Leaving full-time employment and starting a new business venture is a brave decision, but for many business consultants, it makes perfect sense. Statistics from Consultancy.uk found that the UK management consulting industry grew by 7% in 2018 to £10.6 billion and one-fifth goes to independent consultants – an industry ripe, then, for success.
If you’ve decided to set up your own business consultancy and take charge of your career trajectory it’s likely that you’re used to problem-solving and taking on responsibility. However, have you thought about what you need to do to safeguard your business if anything goes wrong?
As you look to grow and evolve your business, you’ll likely be working with more clients on bigger projects, dealing with a whole host of new challenges, complexities and responsibilities along the way. It’s an exciting step to take, but consultancy is also an industry filled with pitfalls – clients reliant on your advice and expertise. What if the advice you give causes their business to lose money or damages their reputation?
What are your responsibilities as a business consultant?
Perhaps the biggest change to get your head around when setting up your own business is that you’re now liable, with no employer safety net to catch you should things go wrong.
That means your clients trust you to act professionally, be an expert in your field, and deliver business advice that will help rather than hinder them. It’s your reputation at stake if the services you provide are not up to scratch or something goes wrong and, unfortunately, business and management consultants are often vulnerable to allegations of negligence if their recommendations or advice fall short of clients’ expectations. It’s in your best interests, then, to take the necessary precautions to protect your livelihood.
Before you get started, it’s worth getting some advice from professional bodies in this field such as the UK Institute of Consulting, which provides consultants with support and helps them understand what is expected of them in industry.
You’ll also find that your business is required to have certain insurance policies in place, depending on the industry you work within, to protect both you and your clients. Here is what you need to know.
Get your business covered with the right insurance
Despite our best intentions, everybody makes mistakes. For an IT consultant, it could be recommending that a client implements a particular technology platform and the implementation ends up presenting huge integration challenges causing the project to overrun by months and months leading to extensive business disruption and escalating costs. Or maybe you’re a financial consultant and you give advice that leads to a client making a huge investment that goes wrong.
Even if you do everything you can to deliver expert advice and adhere to all industry regulations, you could still find yourself faced with the worry and potential expense of a legal dispute or tax enquiry. It’s why most business consultants take out the following policies:
Professional indemnity insurance
This covers you in case you give faulty advice that causes financial loss to a client. It protects you against allegations related to poor performance, misrepresentation, breach of confidentiality and privacy, intellectual property infringement, defamation, breach of contract and employee dishonesty.
Public liability insurance
This is another essential in case someone is injured, or their property is damaged because of your business. If you have customers visiting you on your premises or you and staff members carry out work on theirs, you’ll want to protect yourself with this type of insurance cover.
Employers’ liability insurance
If you employ somebody else, you are legally required to take out employers’ liability insurance, that’s regardless of whether they’re full time, part-time, temporary or permanent. If they are injured or fall ill as a result of working for you, this insurance will cover you. If you don’t have it, expect a heavy fine.
IR35 tax investigation insurance
If your consultancy is working with medium to large-businesses and your status as a self-employed worker comes into question, then you could well be the subject of an HMRC tax investigation. IR35 insurance covers you in the event that HMRC decides to look into your tax affairs and asks you to prove that you’re not an employee. This policy will pay for expensive court fees as well as any loss of work while the investigation is in progress.
Contractor personal accident insurance
This type of insurance, often referred to as PA insurance, protects you and your family from financial loss should you sustain an occupational injury. Maybe you have an accident in your home office, or while you’re commuting to work – this insurance will pay out a weekly benefit to cover your lost income if you suffer a temporary disability or even a permanent disability that prevents you from working.
When you’re just starting out, it may be hard to get your head around the idea that your business may face legal action, but unfortunately it happens. And when you’re dealing with complex contracts and a growing network of clients, you’re automatically opening yourself up to risk. As always, it’s best to take what precautions you can to protect your business and know that if something does go wrong, you have a team of legal experts behind you every step of the way. As the saying goes, it’s better to be safe than sorry.
To find out more about you can protect your consultancy business from legal claims and HMRC investigations, please get in touch with our team of experts at Larsen Howie. You can also read more about the latest issues in the industry by heading to our Knowledge Hub.