Currently, I'm an independent contractor that provides consulting services to third-party companies and help them manage projects with large budgets. I am looking to transition into a full-service consulting business where my company will internally take on the large project budgets as those that I consult for, essentially growing from an individual salary to processing the entire project budget overnight. How should I prepare to navigate the gap to set up my company team/finances to properly handle the accounting and cash flow of these projects when most end-clients deal on net 30 or 60 terms. The lifespan of the project is 8-10 months and cannot float the millions required in the interim. I want to tell my client I can take on the entire project, but not sure how to plan for this.
You need a source of capital to carry you through the receivables period. Basically you've got three options:
-Borrow money to finance the receivables
-Find investors to contribute equity to finance receivables
-Sell the receivables (factoring)
or some combination of these.
In my experience you're talking about making the same leap that a bathroom renovator might make to become a home-building contractor.
The difference in that business is also capital.
Arrange a call if you'd like to discuss your particular case. I can run through a few questions with you and help point you in the right direction.
I'd likely start by doing competitive analysis + finding your competitors.
Then pitch your competitors to partner with them.
BTW, Net 30-60 is crazy, to me. In fact, Net anything is crazy.
Our agency starts with a $1000 retainer + then we bill weekly. If any client slow pays, they go on 100% retainer basis.
Anyone how has to pay on Net... geez... I won't take. There are just to many people who fast pay.
If you go long Net terms + company dies or sells or loses interest in paying, your out your money.
I just won't even consider a client who required long Net pays.
Net on Monday for last 7 days work is how I go.
Most people pay monthly or weekly base cost + overages which add hours outside their plans.