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NOVEMBER 15 DINNER MEETING:

HANGING UP YOUR OWN SHINGLE

Jay W. Preston covers getting started in Consulting

Past Chapter President and Former Consultants' Division Administrator and Division Vice President, Jay W. Preston shared over thirty years' experience as a safety consultant. The presentation covered many of the common start-up questions for new consultants.

A basic outline follows.

1. Business Organization
   1. As a general rule a corporation, or LLC is not necessary unless you have a specific role or goal in mind. They may be set up to change the tax environment, maximize Social Security, limit liability, make more of otherwise non-business expenses deductible, or to simply make your operation look bigger or important.
   2. You may need 5 years before your venture will replace your current income.  Have the resources.
      1. Japanese say "If you can sit on a rock for 5 years, you will be successful."
      2. May be faster now due to Internet.
      3. Funding can come from many sources.  Mine was from real estate and diamond trading.
   3. If paying self employment tax, be sure that spouse is co-owner of business (that way they will get credit for FICA).
   4. CA corporation has minimum tax of $1200/year.
   5. I have a CA corporation, Safetybiz, Inc. that I have seldom used, as I want to maximize my Social Security.  After retirement, dividends and other non-employment payments (rents, royalties, good will, etc.) are not "earned income," and therefore will not reduce SS benefits.
   6. Use Legal Zoom or similar to set up corporation.
   7. Out of state corporation must still register in CA to do business in CA.
   8. Do not build your business on current employer's time.
2. Marketing
   1. Set up your Web Page. Make it look great, and utilize Preston’s "Secrets of Internet Marketing." (Available for sale from prestograph.com or by email request {free}).
   2. Have phone and other contact points up and running.
   3. Get the best stationery that you can afford for all your paperwork.
   4. Design and register a TradeMark. It makes you look more permanent, important, and bigger.
   5. Utilize the AOL small business news.
   6. Register with services and listing agencies (like TASA, if appropriate)
   7. Advertise where your market is.
   8. Approach clients by direct mail and phone.
3. Communication
   1. Make it all perfect and clear. Use Web Page for details.
   2. All stationery should have all contact points.
   3. Be available to clients.  Be quick to return calls.
   4. Be persistent.
4. Taxation
   1. Hire family, set up IRAs.
   2. Take advantage of business that many expenses that were personal become deductible as business expenses.
   3. To simplify accounting put all of business expenses on one credit card and one checking account.
   4. Do business in a location that has no tax.
5. Billing and Collections
   1. Simplify by getting enough up front to cover the job.
   2. Otherwise bill monthly.
   3. Small claims for "deadbeats."
   4. Never give attorneys a break
6. Bidding for work
   1. Accident prevention work
      1. My rule of thumb: One percent of insurance premium.
      2. Cost to hire someone full-time to do the work, then double it for overhead.
      3. $120/hour seems to be what current market supports
   2. Forensic expert work
      1. Whatever the market can bear
      2. $450/hour is about the present maximum
7. Liability and Insurance
   1. In forensic expert work, risk of suit is so low, that I am self-insured. I know of only one case in 30 years where CSP was sued. He was consultant on jobsite where everybody was sued (his insurance settled for $5K even though his causal relation to the incident was impossible to prove).
   2. Getting insurance means that you give up control. Insurance company decides when to fight and how hard, when to settle and for how much. (Remember, too, that one paid claim will likely make you uninsurable, anyway).  Insurance also makes you an easy target for policy limits.
   3. Until a judgment is actually entered,  one can make assets "disappear" to be harder to find and attach.  After the judgment, such estate planning is fraud.  Bankruptcy can eliminate judgments as well as other debts. Also there is the O.J. gambit (move to Florida, invest all assets in personal dwelling, live on pensions and loans against property).
   4. Standard general liability policies usually exclude E&O and products coverage.
   5. What do you do if client requires Errors and Omissions (E&O) insurance?
      1. Pass on the job
      2. Get insurance for the job (difficult and overly expensive)
      3. Negotiate to be covered as client’s additional named insured.
      4. Submit any insurance you have (it may be sufficient to meet requirements).
      5. Post a bond.
      6. I have done first 4.

There was a lively question and answer session with answers on how these entrepreneurial techniques can improve chances at success whether employed by yourself or a Fortune 500 company.  The answer to the FAQ of "What's more fun: practicing safety or plundering the Spanish Main?" will have to wait until Preston's next presentation.

For more on Preston's background, go to his websites: www.askasafetyengineer.com or www.safetybiz.com  and surf to your heart's content.

Given annually at the discretion of the Awards and Honors Committee. Begun in 1983, this award commemorates the contributions of Harold Somerfeld to the professional development of the Membership. Harold was a tireless teacher of safety subjects, CSP prep courses, and PE prep courses to the Membership, as well as being a highly regarded instructor at local colleges and for the National Safety Council's Greater Los Angeles Chapter.

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