what is that my software did. After a lot of reading, I determined that my project was an ABAP Add on. This is a fancy way of saying that my entire project was written in ABAP, and didn’t use any other 3rd party integration. Now, the number one requirement that I had to fulfill was to get an SAP developer’s license. With a developer’s license, that gives me the right to code my own software and legally sell it. What I discovered was that there were 2 ways of getting that license. I could buy (3) licenses outright. These were selling for roughly 3400 Euros each. The other way is to buy a certification package, which comes with one license. The price tag for this was around 15000 Euros. Next came the pros and cons. If I bought the certification it meant I’d get the fancy SAP marketing, I could say that SAP has certified my product, and I get (1) license. A great deal, but a lot of cash. However, if I went the cheaper route, I could start selling, and even give myself room for growth. I ultimately chose the certification package. This required lots of forms, paperwork, and of course a big check (that had to be in Euro’s) sent to Germany. Now, all the fun pieces. I’ll save those for another post.

I apologize, this is way overdue. The next thing I recommend is getting yourself a website. Now depending on your skill sets, and your time available to work on the site, you have a lot of options. Personally, I’m no web developer. So I went down the path of a fully hosted site. I wanted a site that already had email accounts ready for me to set up, and a drag and drop website creator to get started. I went with FatCow. They were reasonable and had what I needed. Now that I’m looking to expand my business from straight consulting, I’m realizing that I probably need a better website, and the drag and drop style is limited. it was a great place to start, but eventually you’ll outgrow it. Now, if you either do website design, or have a friend that is willing to do it for you and help you figure out the hosting aspect, I highly recommend it. You’ll get exactly what you want, have more control and pay less.

Finally, the last professional you should consider finding is a lawyer. Depending on your business model, you may be dealing with a lot of contracts, agreements, perhaps copyright agreements, etc. Unless you are very familiar with reading legalese, I recommend getting someone that explain the ins and out very carefully. In the consulting world, everything is about a contract for a period of time. Those contracts pretty define what you can and can’t for the length of the contract, as well as possibly for a period of time after the contract. I’ll have a separate post later on explaining some of the things to watch out for in contracts. A lawyer can look these over pretty quickly and let you know what you should consider revising or not accepting in any contract. I’ve found that every organization is different that I’ve worked for, and so is there wording in the contract. Also, if you’re planning on producing or selling any type of products, a lawyer will be able to advise you on exactly what you need to file to protect yourself. It could a terms and conditions of any sale, it could be a disclosure about the product you’re selling and what you are liable for, or it could be just to protect yourself if you do end up being sued for anything. I haven’t used my lawyer a whole lot, but it in nice to know he’s there when I need him.

Next up, have a financial investment person you trust. You may already have one, but if you don’t, go find one. Then sit down and talk to them for an hour and explain everything you’re planning on doing with your company. Explain what you plan to do, based on your accountant’s recommendations how much you plan to be putting into savings for the business, how much into a 401K, etc. The next thing that your financial person can do for you is to set up all your business accounts. Depending on what you choose to do, you may need to set up a 401K program for you business, and this isn’t as easy as it sounds. It turns out that there are quite a few options available to set up a 401K for your company. The type you choose will have a lot to do with how much growth and how many employees you expect to employ. If you plan to just be a 1 or 2 person operation, you can probably use a Solo-K, but if you plan to have a full staff that you will be providing the 401K benefits to, you’ll need to look at other options. You’ll also want to figure out exactly how you’ll plan to invest your money. If you’ll primarily be investing all your earnings into yourself, or back into the company, your options are pretty easy, but if you’re a consultant like me, you’ll need to keep some money put away for any periods when you are without a contract. You can also think about investing that savings into CD’s or bonds or something else you can keep relatively liquid. These are all of the different things you should sit down with your financial professional to talk about. They may have a lot of suggestions for you and a lot of things you never thought about.
You’re next member of your team is an insurance person. This could be your financial person if they also deal in insurance, but often you’ll need someone separate. It’s easiest to find an insurance broker, just because there are so many different types of insurance, and they can find you the best coverage for the best price, since they are not locked into a single company. Some of the insurance coverages you’ll need to consider include, business auto policy, business liability, professional liability, errors and omissions coverage, unemployment insurance, disability insurance, life insurance, workman’s comp, etc. I had no idea that there were so many insurances policies that I would need. Every one of my contracts has had different insurance requirements. If you do consulting, often you’ll only need a policy for the length of a contract, and then your next contract won’t require it. So be sure that you can cancel a policy at any time (and often you can even get a refund for the unused portion if you pre-paid.

The next thing I recommend is to find your professional support team. This includes an accountant, an insurance professional, a lawyer and a financial/investment person. Now, this will initially sound expensive, but most of these professionals will only charge you for the time they spend working on your stuff.
Here’s why you need an accountant. An accountant will help you set up your accounting basics. They can also tell you how much you should be paying for state and federal taxes. they will tell you what sorts of things you can deduct on your taxes, including depreciation, a home office, mileage on your vehicle etc. They can also “run the numbers” for you about how much you should be putting into savings, in case your new company has some quiet periods, financially, they can figure out exactly how much you can put into your 401K from the employee and the employer if you choose to do that, and if you choose the S-Corp route, how much you should pay yourself as a salary vs. how much you take as a distribution from the company. You’ll also find that when you run your own business you suddenly have to file new tax forms that you are responsible for . Some are due every time you pay salary, some are due quarterly, and some are due yearly. Depending on your level of experience and amount of time you’re willing to spend on paperwork, you can decide to fill it out yourself, but I highly recommend that you get a professional accountant to fill it out the first time and explain what you need to do. I learned this the hard way. When I was on the bench for 6 months, I decided I could figure out my tax forms. So I copied one of my previous quarterly returns. Well, a month later, I suddenly received a bill from the IRS for $12,000. Well, my taxes were paid in full, but since I screwed up the return, I had to spend the next 6 months going back and forth with the IRS trying clear this up without paying major penalties or the $12,000, which I didn’t have to spare at the time. Since then, I gladly pay my accountant to take care of this stuff for me. At a bare minimum, you want to find someone you trust to take care of your yearly tax returns.
I recommend getting a copy of Quickbooks or some other financial software you can use to track your business. This has actually been invaluable for me because each quarter or year end, as long as I make my entries, I can just print off a couple of forms (or if your accountant uses Quickbooks, you can just give them the “accountant’s copy” and they have all of my transactions for the business. Again, I highly recommend getting your accountant to set up all your accounts. Based on your business, you may have different needs, or want to track different expenses. But no matter what your business model is, you can quickly see accounts payable, accounts receivable. You can print off professional invoices and purchase orders. You can track your bank accounts, taxes and expense very easily. You don’t need to be an accountant to use this software. Believe me, I’m a software guy, not an accountant, but it’s pretty easy to update every 2 weeks or a month depending on your volume of transactions. I spend on average 1hr a month doing pretty much everything (and I track my weekly travel expenses in the system). It’s totally worth the effort.

In my last post, I talked about how to get started, how to get the paperwork rolling for your new business. This time, I wanted to start talking about some of the key pieces you need for your business.
First order of business, get yourself a business checking account. Now this initially sounded like an easy task to me. So I started checking out the banks in my area and quickly realized that business checking accounts have a lot more options than your average personal account. Here’s some of the big things to keep in mind when selecting your bank/account type.

1. First and foremost, you can’t open a business bank account without your business paperwork. Normally, your Article of Incorporation or some similar form of proof that you are truly a business and registered with the state you are opening your account in. When I moved to NC from MN, I decided to switch banks. I had been with US Bank and I loved them, but they had no presence in NC/SC, so I had to make a switch. Before I could open any account, I needed the actual NC paperwork that proved I was licensed to do business in that state.

2. Bank Fees. Does the account carry a monthly fee? If you carry a high enough balance, is the fee waived? Is it likely that you will be able to carry that balance every month. My account charges me $12.95 every month if I don’t maintain a $5000 balance for the entire month. This can add up quickly, so I do everything I can to maintain that balance. Make sure you know exactly how and why your bank will charge you fees. Some of the other fees to check on are: Does your bank charge your for ATM’s that aren’t in your network? Are you charged for viewing your checks online? Do they charge you to download your transactions into Quicken or Quickbooks? Do you earn interest on your account? All these add up quickly, especially when you’re just starting out. You need to look at how you bank to decide which fees don’t matter and which ones will kill you.

3. How long will the bank hold your checks after you first open your account? Now this is something I never thought of. When I first started with my bank, I was getting paid by check. Now since I had a bank account, I figured it was no big deal. I quickly found that until the bank thinks you’re reliable, they will hold your funds for 7 – 10 days. Now, if you’re just starting out, this is a long time to have money just sitting in your bank that you can’t spend. Many banks will release your funds immediately if you direct deposit it, however, this isn’t always an option. Just be prepared for this possibility.

4. Can you do most of your banking online? Does your bank offer free online bill pay. For me, this feature is invaluable. I spend a lot of time on the road, so I want to be able to pay all my bills online, anytime I want. Make sure to find out how much your bank charges for this convenience.

5. Can you tie your personal account to your business account? this was another important feature for me. Since I setup as an S-Corp, it meant that I would be paying a salary to my employee (me). So I wanted to link up my accounts so I could do easy fund transfers from my business account to my personal account.

6. Extra things. Most accounts will allow you to do wire transfers, but only after you’ve filled out some additional paperwork. For example, I needed to move some money around in a hurry. Well, with the new money laundering laws, any large checks must be held for 7 days by any account. A wire transfer was my only option. Well, I called up my bank, and they informed me that I would have to visit a live bank person, fill out some paperwork, and then I could do a wire transfer over the phone. Well, I was on the road, and my bank wasn’t in the area. I made it work, but it took a lot of phone calls and extra stress. My advice to anyone starting out, get yourself set up to do wire transfers. You may never need it, but just in case, have the paperwork in place.

Wow. I forgot just how much effort it was to get a “simple” bank account set up for my business. Anyway, next post, I’ll hit the next set of needs to focus on for your new business.
Thanks for reading,
Mike