How to Start a Consulting Business

photo of a consulant meeting with two clients in a cafe

So you’ve clocked a few years in the business world, and now you’re thinking, “Hey, I could help other folks do this, too!” Welcome to the exciting and empowering world of consulting.

Even just a couple of years of your hands-on experience is a treasure trove for businesses out there struggling to find their feet or seasoned companies trying to find a new direction.

Now, the real trick is not just knowing your stuff but knowing exactly who needs your stuff. We’re talking about carving out your niche. That sweet spot where your know-how meets the market’s oh-please-help-us.

In this guide, we’re diving deep into everything – and we mean everything – you need to know to figure out if consulting is your next big move, how to nail down that niche, and all the details on getting your consulting business off the ground.

Consultant vs. contractor vs. freelancer

Navigating the maze of professional self-employment labels – consultant, contractor, and freelancer – demands a clear understanding of their unique and sometimes overlapping roles. Though all three cater to providing services to businesses, distinctions are crucial.

Contractors and freelancers, typically self-employed, are tethered to specific, contract-based service provisions for companies. In contrast, consultants, potentially independent or aligned with a firm, dispense specialized advice, delivering expertise and evaluative assessments in their domain.

The dynamics may occasionally intertwine. As a consultant, while your core service may be to provide strategic advice, occasionally, your role might metamorphose into a contractor’s sphere. Envision evaluating a client’s customer service team, providing strategic advice, and then being engaged further to implement and drive that strategy – a task steering towards a contractor’s role.

Different consulting models

Independent Consultant Model. You are the sole operator, managing and delivering all aspects.

Pro: Full control and flexibility.
Con: All rests on your shoulders – expertise and management skills are crucial.

Consultancy Firm Model. You lead a team, contributing expertise and management.

Pro: Scalability and capacity to tackle larger projects.
Con: Comes with team management responsibilities and complexities.

Productized Consulting Model. You develop and sell standardized expertise “products” (e.g., courses, tools).

Pro: Scalable passive income and broader audience reach.
Con: Needs product development and marketing prowess.

Hybrid Consulting Model. You blend models, e.g., individual consulting plus productized services.

Pro: Flexible, tailored to your skills and market needs.
Con: Requires careful balance and strategic planning.

Networked Consulting Model. You ally with a network of consultants, sharing and collaborating.

Pro: Enhanced service offering, low overheads.
Con: Reliant on building robust professional relationships and collaborations.

Subscription Consulting Model. You offer services for a regular subscription fee.

Pro: Stable revenue and deeper client relations.
Con: Best suited for consultants offering continual services.

Selecting the right model hinges on aligning your goals, working style, and client needs with the model’s characteristics, ensuring a strategic fit that propels your consulting business forward.

How to start a consulting business

1. Decide if consulting is right for you

The consulting industry is huge. Management consulting alone is estimated to be about $330 billion in 2023. Consulting sectors include the following:

  1. Finance. Financial management consulting aids businesses in managing their financial operations, investments, and strategies efficiently to ensure profitability and compliance.
  2. Real estate. Real estate investment consulting guides investors and companies in making savvy property investment choices, managing portfolios, and navigating property laws and regulations.
  3. Education. Educational consulting assists educational institutions in curriculum development, technology integration, policy-making, and, potentially, student recruitment strategies.
  4. Tech. IT consulting helps businesses leverage technology effectively, ensuring robust cybersecurity and smoothly implementing new software and tech solutions.
  5. Health care. Healthcare management consulting supports healthcare providers in optimizing operations, adhering to regulations, and implementing technology while ensuring quality patient care.
  6. Retail. Retail business consulting advances strategies related to customer experience, inventory management, e-commerce, and ensuring a thriving presence in both online and offline platforms.
  7. Manufacturing. Manufacturing operations consulting enhances production efficiency, reducing costs, ensuring quality, and implementing lean manufacturing practices.
  8. Hospitality. Hospitality consulting boosts customer satisfaction, optimizing operational processes and innovating services and offerings in hotels, restaurants, and related businesses.
  9. Agriculture. Agribusiness consulting aids in sustainable farming practices, supply chain management, and ensuring profitable and eco-friendly agriculture business operations.
  10. Marketing. Marketing strategy consulting guides businesses in crafting and implementing effective marketing strategies, utilizing digital platforms, and developing brands.

Picking a domain where your expertise shines isn’t just smart; it’s crucial. Imagine being a wizard in the tech world, like my friend Clara, who identified a glaring gap in small businesses’ security protocols after just a year in cybersecurity. Her consultancy now shields businesses from digital threats, ensuring they thrive without lurking fears of data breaches.

Think about your everyday. If you love that nine-to-five stability, lean towards guidance from leadership, and find joy in producing rather than selling ideas, maybe keep that consultancy dream on the back burner for a tad longer.

For busy moms managing family responsibilities, starting a side hustle can be a strategic step toward transitioning into a full-time consulting role. This approach allows for a gradual shift, accommodating family needs while building a professional career.

But if brewing data-driven strategies excites you and you’re itching for the liberty to paint your own professional journey, consulting might just be your arena.

Becoming that go-to consultant isn’t merely about knowing your stuff (although that’s a big chunk!). It’s also about weaving through the company’s structural and cultural maze with finesse, building that oh-so-important trust bridge with potential clients, ensuring they’re heard and truly understood.

Winning hearts (and clients!) boils down to:

  • Keeping that customer-first mindset glowing
  • Becoming that problem-solver everyone can rely on
  • Flexing those analytical muscles
  • Being the rock – embodying dependability
  • Maintaining absolute professionalism
  • Crystal clear and empathetic communication
  • Adapting with flexibility in your approach

Consider Alice, a finance consultant who identified a recurring budgeting hiccup in startups. Her fresh, dynamic, and transparent approach and unwavering commitment to tailoring strategies to each unique client resolved their fiscal headaches and turned several startups into financial success stories. And Alice’s consulting business soared as a result.

2. Validate your expertise as a consultant

Navigating through the intricate maze of consultancy requires more than just an entrepreneurial spirit. A robust combination of education, work experience, and relevant certifications lays the foundation for a successful consultancy career.

Consultants typically have a bachelor’s degree, optimally in a domain that aligns with their consulting focus. Moreover, continuous education through further certifications or an MBA can elevate your credibility and expertise, particularly in the eyes of discerning clients.

Consultants often navigate complexities akin to those senior-level executives face, providing strategic insights and fulfilling knowledge gaps. Whether you choose to be a versatile consultant addressing varied issues or niche to offer specialized services, having a minimum of two to three years of experience will stand you in good stead.

An assortment of certifications can embellish your consulting profile and confer a competitive edge, allowing you to charge a premium for your expert services. Here are fifteen areas and certifications that cater to various consulting specialties:

  1. Project Management. Agile Certified Practitioner (ACP), Associate in Project Management (APM), Business Value-Oriented Principles (BVOP), Certified Associate in Project Management (CAPM)
  2. Financial. Certified Financial Planner (CFP), Certified Public Accountant (CPA), Chartered Financial Consultant (ChFC), Financial Risk Manager (FRM)
  3. Marketing. Certified Marketing Management Professional (CMMP), Professional Certified Marketer (PCM), Certified Content Marketing Specialist (CCMS), Digital Marketing Pro (DMP)
  4. Sales. Certified Inside Sales Professional (CISP), Certified Professional Sales Person (CPSP), Certified Sales Leadership Professional (CSLP), HubSpot Inbound Sales
  5. Human Resources. Certified Professional (IPMA-CP), Senior Professional in Human Resources (SPHR), Society for Human Resource Management Certified Professional (SHRM-CP), International Public Management Association for Human Resources (IPMA-HR)
  6. Management and Strategy. Google Ads, Google Analytics, HubSpot Content Marketing, HubSpot Inbound Marketing
  7. Environmental and Sustainability. International Society of Sustainability Professionals (ISSP-SA), Association of Climate Change Officers (ACCO), Leadership in Energy and Environmental Design (LEED Green Associate), Green Globes Professional (GGP)
  8. Information Technology. Cisco Certified Network Associate (CCNA), CompTIA A+, Certified Information Systems Security Professional (CISSP), Microsoft Certified: Azure Fundamentals
  9. Legal. Certified Legal Consultant (CLC), Legal Nurse Consultant Certified (LNCC), Certified E-Discovery Specialist (CEDS), Associate Legal Project Practitioner (ALPP)
  10. Health and Safety. Certified Safety Professional (CSP), Associate Safety Professional (ASP), Occupational Hygiene and Safety Technician (OHST), Safety Management Specialist (SMS)
  11. Supply Chain. Certified Supply Chain Professional (CSCP), Certified in Production and Inventory Management (CPIM), Certified in Logistics, Transportation, and Distribution (CLTD), SCPro Level One
  12. Engineering. Professional Engineer (PE), Engineering Manager Professional Certification (EMPC), Certified Systems Engineering Professional (CSEP), Associate Value Specialist (AVS)
  13. Data and Analytics. Certified Analytics Professional (CAP), Data Management Professional (DAMA-CDMP), Associate Certified Analytics Professional (aCAP), Microsoft Certified: Data Analyst Associate
  14. Quality Management. Certified Manager of Quality (CMQ), Certified Quality Auditor (CQA), Certified Quality Engineer (CQE), Certified Six Sigma Black Belt (CSSBB)
  15. Nonprofit. Certified Nonprofit Professional (CNP), Certified Fund Raising Executive (CFRE), Nonprofit Leadership Alliance (CNP), Certified Nonprofit Accounting Professional (CNAP)

Embarking on the consultant’s path is about leveraging your specific skills and knowledge, fortified by accredited certifications, to guide businesses toward strategic accomplishments. Each certification enhances a unique facet of your consultancy, propelling you toward becoming an indispensable asset for businesses navigating through their respective challenges.

3. Pick your consulting niche

In consulting, niching down to offer specialized, pinpointed expertise can become your calling card.

Let’s demystify some potentially lucrative niches in consulting:

  1. Strategy Consulting. Aids companies sculpt their business or marketing strategies, meticulously aligning resources, identifying competition, and creating a roadmap to fulfill high-ROI projects.
  2. Lead Generation Consulting. Spearheading initiatives to unearth business prospects and revenue streams, thereby facilitating companies in scaling their operational heights in sales and customer acquisition.
  3. Financial Advising. Steering businesses through financial management’s labyrinth ensures they amplify revenue, enhance profit margins, and mitigate financial risks.
  4. Business Operations Consulting. Streamlining company operations and curtailing expenditures by orchestrating client management, product delivery, and supply chain processes.
  5. Information Technology (IT) Consulting. Offering training to staff and executives on adept utilization of software and equipment while concurrently scrutinizing security protocols and mitigating potential IT threats.
  6. Human Resources (HR) Consulting. Designing and implementing HR policies, ensuring legal compliance, aiding talent acquisition, and developing workplace culture to enhance employee satisfaction and productivity.
  7. Marketing Consulting. Crafting and executing marketing strategies, leveraging various channels (digital, print, social media) to boost brand visibility and drive customer engagement and sales.
  8. Environmental Consulting. Assisting businesses in adhering to environmental regulations, implementing sustainable practices, and mitigating environmental risks and impacts.
  9. Health and Wellness Consulting. Guiding organizations in developing and implementing health and wellness programs, ensuring workplace safety, and adhering to industry-specific health regulations.
  10. Legal Consulting. Providing expertise in navigating legal intricacies, ensuring companies adhere to regulations, manage legal risks, and deal effectively with legal issues and disputes.

And don’t shy away from overseas markets in these niches. Language differences shouldn’t hold you back, thanks to translation services that can facilitate effective communication. Your specialized skills could be in high demand abroad, so don’t let language barriers limit your potential.

4. Conduct market research

Identifying your niche is like finding the right musical note. But to create a symphony, you need to understand the rhythm of the market. It’s essential to discern who you’ll serenade with your expertise.

To define your target audience and visualize your ideal client, consider these guiding questions:

  • What kind of teaching environment energizes me: individual, small group, or large corporate sessions?
  • Who’s likely to invest in my expertise without batting an eye?
  • Is my camaraderie best suited for budding entrepreneurs, middle managers, or boardroom tycoons?
  • Are there specific behaviors in clients that I admire or can’t stand? What sort of demographics typically exhibit these behaviors?
  • With whom do I share an intellectual wavelength regarding interests and communication dynamics?
  • Can I pinpoint the problems these folks are grappling with, which I’m equipped to solve?

Research the competition

So, you’re ready to serve a gourmet of solutions. But how do you ascertain there’s an appetite for what you’re dishing out? To test the waters:

  • Identify potential clientele genuinely intrigued by your offerings.
  • Pinpoint prevailing challenges companies in your domain are wrestling with.
  • Map the geographical span of your prospective clients – are they local or global?
  • Take a headcount of rivals lurking in your vicinity.
  • Test the elasticity of your clients’ wallets – what premium are they willing to shell out?

In essence, entering the consulting arena demands more than just expertise. It’s about understanding the market’s pulse, recognizing potential allies, and anticipating challenges. Every insight gained nudges you closer to becoming a consulting virtuoso.

5. Write a business plan

Establishing a consulting business requires more than just expertise in a specific field. Crafting a robust business plan acts as your compass, navigating through the initial chaos and directing toward a harbor of success.

Your business plan is more than a document; it’s a narrative that tells the story of your ambitions, strategies, and foreseeabilities. Here are the key sections you should include in your plan:

  1. Executive summary. Paint a portrait of your venture, infusing it with your mission, leadership insights, expansion blueprints, and elements that will script your success saga.
  2. Company description. Elaborate on the ‘who,’ ‘where,’ and ‘how’ of your service, crafting a story about the impact you intend to create.
  3. Market analysis. Unveil the landscape of your industry with a keen eye on competitors, emerging trends, and pulsating demands. For example, in the constantly evolving fintech space, highlight your expertise in emerging technologies like blockchain and AI compared to competitors who might be sticking to traditional consulting.
  4. Offerings. Narrate the array of your products and services, and show why your offerings will be the choice over others.
  5. Target market. Sculpt a detailed sketch of your ideal client, weaving in why they are the puzzle pieces that complete your market image and how you intend to cater to their specific needs.
  6. Strategy. Identify your methodologies for brand building and customer accrual, ensuring your strategies blend conventional and innovative approaches. For example, you can leverage inbound marketing using insightful content on fintech advancements, client case studies, and targeted outreach through LinkedIn.
  7. Financing needs. Show your fiscal roadmap detailing overhead, operational expenses, incentive programs, and how you intend to fuel your financial engine through fundraising, loans, or other financing options.

Go a step beyond just documenting and dive deep into strategic detailing. Specify the tactical aspects in your strategy section, such as employing SEO-rich content marketing or establishing partnership channels. Similarly, provide a detailed breakdown of the initial expenses versus operational costs in financing, ensuring a clear understanding of short-term and long-term financial demands.

Embarking on your consulting voyage with a meticulously crafted business plan will not only grant you clarity and direction. Still, it will also serve as a compelling narrative when attracting clients, partners, and investors. Craft your story,

6. Register your consulting business.

Choosing between an LLC, sole proprietorship, partnership, or corporation isn’t just a registration formality but a pivotal decision impacting your liability, taxation, and operational dynamics. Analyze based on:

  • Risk management. Consider the potential liabilities and risks involved in consulting and select a structure offering optimal protection.
  • Tax implications. Each structure comes with unique tax attributes and obligations, thoroughly evaluated by a tax expert.

Most consulting businesses are formed as an LLC. This ultimate guide on how to form an LLC should help you get started quickly.

7. Build your brand identity, website, and online presence

Don’t underestimate the power of a potent brand, even for small businesses and consultants.

Your brand, essentially your company’s public face, should mirror your vital and most advantageous characteristics. Especially for consultants, where credibility is paramount, a well-crafted brand identity is not merely beneficial – it’s indispensable.

Here’s why: imagine aiming to double the price of your $10,000 projects. Achieving this requires showing and elevating perceived value, and stellar design plays a pivotal role in this context.

Before plunging into networking and client interactions, meticulously consider the following:

  • The persona your brand should emanate
  • Your target demographic
  • The unique value you bring
  • Your brand values
  • The essence of the client experience you deliver

Your responses will mold the nucleus of your brand and guide subsequent decisions, spanning from company name and logo to website design.

Building a robust brand identity needn’t be financially strenuous. Guides on costing for various design elements like logos, business cards, brochures, and websites cater to varied price ranges, ensuring there’s something to accommodate your budget.

8. Set your consulting prices and choose a business model

Navigating through the maze of pricing models and pinpointing a structure that magnifies the value of your intangible yet indispensable consulting services can be daunting yet pivotal.

While consulting may not be capital intensive, ensuring your pricing covers your operational costs and propels profitability is imperative. Constantly monitor expenses and align them with revenue.

Hourly pricing

This model is straightforward and especially suitable for startups and smaller projects with transparent work scope.

Formulating the hourly rate: Hourly rate = desired annual salary ÷ annual billable hours

To carve out an annual income of $150,000 with an assumption of 1,800 billable hours (considering vacations and non-billable work), your rate would be: 150,000 ÷ 1,800 = $83.33/hour.

Project-based pricing

Embraced often for finite projects with clear objectives and timelines, this model assures clients of a fixed cost.

Understand the scope thoroughly, estimate the hours and multiply by your hourly rate, adding a margin for contingencies.

For an IT project estimated to consume 120 hours and desiring to make a 20% profit margin on your hourly rate of $83.33, you’d charge: (120 hours × $83.33/hour) × 120% = $11,999.60

Retainer model

Ideal for offering continual support, this ensures a steady flow of income and solidifies client relationships.

If managing a company’s website and ensuring its optimal functionality demands 15 hours a month of your time, your retainer could be: 15 hours/month × $83.33/hour = $1,249.95/month

Measuring against competition and goals

Whether your services will be charged hourly or per-project basis should emanate from both market standards and intrinsic cost and value parameters.

Charging for value and access

An advanced pricing strategy to explore as you burgeon in experience and reputation is value-based pricing, where your charges are based not on the hours spent but on the value imparted to the client. Additionally, charging for access, where clients pay for the privilege of having you on standby for advice and support, could exponentially enhance revenue as your consulting brand grows.

In the intricate voyage of consulting business establishment, your pricing strategy isn’t merely a reflection of your services’ monetary worth but a beacon of your brand, value, and professional ethos. So, choose wisely, tread strategically, and sculpt a pricing matrix that is a testament to your expertise.

9. Market your consulting business

The lifeblood of your practice will be consistently attracting clients, crafting connections, and building a reputation that resonates across markets. Here are your stepping stones to success:

  1. Crafting an elevator pitch. Develop a succinct, compelling elevator pitch that encapsulates your value proposition, enabling you to captivate potential clients or collaborators in seconds. For example, instead of saying, “I provide IT consulting,” opt for something more specific and evocative, like “I specialize in crafting bespoke IT infrastructures for SMBs, ensuring seamless, secure, and scalable operations.”
  2. Building a brand. Create a coherent brand strategy with material like a unique company logo, business cards, brochures, or a website that uniformly communicates your services, ethos, and unique selling proposition across platforms.
  3. Commencing marketing campaigns. Execute a well-researched marketing campaign leveraging digital and traditional media platforms, ensuring your message effectively permeates your target demographic.
  4. Navigating the networking circuit. Engage with local business communities, industry forums, and events to forge relationships that could blossom into collaborative ventures or client relationships.
  5. Maximizing referral opportunities. Activate profiles on referral and review platforms to authenticate and amplify your expertise and reliability.
  6. Digital & social leverage. Select a social platform aligning with your communication style and mastery, ensuring your social media journey is impactful and sustainable.
  7. Harnessing referrals and reviews. Reach out, communicate your venture, and transparently discuss how your clients can be integral in your journey.
  8. Investing in your reputation. The buoyancy to take calculated risks, combined with your expertise, paves the path to a rewarding consulting career.

Client acquisition and retention in consulting do not solely rest on your expertise but intertwine with your networking, marketing, and client relationship strategies. Deploying a multifaceted approach, leveraging offline and online platforms, and consistently delivering value will solidify your presence and success in the consulting arena. A robust plan, relentless commitment, and adept execution of strategies are the trifecta that will sculpt your consulting business’s thriving future.

10. Build a sales strategy and generate sales leads

Cultivating sales leads involves meticulous strategies that bridge the gap between your services and your potential clients.

  • Leverage current clients. Happy clients can be ambassadors for your services. Encourage referrals through incentive programs.
  • Infiltrate communities. Consider hosting webinars or workshops relevant to your expertise, not just physical events.
  • Cold outreach. Don’t just send emails; consider using LinkedIn for a personalized cold outreach strategy, tapping into prospects professionally.
  • Key tactic: Use CRM tools to track, manage, and analyze customer interactions and data throughout the customer lifecycle, enhancing customer service relationships and facilitating sales growth.

Anchoring success in sales meetings

A successful sales meeting aligns your solutions with the client’s needs elegantly and empathetically.

  • Use visual aids. Infographics or brief slide decks can make your pitch more digestible and memorable.
  • Employ psychological tactics. Techniques like the “Yes Ladder” can gradually align prospects with your propositions through affirmative interactions.

Crafting a compelling sales proposal

Elevating your sales proposal can entail merging client-centric solutions with a dash of strategic positioning.

  • Employ the decoy effect. Introduce a pricing strategy where you place a slightly inferior, similarly priced option next to a substantially superior one, guiding clients towards higher value options.
  • Include testimonials. Leverage previous success stories and client testimonials to add authenticity and reliability to your proposal.

Draft a comprehensive consulting agreement

A consulting agreement shouldn’t just be a formality but a clear, mutual understanding of deliverables, scope, and boundaries. In addition to typical provisions, include the following:

  • Service Level Agreements (SLAs). Define expected service quality and delivery parameters to prevent misunderstandings.
  • Revision clauses. Highlight conditions and charges for revisions or changes the client requests after work has commenced.

Cultivating and nurturing client relationships

A symbiotic client relationship can foster repeat business and turn clients into brand advocates.

  • Create a client onboarding process. Ensure smooth, structured entry for new clients, acquainting them with your processes, team, and communication channels.
  • Client success programs. Implement programs that consistently check in with clients, ensuring their goals are met and adjusting strategies as needed.
  • Client appreciation. Consider sending thank-you notes, celebrating client achievements or anniversaries, or occasionally providing value-added services as a token of appreciation.
  • Feedback mechanism. Implement a structured feedback mechanism that collects client insights post-project and during the engagement to tweak and improve the process dynamically.
  • Customer Relationship Management (CRM) software. Use CRM software to track interactions, manage follow-ups, and ensure no client communication or requirement falls through the cracks.

Embarking on a consulting business journey demands more than expertise; it requires steadfast determination, strategic planning, and a mastery of balancing myriad elements from analysis to client management. Your work hours will flux, and your lifestyle will adapt, but the potential for constructing a profitable and sustainable business lies within this evolution.