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.

David Barnett

Answered 4 years ago

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