You’ve likely heard of large consulting firms like Deloitte or Mckinsey. But did you know that several consultants work for themselves — or even start their own consulting firm?
It’s not as overwhelming as it sounds! In this article, we’ll break down step by step how to start a consulting business. Breaking the huge overwhelming task of starting a business into small steps makes it more manageable and less daunting.
So, let’s explore what options you have if you want to start your own consulting business.
How to Start a Consulting Business in 7 Steps
If you have no idea how to start your own consulting business, here are the first seven steps to build your own successful consulting business!
1. Choose your consulting specialty
Consulting isn’t a one-size-fits-all deal. There are as many types of consulting specialties as there are coaching niches.
For example, do you have expertise in marketing? Perhaps you could become a marketing consultant. If you’re proficient in human resources, PR, or even high-level business strategy, you could become an HR, PR, or strategy consultant.
You should also choose what types of clients you’ll be able to help. Working in the consulting industry for small businesses is a completely different experience compared to consulting for a multinational corporation. They don’t have the same problems to solve and don’t require the same type of expertise.
To choose the right consulting niche for you, take a good look at your work background. What are all the topics you’ve had some experience with? Which ones did you have the most passion for? Spent some time working in HR? Then maybe you should work in human resources consulting. Maybe you worked in sales or marketing, business operations, or project management. The types of consulting businesses out there are limitless.
Consultants need to be pretty knowledgeable about their niche, so don’t pick this lightly. Not only should you be passionate about your niche, but you should have the desire to deepen your knowledge and skills surrounding this topic, too.
2. Make sure you have the right skills
As a consultant, you’ll need more than just your skills surrounding your chosen niche. You’ll need to develop some other skills if you don’t have them already, such as:
- Public speaking – since you’ll be speaking to clients and their teams regularly
- Identifying other people’s problems
- Presenting data in a concise way
- Offering feedback
- Training people to implement solutions
If you’re not perfect at all of these, don’t worry! You’ll be able to hone your skill set as you gain experience. But you should have a basic grasp at the minimum.
Before you decide that consulting is for you, you could do some work on determining your strengths and weaknesses. Do you have what it takes to start a consulting company?
Of course, you can work on your skill development, but you need some foundational skills before you start consulting.
3. Pick a business type
Do you intend to start off on your own as an independent consultant? Or do you see yourself growing a large team of consultants instead? How you envision your business structure to be in the future may impact what type of business you create today.
If you’re on your own, all you need to do is become a sole proprietor. A sole proprietorship doesn’t cost anything, and you’re not required to register as a business. But if you want to hire other people, you’ll need to register your business as a Limited Liability Company (LLC).
Even if you’re on your own, you can still opt to make your business an LLC. This legal structure will make your business a liable entity, which means you personally won’t be liable for anything that happens to your clients. However, there are costs associated with LLCs as one-time filing fees and LLC annual fees to maintain it.
Here are some other important administration tasks to take into account when starting your own consulting business:
i) Understand the legal business structure requirements
Checking the business license and permit requirements for your state is an important step in legalizing your new enterprise. You want to make sure that everything you’re doing is legal from the offset.
You will either need a general business license, a zoning permit, or a sales tax permit, depending on where you will operate your business from. You only need a sales tax permit if you sell physical goods.
ii) Know your tax obligations
Making the transition from employee to self-employed is a big change, and there are numerous bureaucratic obligations to navigate. When you check the regulations for your business in your state, you will also need to check the current tax rules for self-employed people (it changes slightly from year to year).
All business owners need to pay taxes, and knowing the tax requirements in your region can help you decide which structure will work best for your new business. There are certain expenses you can offset as a small business owner, and it’s useful to know about these when creating your consulting business model.
iii) Research business insurance
Having the right insurance for your business is also an important part of setting up your new business; it’s important risk management. Signing up for an insurance plan before you take on your first client will ensure you’re covered for anything that could potentially go wrong.
Not sure about the type of insurance you require? Check out this article to learn everything you need to know about business insurance for consultants.
iv) Get a business bank account
To keep your financial matters in order, you’ll want a separate business account for all your business income and expenses. Keeping your business financials separate from your personal ones will also make it far easier when tax season comes around.
Many business bank accounts have special offers or perks for new business owners, so shop around. You may also want to get a business credit card so you can cover any unexpected expenses that come up when you’re starting out.
v) Start to build a brand identity
At this early stage, you will also want to think about a business name. Will you name the business after yourself or choose something more broad? Think about the image you want your consulting firm to convey. You can also think about a logo that embodies what your brand stands for, your values, and the image you want your business to have.
At this stage of opening a consulting business, you may also want to secure a domain name and social media handles with your company name.
4. Establish a business plan
Your business model will dictate how you’re able to make money from consulting.
You’ll usually see three different ways to build a profitable business when it comes to consulting :
- Hourly: charges their clients for every hour a consultant spends on their project
- Per project: flat fee for a predetermined scope of work
- Retainer: flat fee per month
One isn’t better than the other. It all depends on what works best for you. It’s also possible to work with all three models depending on the type of project.
In this stage of your process, you’ll want to create a business plan. Without a solid plan, how will you know if your business has the potential for success? If you’re planning to make consultancy your main income source, you’ll want reassurance that your business can turn a profit.
A consulting business plan usually contains the following sections:
- A summary that outlines exactly what your business will do and how it will achieve those goals.
- An overview of the type of consulting service your business provides – for example, are you an HR consultant, a social media marketing consultant, or an IT consultant?
- An analysis of industry trends – how will your consulting company provide a service that people need? Is there a current gap in the market for people with your expertise? What is the size of the market you’re targeting, and how easy will it be to penetrate? Market research is an important part of your plan as you want to be sure there are enough business opportunities out there for you.
- Customer analysis – who exactly will your customers be? A section on your target market will help you identify opportunities, the type of consulting they are looking for, and how you can reach them. Do write this part of your plan; you may want to interview some potential customers so you can truly understand their needs.
- Competitive analysis – an overview of what other consulting businesses are doing – and especially your competitors – will help you understand the potential market share for your services and whether or not the strategies they are taking are successful. Analyzing your competitors will also give you ideas – you will notice things they are missing and the potential for your business to offer something unique.
- Financials – without financial planning, it will be impossible to make a solid business plan. You need to know what your startup costs will be and exactly where your income will come from. How many clients do you need to become profitable, and how much will you need to spend on business operations? Will you need startup funding to get your professional consulting business up and running?
- Marketing plan – once you’ve done your research and know the type of service you want to provide and who you’ll provide it to, you need to write down how you’ll reach those prospective clients. Will you use cold outreach or search engine optimization for your website? What about paid ads or word-of-mouth referrals? Get all your ideas down in your business plan so you can go about achieving those business goals.
When you’re happy with your business plan, you can move on to getting even deeper into the details, deciding on your exact offer, and finding your first clients.
5. Develop your consulting services and set pricing
Once you’ve chosen a model for your new consulting business, it’s time to develop your consulting offers. What will you actually be delivering to clients?
Consider who you want to help in your niche and what that market needs. What are their deepest pain points? What outcomes do they want the most? How can your expertise create a bridge between that pain and those outcomes?
When you’re starting a consultancy, make sure not to make your consulting offers too broad. The more you niche down, the more deeply you can develop your expertise. You’ll also be more likely to attract clients that are dealing with those exact pain points.
You’ll also need to determine a price for those services and packages. If you’re not sure where to start, reach out to your network to get other points of view on what consultants charge. You can ask another consultant, but you can also ask people who’ve hired consultants before.
Creating a defined pricing strategy and listing out exactly what you can offer for each price will make it much easier when it comes to writing your client proposals. You’ll be able to demonstrate a clear value proposition to potential clients.
6. Set up standard operating procedures
We swear this is sexier than it sounds! If you want to stay on top of the admin side of your consulting business, it’s vital that you set up a few things BEFORE you onboard your first clients.
Standard operating procedures are the exact steps you go through when you execute something in your business. Putting SOPs in place ensures that you’re able to do the same thing over and over again and deliver the same results with consistency.
It also sets you up for success when you’re ready to hire help.
To get started, you can use Paperbell to build the entire back end of your consulting practice! For example, you can:
- Create templates for onboarding emails so that you never have to draft an email from scratch again
- Set up your schedule so your clients can book themselves in your calendar
- Design templated intake questionnaires
- Create feedback forms to constantly know what your clients think of your consulting services
- Automate invoice sending and reminder emails
Not only will SOPs make you appear more professional, but they’ll also save you tons of time and let you remain in your zone of genius as much as possible. It’s a win-win as a business owner.
If your business grows significantly and you start to hire employees, having standard operating procedures in place will help to onboard them and ensure they complete work to the same standard as you do.
7. Get your first clients
With all your strategic business decisions in place, you’ll be ready to get your first clients.
Remember the marketing strategy you created as part of your business plan? Now it’s time to put that into action! Start with organic marketing before you get an advertising budget; this will keep your marketing costs low at the beginning.
Reach out to your existing network, and let them know that you’re open for business. Ask people in your network to share the news with their own networks. You can even reach out to people who aren’t a right fit but who may have a referral for you! You may be able to build a consulting business through connections alone if you have a big enough network. If you want to expand your business connections, attending networking events in your niche could be a great start.
If you have a LinkedIn profile, update it with everything you’ve created so far, and make sure to post about the news there. You may also want to reach out to previous employers, colleagues, and other people you’ve worked with directly in the past. You never know who may need your expertise.
Before launching your business, you may want to start building an email list so you can tell potential clients about your offers via email marketing. Content creation and content marketing are also great ways to get your name out there when you’re starting a small consulting business. Never underestimate the power of social media marketing for sharing your expertise. If you establish yourself as an expert in your niche, clients will find you rather than you needing to find them.
Once you have a client, it’s time to wow them. Go above and beyond to provide a consulting experience you can be proud of. If you’re confident they’re happy with your services, make sure to ask for a testimonial. These will be powerful tools you can use to keep growing your consulting business!
5 Mistakes to Avoid When Setting Up Your Own Consulting Business
Deciding to go it alone and set up a consulting business is a big decision, so you should be proud you’ve come this far and taken the leap. If you follow the steps above in this article, you should be well on your way to building a successful business.
Here are some insider tips about common mistakes new consultancy business owners make. Avoid these mistakes at all costs:
1. Lack of a Clear Niche
Trying to go too broad in the beginning can set you up for failure. You want a specific niche and target clients to ensure you can differentiate yourself from competitors in the consulting industry.
If you have a clear area of expertise and can establish yourself as a thought leader in that area, people will seek out your services, and you won’t even need to spend money on marketing yourself.
2. Skipping Market Analysis
If you just bring your business to market without conducting any research as to whether or not people need your services, it’s a big risk. We tend to assume we know what people want; in actual fact, the best way to know what they want is to ask! So do your customer research, speak to potential clients, and understand how you can help solve their problems.
3. Underestimating Your Financial Planning
Setting your prices too low or not anticipating all your costs can lead to a loss before you’ve even got your business off the ground. Conduct a thorough financial analysis to make sure you charge what you’re worth and ensure you make a profit from your first clients. Overestimate your costs so you can avoid any unexpected surprises.
4. Not Establishing Processes
If you start your consulting business without processes, just try a few things and hope for the best; you won’t be able to sustain it as you grow. Creating systems for client management, invoicing, and project delivery can ensure you can build trust with your clients and always provide a seamless experience for them.
5. Lack of Marketing
Putting your business out into the world and hoping it succeeds is not a strategy. Sharing your website on LinkedIn and hoping your dream clients just stumble across it is also not a strategy. You need strategic and well-executed marketing efforts in order to get your message in front of the right people at the right time. Relying solely on word of mouth won’t work either.
Using different ways to reach your potential audience will ensure you get visibility and get the inbound leads you deserve.
By avoiding these common mistakes, you will build a consultancy business with a strong foundation and increase your chances of success and sustainable growth.
5 Best Books on Starting a Consulting Business
Want to take your reading about the consulting industry further? Add these five books to your library to build and grow your consulting business.
What do you do when there’s no rulebook? People who figure out what to do are the linchpins. They’re the indispensable members of an organization.
As a consultant, you’ll often be called on to solve problems that may have never been solved before. What you learn in Seth Godin’s book will be highly useful to give you a new perspective.
If you’ve never heard about the 80/20 principle before, here’s a brief explanation:
80% of your results usually come from 20% of your input. This could mean that 20% of your clients represent 80% of your income, for instance.
In this book, Perry Marshall teaches you how to streamline your business using the 80/20 principle in sales and marketing. You’ll learn how to solve your own business problems, but the book will also help you do the same for your clients.
This book is a must-read to learn how to run your consulting business once you have a client or two under your belt. It will teach you how to maintain authentic relationships with those clients, so that you can help them get the results they’re hoping for. Authentic relationships will also help you get repeat business from the same clients instead of always getting stuck in client-getting mode.
Plus, this book will guide you in how to ask the right questions that really move the needle for your clients.
Want a detailed, step-by-step process to help you start consulting in 90 days? Then make sure to grab this book by Alan Weiss.
He’ll show you how you can start generating revenue quickly while keeping your passion aflame.
This book is different from the others in this list because it’s not focused on business or consulting specifically. But learning how to communicate logically and clearly matters just as much, if not more, than knowing how to market yourself.
That’s exactly what you’ll learn in this book by Barbara Minto. Not only will you learn how to communicate your ideas succinctly, but you’ll also learn how to save time as you’re doing it.
Starting a Consulting Business Checklist
Here’s a quick checklist to keep track of what you need to do to start your consulting business:
- Pick a consulting niche
- Register your business if you’re choosing an LLC
- Choose a business model
- Plan your first consulting packages
- Price your consulting packages
- Get your free Paperbell account
- Set up your calendar and SOPs
- Let your network know you’re open for business
- Reach out to past colleagues
- Ask your first happy client for a testimonial
Start a Consulting Business You Love
If you have deep knowledge of something and want to help others succeed, starting a consulting business could be perfect for you. You’ll be able to work on your own terms while helping your clients overcome their biggest hurdles.
Now you know the 7 steps of how to start a consulting business, it’s over to you!
Create your free Paperbell account to start building a profitable consulting business!