The Complete Guide To Starting Your Own Consulting Business In 8 Easy Steps
Launching a consulting startup? Start here to learn how much to charge, what kind of insurance you might need, how to fund your consulting business, and more!
Have you been wondering how to start a consulting business in 2022?
We’re here to give you the resources you need to begin your own consulting startup in 8 easy-to-understand steps.
Table of Contents
- Step 1: Assess Your Skills & The Market For Consulting Startups
- Step 2: Make Your Business Plan & Define Your Brand
- Step 3: Fund Your Consulting Startup Business
- Step 4: Set Up Your Consulting Business
- Step 5: Invest In Business Tools & Software
- Step 6: Plan To Get Paid
- Step 7: Find Clients & Practice Your Pitch
- Step 8: Plan For Growth
- Is Starting A Consulting Business Right For You?
- FAQs: How To Start A Consulting Business
Step 1: Assess Your Skills & The Market For Consulting Startups
Before you begin your journey to starting a consulting business, it’s important to assess what skills you have and where they could fit in the consulting startup market. When clients are looking to hire a consultant, they’re looking for an expert. They don’t want a consultant who knows a little bit about everything, they want to work with someone who knows everything about one thing. This is why it’s so important to find your niche!
Step 2: Make Your Business Plan & Define Your Brand
Even if your consulting business seems pretty simple, it’s still necessary to have a business plan.
Your plan will map out your business goals and outline how you will reach those goals. It may be necessary to have a business plan when you seek funding through banks or other lenders.
Because every business has a different vision, no two business plans are exactly alike. However, there are a few common components that should be included in all business plans. Those components are:
- Executive Summary: Highlights what will be discussed in your plan and summarizes what your business hopes to accomplish.
- Company Description: Includes key information about your business and the customers that you will serve.
- Competitive Analysis: Who are your competitors, and what are their strengths and weaknesses?
- Organization & Management: An outline of the setup of your organization and names and summaries of the job responsibilities of your management team.
- Market Analysis: An analysis of your industry now and in the future.
- Marketing Plan: An outline of the marketing strategies you will use to draw clients to your business.
- Financial Projections: Your expectations for future revenue based on market research.
Read our article The “How-To” For One Page Business Plans to learn more about how to tackle your very own plan.
Step 3: Fund Your Consulting Startup Business
Whether you start off big or you plan to grow in the future, you’ll need capital for your small business. In some cases, you may be able to use your revenue to fund your expenses and growth. If you don’t have personal savings or friends and/or family who are able to help fund your consulting business (or if you haven’t used crowdfunding resources like GoFundMe), you’ll need a financial boost from a business lender.
Fortunately, there are many financing options out there if you know where to look.
How Much Does It Cost To Start A Consulting Business?
The cost of starting your consulting business (or any new business for that matter) depends on a number of things including the services you plan to offer, how large your business is, and if you plan to be brick-and-mortar or only online, among other factors.
The start-up costs for your consulting business should include some basic office equipment and supplies. There may be training courses or certifications related to your consulting niche you want to invest in as well. Map out potential expenses and round up when you can to account for inflation, unexpected problems, and additional supplies you may require along the way.
If you decide to take the plunge and rely on your consulting business as your full-time employment, there are extra costs you need to consider. Living costs, your own salary, sick days, and health insurance, are all things that would typically be taken care of in one way or another if you were employed full-time by a company or organization. And how much are you saving for an emergency fund? All of these are things to consider.
How Do You Choose The Right Startup Funding Option?
The right funding option is a highly individualized decision.
Have you taken out loans before, do you want a monthly payment, are you more comfortable with credit cards, do you have generous friends or family? All of these are questions that can influence the decision you make when deciding what funding option to pursue. Fully evaluate all of your funding options, the total cost of the loan, and the return investment from taking the loan. Weigh out the pros and cons before signing any paperwork.
Don’t know where to start? Here are a few funding options we recommend:
Step 4: Set Up Your Consulting Business
Niche, business plan, and funding all settled? Great! Now to get into the (hopefully) exciting task of actually setting up your consulting business!
Do You Need To Register Your Consulting Business?
Before you launch any kind of business, you will have to register your business name in the state in which you operate. You also have to register with federal, state, and local agencies. If you need additional licenses or certifications for your niche or state of operation, you should budget for extra start-up costs and time to complete these added tasks.
In addition, as we mentioned earlier when going over business checking accounts, you will need to register with the IRS to get an Employer Identification Number if you plan to ever hire employees. Do your research to make sure you obtain licenses and permits to operate your business based on any state or local regulations. Registration of your small business is required if you plan to seek any kind of funding now or in the future.
Besides being a legal requirement, registering your consulting business makes you look more professional and legitimate to your potential clients and other business owners you may network with!
Do You Need Business Insurance?
Business insurance is critical for the protection of your business. From property insurance that protects your office building to liability insurance that safeguards you from lawsuits, there are a few different types of business insurance to consider for your consulting business.
- General Liability Insurance: This type of insurance policy is necessary for businesses that have a physical storefront. General liability insurance covers the legal fees and/or medical bills incurred if something (like a slip and fall) happens to a client on your property.
- Professional Liability Insurance: This type of policy is also known as errors and omissions (E&O) insurance. If you give bad advice in a professional setting or hurt someone while providing a service and a client decides to sue you for it, E&O insurance can protect you by paying attorney’s fees, settlement expenses, court costs, etc. up to the full amount of your policy.
- Worker’s Compensation: If you have employees or plan on having them in the future, your consulting business needs to have worker’s compensation insurance. This policy will cover the medical expenses, wages, and legal fees of an employee that is injured on the job or suffers a form of work-related ailment. Most states require all W-2 employees to be covered under worker’s compensation insurance, but laws vary state by state.
- Business Renters Insurance: If you plan to rent a storefront for your consulting business, it’s likely that business renters insurance is a requirement for your potential lease. Business renters insurance is like homeowner’s insurance in that it covers certain accidents and damages to the property and building you’re renting.
Step 5: Invest In Business Tools & Software
Even though you will be keeping an eye on your finances through your business checking account, it’s important to also register for and set up an accounting system for your consulting business. While you can hire a bookkeeper to monitor the money coming in and going out of your business, you can also use accounting software to track everything yourself.
Step 6: Plan To Get Paid
While your consulting business is a labor of love and maybe even a passion project, it is still a business. As a small business owner, you need to have revenue, without it you won’t be able to pay yourself, potential employees, or grow your business.
So, how are you going to get paid?
How Much Should You Charge For Consulting?
To have a successful and profitable consulting business, you will need to set rates. This is going to be a bit of a balancing act as a new business owner. If your rates are too high, they may scare away potential clients, if you set your rates too low, clients may not take you seriously and you probably won’t bring in enough revenue to cover your regular expenses.
In order to determine how much to charge for consulting, you first need to decide what your pay structure will look like. The three main structures you have to choose from are: per project, per hour, and under retainers. Pick the best way to be paid based on your industry.
Once you’ve made a list of all of the expenses of your consulting business and determined what you will need to charge and how many clients you will need to have to make enough revenue to cover those costs, you need to do some research into your competitors. How much do they charge? How do they charge? What is their experience? Do they have different credentials than you?
You can learn about your competitor’s rates by visiting their websites, checking their social media, looking through their brochures, or calling to inquire. If you don’t have an obvious advantage over other local consultants in your niche (years of experience in the industry, highly specific in-demand industry, etc.) it’s important to make sure your fees are competitive.
How Do You Bill Your Clients?
As we discussed earlier, mobile POS systems can be an invaluable resource for small business owners. The majority of point of sale systems will allow you to accept multiple forms of payment, create invoices for clients, and keep your payments organized in one easy-to-access place. Invoicing is crucial when it comes to getting paid. It not only will make your clients feel more at ease to pay you through a secure and professional portal, but it helps you get paid faster.
An important part of being a business owner is to know what your legal recourse is in tricky situations with your clients. If you have clients who refuse to pay, dispute your fees, or otherwise get in the way of you being paid for your work, you have to know how to deal with them and keep yourself and your business safe. No small business story should end because of unpaid invoices and negligent clients.
We do have some strategies you can try if you run into a situation like this with a client.
- Make multiple attempts to contact your client
- Discuss a payment installment plan
- Charge a late fee
- Cut services
- Connect with the client’s company leadership
Some more aggressive tactics you can consider if these steps fail include: invoice factoring, using a debt collection agency, taking a client to small claims court, and writing the money owed off as a bad debt.
Step 7: Find Clients & Practice Your Pitch
It’s time to start building your client list. Like any business, word-of-mouth referrals from happy clients will prove to be the best way for you to meet potential customers. When you’re just getting started, however, it’s hard to take advantage of this form of marketing.
We’ve got some tips to help you find your first client and write your pitch!
How To Find Clients
Here are some of our most highly recommended strategies for marketing your business to find clients
- Establish Your Web Presence: Everything has a website in this day and age. If your consulting business doesn’t, it’s going to be difficult for potential clients to find you or learn anything about you, your experience, or your business.
- Consider Social Media: While not a necessity, social media is a free way to provide potential clients with important information about your consulting business. Make sure any pages you create have your contact information, the services you offer, and regular business hours. If you want to take it a step further, consider using social media to market your business.
- Make A Newsletter: Create a simple newsletter with important information and updates about your business! You could send a physical copy of this newsletter through the mail but the more cost-effective option would be to offer an e-newsletter via an email marketing service. Include a sign-up option on your website and social media pages.
- Make Brochures: If you have the budget for it, you could consider making a brochure or flyer to post around your community. Make sure you include the services you provide, your value proposition, the industries you specialize in, and your credentials, training, and/or education.
- Be A Guest Speaker: Use your knowledge and experience to speak at a dinner, luncheon, and other industry events. If public speaking isn’t your cup of tea, you can also attend these events and network with potential clients. Networking is key to running a successful consulting business and with many events remaining online due to COVID-19, it is easier than ever before to attend.
- Call Local Businesses: Cold-calling businesses in your area that could use your services is another way to attract potential clients. The goal of your calls should be to get a meeting with whoever is in charge of making decisions for the business to sell yourself and your services to secure a new client.
Prepare Your Pitch
Before you start trying to find clients, however, you need to write your pitch/proposal. Think of it as your mission statement, goals, and self-promotion all in one. There are several different forms your pitch/proposal can take. Pitches are typically meant to help you interest a client while proposals are used to seal the deal.
Here are several things to keep in mind: Make sure you stay concise, demonstrate the extent of your research, tell a story, include information about the financials, use photos/graphics, and keep your formatting consistent. Don’t include too much information, or overuse jargon or acronyms. And if you are showing a presentation, keep your deck under 10 slides.
Proposals are usually required before a client will agree to work with you. A consulting proposal is meant to outline your working relationship and expectations. These documents typically present the nature, scope, and timeline of a consulting project while highlighting the problem your prospective client is facing and how you are the solution. While a pitch will typically resemble a slideshow, a proposal will look more like a formal letter.
Step 8: Plan For Growth
With the right amount of revenue, a number of clients, and successful marketing, it’s entirely possible for you to expand your consulting business to include employees or subcontractors to help you manage your workload.
If your goal is to build a consulting firm out of your small business, plan ahead and make sure you are operating legally when expanding or deciding to hire employees. Check out our article on how to hire your first employee to learn more.
With growth does come more expenses. You may not be able to run your business out of your spare room at a certain point and need to invest in renting or purchasing a storefront. Check on your expenses monthly and budget accordingly for any big changes you plan to make. If a brick-and-mortar location is in your small business’s future, read our article on commercial real estate loans to set yourself up for success.
Also, plan ahead and consider attending seminars, networking events, training courses, and renewing your certifications regularly to make sure you are aware of any major changes in your industry.
Is Starting A Consulting Business Right For You?
Monetizing your expertise by starting your own consulting business can be not just lucrative, but also a personally fulfilling endeavor if you care greatly about your industry.
Sharing your knowledge can not just help improve an individual business, but actually make the local industry better as a whole through collaborative work! With careful planning, you have a great chance of reaching new clients and meeting any goals you set for yourself and your consulting business. Good luck!