Is Consulting a High Risk Business and How to Manage It

Consulting can be a high-risk business, especially for those who are new to the industry. A study found that 70% of consultants fail within the first two years of starting their business.

The main reasons for this high failure rate are lack of a clear business plan and poor financial management. According to the article, a consultant without a solid business plan is like a ship without a rudder, drifting aimlessly in a sea of uncertainty.

This lack of planning can lead to a range of problems, including cash flow issues and difficulty in attracting and retaining clients. In fact, the article states that 80% of consultants struggle to find consistent clients, leading to a feast or famine situation.

However, with the right strategies in place, consultants can mitigate these risks and build a successful business. By creating a clear business plan and prioritizing financial management, consultants can set themselves up for success and avoid the pitfalls that have led to the high failure rate in the industry.

The risk of consulting as a business is a significant concern for many entrepreneurs. Consulting can be a high-risk venture due to the uncertainty of client acquisition and project completion.

Long hours and low pay are common issues faced by consultants, with some working up to 60 hours a week for a median hourly rate of $25. This can lead to burnout and financial strain.

Despite the challenges, many consultants are able to build successful businesses with a high earning potential, with some top consultants earning upwards of $1 million annually.

Being labeled a high-risk business can have some serious consequences. You may be required to submit more information and supporting documents about your business, and your financials and credit card processing history will be scrutinized more.

Not all providers will work with you, so it's essential to find a provider that specializes in high-risk merchant accounts. This can save you a lot of time and hassle in the long run.

Tougher application processes are the norm for high-risk businesses. This means you can expect a longer underwriting process, which can be frustrating if you're eager to start accepting payments.

Higher processing rates are another consequence of being a high-risk business. You can expect to pay between 3.5% and 5% per transaction, with some ultra-high-risk industries facing even higher rates.

Stricter terms are also common for high-risk merchants. You may be required to sign a long-term contract, typically 2-3 years, with an early termination fee. This can be a significant commitment, so make sure you understand the terms before signing.

A reserve requirement is another aspect of high-risk merchant accounts. This means that a portion of your funds will be set aside to cover potential chargebacks, effectively limiting your access to those funds.

Consulting businesses face a range of potential risks that can impact their operations and reputation.

Injuries can occur on the job, which is a common threat that a risk management plan can help mitigate.

Lawsuits are another risk that consulting businesses may face, often resulting from disputes with clients or employees.

Financial loss is a significant concern, particularly if a consulting business is not adequately insured or if a major client defaults on payments.

Reputational damage can also be a major risk, resulting from negative reviews, social media backlash, or other forms of online criticism.

While completely avoiding risks is ideal, it may not always be possible, which is why having a risk reduction or mitigation strategy in place is crucial.

Being labeled a high-risk merchant can be a major headache for your business. Unfortunately, if your industry is historically prone to chargebacks and fraud, you can't avoid it entirely. However, by keeping your chargeback ratio low (less than 1%) and focusing on fraud detection and chargeback prevention, you can reduce the risk.

To maintain good financial standing, it's essential to stay PCI compliant and improve customer service, which means customers are less likely to issue chargebacks. You should also maintain good personal and business credit scores and keep debt levels manageable.

Here are some preventive solutions you can practice to avoid becoming a high-risk merchant:

To avoid being labeled a high-risk merchant, it's essential to keep your chargeback ratio low, below 1%. This means you need to focus on preventing chargebacks and fraud, which can be achieved by staying on top of your financial standing and maintaining good personal and business credit scores.

Keeping debt levels manageable is also crucial, as high debt levels can increase the risk of chargebacks and fraud. Documenting every order you receive and keeping a blacklist of customers who file chargebacks repeatedly can also help prevent chargebacks due to attempts to obtain free goods and services.

To avoid confusion with the description or transaction, use a clear and consistent business name on your receipts and supply a copy of the transaction or signed order form. Setting up a generous return policy and improving customer service can also help prevent chargebacks due to returns of goods outside the return period.

Here are some preventive solutions to chargebacks:

By implementing these preventive solutions, you can reduce the risk of chargebacks and maintain a good financial standing, ultimately avoiding the high-risk merchant label.

High risk credit card processing can be a challenge, but it's not impossible to navigate. A high risk merchant account will have higher fees and stricter contract terms, but they're more equipped to deal with your unique needs.

To find the right high risk credit card processor, you need to contact them for a personalized quote, which should be completely obligation-free. This way, you can compare rates and find the best option for your business.

Reliable customer service is crucial, so look for a processor that offers dedicated account management. This ensures that you have a single point of contact who understands your business and can guide you through the setup process and any ongoing issues.

When comparing high risk credit card processors, consider the types of payment methods they support. You should be able to take payments in-person, online, contactless, through invoicing, auto-recurring billing, by phone, ACH transfers, or even crypto.

Fraud prevention solutions are also essential, especially for high risk businesses. Look for a processor that provides tools to prevent and detect fraud before it happens, which can help reduce chargebacks and save you money.

To avoid being labeled as a high-risk merchant, focus on keeping your chargeback ratio low (less than 1%), fraud detection and chargeback prevention, staying PCI compliant, and improving customer service. Maintaining good personal and business credit scores and keeping debt levels manageable can also help.

Here are some preventive solutions to avoid chargebacks: