Are you an expert in your field? Are you tired of working for someone else? If you answered yes to both, then starting your own consulting business could be your next venture. Consultants are in high demand, as they advise businesses on strategy, help cut costs and outline roadmaps for companies.
The beauty of consulting is that you can specialize in whatever you’re good at: managing software development, regulatory compliance, digital marketing, talent recruitment, etc. No matter your area of expertise, you can help businesses run more profitably and efficiently. And the best part? Even if you’re just starting to consult as a side hustle, you’re your own boss with the ability to work from anywhere and build a lifestyle that fits your career goals.
Before diving headfirst into owning your own consulting firm, though, you should learn what to expect. Here are the basics of starting a successful consulting business, including what services to offer, creating a marketing strategy and the kind of paperwork you’ll need to file.
How much does it cost to start a consulting business?
If you’re thinking of starting a consulting business, you’re probably wondering how much it’ll cost to get started. The good news is that the startup costs for most consulting businesses are relatively low, with just a few essential expenses to budget for including marketing, office space and networking events.
That said, costs can vary depending on the type of consulting business you plan to operate. If you start an IT consulting business, for example, you’ll need to have the proper hardware and software, which can cost thousands of dollars. Other industries, such as insurance or real estate, involve their own special licenses and registrations.
Marketing costs can vary depending on the type of marketing you pursue. A simple website and some online advertising can quickly add up, and while business cards might seem outdated, don’t neglect the power of word-of-mouth referrals. If you plan on meeting with clients in person, you might also factor in the cost of office space, which gives your business a more professional appearance and helps build credibility with potential clients.
At a glance
LLC filing fee: $35-$300, depending on your state
Reporting fees: $100
Business license fees: Varies
Annual report fees: $50-$200
How much do consultants make?
Consulting work can be profitable, but it depends on a few factors. First, you must determine what kind of consultant you want to be. Some general consultants help clients with a wide range of knowledge, some specialize in accounting, marketing or human resources.
After you’ve honed in on your specialty, research what services and hourly rates you should offer. There are a few things to keep in mind when setting your prices. Consulting is often seen as an investment, and many clients will pay more for a good consultant — someone with experience who can help them achieve their goals. Some examples of consulting salaries, according to the U.S. Bureau of Labor Statistics:
- Information security consultant: $120,000
- Computer programming consultant: $100,000
- Financial analysis consultant: $99,000
- Management consultant: $99,000
- Web development consultant: $92,000
- Accounting consultant: $80,000
- Environmental consultant: $79,000
What types of consultants are there?
When most people think of consultants, they think of business consultants. However, there are many other types of consultants, including (but not limited to) financial, IT, HR and marketing.
Business consultants
Business consultants provide companies with advice and guidance on various topics, such as marketing, finance and operations. These consultants can be beneficial in times of change or growth, when businesses need to make critical decisions but lack the required expertise.
Many business consultants are self-employed, working as independent entrepreneurs. There are also a number of large firms, such as Deloitte and McKinsey, that offer a wide range of services. These firms often have teams of specialists who can help clients with any issue they face (e.g., business processes, public relations, cutting costs, value propositions).
Financial consultants
Financial consultants help people with their money. They know a lot about money management, i.e. how to save it and how to make it grow. To thrive in this business, you’ll need a deep understanding of bank accounts, stocks, loans and interest rates, in addition to your specific expertise.
The most successful financial consultants are patient and helpful, with the ability to break down complicated cost analyses for clients. After all, you’re helping people figure out how much money they’re making and how much they need to save. Moreover, the best financial consultants understand how to advise people from various economic backgrounds. It’s essential to have a knack for helping people make intelligent financial decisions no matter how much money they’re working with.
IT consultants
IT consultants help businesses with their technology needs. They can advise companies on what technology to buy and how to set up networks, as well as provide training on how to use new systems.
Being a successful IT consultant requires a plethora of technical knowledge and the ability to explain complex concepts in an easy-to-understand way (remember: your clients aren’t tech experts, that’s why they hired you). It’s also critical to stay updated on the latest changes in the tech industry so you can advise clients on the best options for their business.
HR consultants
If you’re looking for a career that’s constantly evolving and challenging, becoming an HR consultant might be the perfect fit. HR consultants work with businesses to help them develop and implement human resources policies and procedures.
Related: Human Resources – Entrepreneur Small Business Encyclopedia
They also advise and support managers and employees on HR-related issues, such as hiring, firing, pay, team structures, benefits and training. Here are a few things you can do to boost your chances of success as an HR consultant:
- Gain a strong understanding of the law as it relates to HR. This includes federal and state labor laws, as well as employment discrimination laws.
- Develop strong interpersonal skills. HR consultants must build relationships with clients, employees and management teams.
- Stay current on evolving HR trends. The only way to provide your clients with the best possible advice is to have a firm understanding of the standards and practices related to your field.
Marketing consultants
A marketing consultant helps businesses and individuals grow and reach their target markets.
To be successful as a marketing consultant, you must have in-depth knowledge of marketing principles and strategies and experience implementing these strategies for businesses.
Marketing consultants help businesses:
- Create effective marketing plans
- Develop campaigns to promote their products and services
- Analyze market research data to identify trends
- Assess customer needs and preferences
- Advise on pricing strategies
- Position their company in the marketplace
You’ll also need expertise in digital marketing tactics such as social media marketing, content creation, search engine optimization (SEO) and email marketing. Help your clients with branding efforts, create marketing materials (e.g., websites, brochures, and email newsletters) and even provide training for employees on best practices for marketing their business.
The ultimate goal of a marketing consultant is to help businesses succeed by increasing sales, building brand awareness and attracting new customers. If you can do that, you’ll become indispensable to your clients.
Other types of consultants
There are many other types of consultants that can help businesses and individuals. If none of the jobs above feel like a good match, consider these:
- Accounting consultants provide expert financial advice and help businesses manage their finances, assets and investments. Many organizations hire accounting consultants to improve their cash flow and tax preparation.
- Management consultants advise companies on improving their operations and processes.
- Environmental consultants help organizations comply with environmental regulations, minimize pollution and protect natural resources.
- Business coaches guide entrepreneurs in developing the skills they need to be successful.
- Supply chain consultants help businesses improve their supply chain processes.
- Data analytics consultants analyze large amounts of data to uncover patterns and insights.
- Financial advisors provide individuals with advice and guidance on retirement planning, investments and other financial matters.
- Legal consultants give legal advice and help businesses stay compliant with ever-changing regulations.
No matter which type of consultant you choose to become, there is immense potential for professional growth and success. With the right skills, dedication, and knowledge you can make a name for yourself in your field.
Steps to starting a consulting business
So you’re inching closer to becoming a business owner. But where do you start? Starting any small business can be complex and demanding, but you can save yourself time, stress and money by knowing what to expect — and preparing accordingly.
Here are some essential steps to starting a successful new business:
Research the market and identify target clients
Before you launch your consulting business, you should understand the industry and identify your target audience. Doing market research can help you understand the behaviors and would-be clients, your potential competitors and — perhaps most importantly — what sets your business apart.
Network with potential partners
Networking is also critical to any successful business and especially important in the consulting industry. Cultivate relationships with potential partners and influencers in your industry to generate more leads, grow your client base and build a successful consulting business.
Related: Target Market – Entrepreneur Small Business Encyclopedia
Determine services and pricing
Scout the competition and do some digging to understand how local competitors price and position themselves. It also helps to find a niche because you’ll have fewer competitors if your services are specialized. Entrepreneur’s also covered how to determine the best pricing strategy.
Register your consulting business
Depending on what service you’re providing, you’ll need to obtain the proper paperwork and certifications to start consulting. At the very least that includes a state business license, with the possibility of more specialized licenses for medical or legal services. (See: Do I need a consulting license? section below.)
Outline your business plan
Gather all of your research and turn it into an actionable roadmap, a.k.a. your business plan. A business plan is a written document that outlines your business goals and strategies and the resources needed to achieve them. It should also include your marketing and financial plans. A business plan can help you stay organized, track your progress and identify any missing pieces that need to be addressed.
Secure the necessary financing
Before you can launch your business, you’ll need to secure the necessary financing. Consider options such as crowdfunding, bank loans or investors. Remember to outline your financial needs in your business plan to help streamline the process.
Develop your brand and build a website
Your brand represents your business, so creating a robust and recognizable identity is crucial. Start by developing a company name, logo, website and other visuals that help to reinforce your brand. Additionally, be sure to use consistent messaging so that potential clients clearly understand who you are and what services you offer.
Related: Branding Basics – How To Build a Stellar Brand from Scratch
Market your consulting business
Once you’ve completed the necessary steps to get your consulting practice up and running, it’s time to start marketing. Develop and execute a comprehensive marketing plan that includes traditional and digital strategies, such as email campaigns, social media promotion, SEO practices and content marketing. At this point, you can also lean on your professional network for early leads and to help you find your first consulting clients.
Do I need a consulting license?
The answer is usually yes if you’re a business consultant or plan to become one. Depending on the state where you operate and the type of services you offer, you might need a consulting license for legal reasons.
Professional certification might also be necessary if you provide certain services. For example, financial advisors typically require a Certification in Financial Planning (CFP) from the Certified Financial Planner Board of Standards Inc. or an Investment Adviser Representative designation from the Financial Industry Regulatory Authority (FINRA). Other services, such as accounting or tax preparation, might require professional licensing from the relevant state board.
Before starting a consulting business, it’s essential to research and understand any applicable licensure requirements in your state. Failure to obtain the necessary license or certification could result in fines and other legal penalties.
Other considerations
It’s also important to note that state and federal employment laws might apply if you hire employees for your consulting business. You’ll want to register your business with the relevant state or federal agencies and obtain applicable permits or licenses, such as an Employer Identification Number (EIN) from the IRS.
Further, obtaining the appropriate business insurance coverage is critical to protect your consulting business from potential liabilities and risks. Comprehensive business insurance policies can provide liability coverage for claims arising from your professional activities, property damage and other losses.
Lastly, as with any type of business, choosing the appropriate legal structure can also protect you from liability. Depending on the services you plan to offer, there are a few business entities to consider for your consulting business. The most common business structures are sole proprietorships, partnerships, limited liability companies (LLCs) and corporations. Each has unique benefits and drawbacks, so you should research and understand which is best for your needs.
The bottom line
Starting a business might be the answer if you’re looking for a way to make more money, set your hours and be your own boss. It doesn’t have to cost a lot of money and you might be able to start a lot sooner than you think, provided you collect the right tools and resources.
Take time to consider the type of consultant you want to be and the services you can offer. And remember to fully commit to your consulting business if you’re going to lay a foundation for long-term success.
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