How to Start a Consulting Business: 9 Steps to Success
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Do you have a vast degree of knowledge in a particular area and want to offer your services to other businesses that could benefit from your experience? As a consultant, you can do just that no matter what your field of expertise may be. Successful consulting businesses are part of a growing industry that totals $132 billion worldwide with $64.4 billion in the United States alone. To cash in on this trend, you need to know how to start a consulting business and grow your client base the right way.
No matter what types of businesses you want to help, consulting business ventures are a growing industry. With more than 5 percent growth year-over-year since 2017, you have plenty of opportunities to find paying clients and make good use of your specialized knowledge and skills.
We’ve created this complete step-by-step guide to success to help you get started.
1. Choose Your Niche Market
One of the fastest ways to earn a decent consulting income is to choose a specific niche that will let your prospective clients know exactly what it is that you do. Having a niche market makes it easier to market to people who actually need services in your field of expertise. For example, you may consult for major corporations, small businesses, or solopreneurs who want to scale and grow their businesses over time.
Choosing a niche market means that you will need to evaluate your strengths, skills, and talents. This is the stage where you consider whether you have the qualifications to start a consulting practice and determine if you need additional services to reach your goal.
Once you know your strengths, it is equally important to discover your weaknesses in the area where you are choosing to work. Your prospective clients are going to want to know that you can offer a real solution and value to their company before hiring you. Shore up those skill sets where you may be lacking and you will have a much easier time securing quality clients.
This could mean that you need to return to the classroom to get special certifications or licenses to consult in your desired field or attend conferences and networking events where you can learn from others. You may also want to join professional associations that can help solidify your knowledge, allow you to advertise on their website, and lend you credibility in the eyes of potential consulting leads.
2. Identify Your Ideal Client
To be a successful consulting business owner, you need to target a specific demographic rather than focusing on a broader client base. Consider the types of businesses your ideal clients run, their level of success, and their budget.
Whether you’re a marketing consultant, content strategist, or you offer human resources consulting or some other specialty, this is the time to really brainstorm who you prefer to work with. Jot down every characteristic of who you would serve. Are they businesses that are just getting started, behemoths that need new life infused into their structure, or mid-size businesses that need help with a specific aspect of growth?
You may even want to be as specific as naming what types of businesses you want to work with: non-profits, corporate businesses, franchise owners, or mom-and-pop shops, for example.
Once you know who you want to work with, it makes your marketing strategy that much easier. You will know who you are targeting, where you want to look, and what problem your key demographic needs you to help them solve. You’ll find more tips and valuable marketing resources in step six.
3. Identify Your Business Structure
Businesses in the consulting field can be run in any number of ways depending on how you want to handle finances, employee salaries, operating costs, and grow your business over time. You’ll need to determine your business structure before you officially start to offer your services to potential clients. Consulting business owners can register with the government as a sole proprietorship, limited liability corporation, or even an S-corp.
Whether you’re an independent consultant or run a consulting firm with business partners, you are a business first and foremost and you need to function as such. This means completing the necessary paperwork and legal forms to establish a legal business structure with the government (you can contact an experienced business attorney to help if you’re unsure). You should also talk to your tax professional about how you will pay federal taxes on your income as part of your legal structures.
Consider what you most want out of your consulting business model. If you are the only employee in the business, a sole proprietorship might be right for you. Depending on where you live, you may not even need to file with the government to start a business as a sole proprietor. All money that you make will still be taxed, but it will be passed through to your personal tax return at the end of the year.
If you are concerned about legal liability for your consulting services, you may want to form a limited liability corporation (LLC). You will receive an employer identification number for this type of legal business structure.
Finances are often handled the same way if you are the sole employee, but this offers a layer of protection for you if an unhappy client decides to sue. It protects your personal assets such as your house, car, and even your bank account. Clients can only go after the business instead of you as a person.
For those who are bringing in a substantial consulting income in the US, an S-corp might be a better fit when it comes to your business venture. You will need to put yourself on payroll which means that you will have a W-2 at the end of the year. Federal taxes are also filed for both the business and the individual at the end of the fiscal year.
As an independent consultant, consider which legal structures fit in your business plan the best. If you need help deciding what structure is right for you, consider meeting with an accountant to review your projected consulting income, business plan, and goals. You will also need to file the appropriate paperwork and legal forms with your local government depending on your business structure. This also determines what sort of license you may need to operate your business.
4. Set Your Hourly Rate
One of the most important aspects of starting a business in the consulting field is knowing what you plan to charge future clients. As part of your business type, you should know what your projected hourly rate will be for your first few clients, even if you have plans to increase that rate as time passes. This will also help you to define your target market as some businesses may not be able to afford your rates.
A successful consultant knows that they need to adjust their pricing strategy according to how much overhead they will have. Fortunately, your business may not have much overhead that needs to be offset with rates. If you plan to only run your business online or meet clients in neutral locations or at their place of business, you will not need to invest in rent for your office space.
For consulting business owners who plan to work with an independent location, you can set lower rates to start building up a pool of potential clients, generate word of mouth, and start with your organic marketing. Instead of hourly income, you might bill on a flat rate, per-project basis.
Once you have a solid list of consulting projects lined up and defined your style of business, you can raise your rates and substantially improve your annual consulting income. This is how many successful consulting business models lay out their pricing structure.
If you are unsure where to set your rates for client projects, consider referring to the national average pricing structure to be competitive. According to Indeed’s pricing guides, consultants frequently make $32 to $40 per hour. On an annual basis, some consultants make somewhere in the ballpark of $60,000 depending on their specialty.
Do some research on competitor pricing to get a better feel of the aspects of pricing and what you can charge. If you know an awesome consultant, look at their pricing guides, including hourly and flat project rates, to determine where you should start. Diving into some competitive analysis may also give you an idea of complementary services you can offer in your niche.
Some consultants, such as marketing or management consultants, or those who work in the human resources consulting field may set higher project rates. Again, looking into competitor pricing for each field of expertise will help.
Consider how much you want to make annually to pay your bills, cover the operating costs of the business, and pay annual taxes and federal taxes. Divide that number by 12 to see how much you need to make monthly and then divide that sum by the number of hours you plan to work each month or based on how many consulting projects you will take on (for payment on a per-project basis).
This will help you establish a realistic pricing strategy for your client proposals and make your business venture a viable source of full-time income. Keep in mind that the consulting market does not present as many opportunities for passive income as other fields, such as running a software business.
5. Get the Right Tools
Even if you opt not to have an office space, there are still other expenses beyond business cards or employee salaries that you need to consider before you open your doors in the consulting field. Most people already have a jump start on the basic tools needed to run a business online, like a laptop, internet service, and mobile phone, but you might want to consider having a designated phone and computer specifically for business purposes.
Living in the digital age means that you will also need a well-designed website with a custom domain to market your new consulting business online. Your website should have an easy-to-use and beautiful design. For those who are a little tech savvy, setting up a site on WordPress and getting hosting through companies like Bluehost or Siteground can be a breeze. Otherwise, you may choose to shell out a couple thousand dollars to hire a web designer to build you a sleek website that’s also mobile responsive.
To complement your original web design, you might want to create your own logo, too. Or you can search sites like Fiverr and PeoplePerHour for affordable, high-quality custom logos. The logo should have a beautiful design and match or incorporate your custom domain name, so choose that wisely! The way you brand your website and company can make a huge difference and this is the first step to growing your small business with consistent branding.
Another tool that you may want to consider is video conferencing software. Depending on how many meetings you will be setting up, video chat is a convenient way for your prospective clients to have a face-to-face meeting with you without anyone needing to travel.
Invoicing software is another must-have for consulting business owners so that your clients can see their bills and pay online, and you can keep all of your data in one place. Popular invoicing software includes FreshBooks, Zoho, QuickBooks, and PayPal. Some are free while others have a nominal fee each month that you will want to factor into your pricing strategy.
Don’t forget scheduling software that can help you keep your appointments straight, maintain a steady flow of clients, and organize your meetings.
6. Start Marketing
If you hope to succeed in the consulting industry, you will need to do more than simply put up a website and hope that quality clients will start rolling in. You need to have a keen interest in marketing your new services. Marketing plans are significant at the start of any business venture and require more than just having an original web design or business card print design.
You will need to get word of your business online, in as many places as you can. Consider all of the places where your prospective clients spend their time such as which social media platforms they use. If you know where to find well-qualified leads, you are one step closer to making a solid income.
Social media marketing is one of the first places you may want to turn with a new business. Setting up a Facebook or LinkedIn page for your business is free and you can go ahead and invite all of your friends to like your new page. This is the easiest form of social media marketing, but there are other avenues you may want to explore.
Publishing regular social media posts is essential, so be sure to develop a social media posting schedule. You can also use social media management tools like Hootsuite to plan content and publish it at the right time.
You may want to consider paying to run a campaign so that consulting leads can find you more easily. First, decide which social media platforms your prospective clients tend to spend time on. If Facebook is where most of your consulting leads hang out, you can easily create a campaign that aligns with your budget.
The same is true of other social media sites or search engines such as Google Ads. This is a valuable marketing resource, especially when coupled with effective search engine optimization.
However, there is a more important aspect to growing a consulting business than setting up a social media posting schedule, and that is organic marketing. Start with the creation of your website and be sure to choose a custom domain name. When building your site, you will want to use good SEO practices, like utilizing the best keywords and writing high-quality and high-ranking landing pages, to make sure that potential clients will find you for the services you offer and to capitalize on industry trends. The same goes for your social media posts – it’s important to use relevant keywords and follow other important SEO practices.
For example, accounting consultants will want to include words and phrases related to bookkeeping, taxes, invoicing, etc., while a strategy consultant or marketing consultant will need to use entirely different wording relevant to their fields. You can conduct your own keyword research for search engine optimization using tools like Answer the Public and Semrush. While some of these tools require a monthly fee, it can be well worth it to invest a few dollars as you are forming your website.
Other means of marketing your new consulting services beyond social media marketing can include content creation like blogs about industry trends. When writing is not a skill in your wheelhouse, you may want to think about hiring a content marketing manager who can help with editorial services. This can help you to keep up with maintaining your business online, from managing your blog and making sure you’re using the best SEO practices, while you focus on finding prospective clients and helping solve their problems.
If you feel really confident, you might want to consider speaking and networking at industry events or even just attend other networking events where you may meet future clients. This will help you make a name for yourself as a new, up-and-coming business owner. You can also join a professional association or look for consulting jobs on popular freelance platforms such as Upwork where you can submit client proposals. When you do have a happy client, be sure to collect testimonials that you can use in future marketing endeavors.
7. Study Sales
The truth is that no matter what style of business you’re catering to, you need to get very good at sales to get positive consulting leads. You might balk at this idea if your consulting industry is taxes, accounting, or content strategizing, but it’s the truth if you want to really engage quality clients.
Research sales and marketing business sources and other valuable marketing resources. Read as many books on consulting as you can get your hands on so that you have a good idea of how to convince potential clients that you know exactly what you’re talking about and can answer any client inquiries on the spot.
Once you have some familiarity with the sales process, it’s time to define what your consulting business offers prospective clients. Some refer to this as your elevator pitch while others mark it as your value proposition. Either way, it simply means that you should know exactly what type of services you offer and who can benefit from them.
It should take you just a minute or two to explain what your business offers and who you serve. Speak to the pain points of your target audience and give a brief taste of what your consulting services might offer to help them solve that problem. Once you get your foot in the door with an elevator pitch, you may have the opportunity to share more about your services and have an in-depth conversation with someone who is considering signing up with you.
8. Documentation
You have successfully targeted your key demographics, completed a marketing strategy, and refined your value proposition. At this point, you have likely had an interested client who wants to experience your services firsthand. Project management is important at this stage of the process so that you can keep your consulting leads straight and be as clear as possible about what you can offer to prospective clients.
Documentation is key to managing your client project. First, you will need to establish a contract that outlines what services you offer, how long the project will take, and what the established rate is for the proposed relationship. A good contract will protect you in case a client bails on the bill, but it also provides some security to the client as you will promise what you want to deliver in this document.
To learn more about drafting a great contract for ongoing service, consider consulting an experienced business attorney who can help you come up with a watertight contract in which you can just plug in the information for each new client such as rate and timeframe. This may increase your overhead costs when getting started but it can protect your business over time.
If you want to run a successful consulting practice, it is crucial to stay as organized as possible. You may want to consider using a calendar app like Calendly to keep your appointments and due dates organized. When you start to have multiple clients, this will be a necessity to keep all of your appointments straight.
9. Consider Hiring
At this point, you’ve got your consulting business off the ground and it’s time to make that business grow. When you start to have more clients than you can reasonably handle or you want to make your business a little more hands-off for you, then it makes sense to start thinking about hiring someone to join your team and help increase your consulting income.
Do not make the mistake of hiring part-time or full-time employees and business partners based solely on what they say they can deliver on their business cards. You will want to do some extensive research into what they have done for their own clients in the past, how they’ve grown their business over time, their training, and even their personal certifications. After all, you may not want to foot the bill for them to receive the training they need to work up to your standard.
Even if you do not want to hire someone to help grow your consulting business, you may want to consider hiring a virtual assistant to help with emails, scheduling, and phone calls. Be cautious when it comes to making a new hire because this person could be the very first contact that well-qualified leads have when they contact you for consulting services. Or the person happy clients reach out to again when they want ongoing services. With some training, the right person may even be able to handle your client proposals.
If you intend to hire full-time employees, you may need to revisit your business structure to form the right type of business to protect both you and them.
You can easily find the perfect assistant on freelancing sites, giving you the flexibility to hire them solely for what you need. Whether you need them five hours a week or 80 hours a month, you can set a reasonable rate and schedule for your new virtual assistant. Paying them hourly instead of via a flat rate ensures that you only pay for what you need.
Be sure to factor the cost of hiring into your consulting project rates. Employee salaries are a major expense, even if you’re only paying part-time employees.
Becoming an Awesome Consulting Business Owner
Getting started in the consulting market is not for the faint of heart. There is a ton of work that goes into entering the job market, even before you book your very first client. From narrowing down your field of expertise and ideal client to hiring part- or full-time employees, setting up a website using the best SEO practices, and writing regular social media posts, you will have hours of work on your plate before the first contract ever gets signed.
Be sure to set aside the time, energy, and money needed to start your new business venture. This may mean you need to work your day job for a bit longer before you land that first major deal and become a successful consultant. You may also need to save up for the overhead you will have.
However, it can be a very lucrative and rewarding career change if you are committed to seeing it through. By following this complete step-by-step guide, you will be well on your way to building awareness of your business online, landing well-qualified leads and future clients, and running a consulting business that can thrive in your niche market!
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