Consulting Business How to Start and Things to Think About Before Becoming a Consultant

By | November 13, 2022

How to Start a Consulting Business

“When launching a consulting business, it is critical to have extensive knowledge in a specific field in order to provide value to your clients. There are numerous types of consultancy that you might choose for your company. The first is that business owners frequently know one another and can provide referrals for you.

Consultants should invest in the same things that almost all new small business owners do: create a website ($2,000 for a great, navigable site plus around $200 for hosting) and order business cards (prices vary by state), open a business checking account and credit card, and hire an accountant to check the books and file taxes. Your elevator pitch is your value proposition in the large picture. Be clear about what the project is, why you’re lending your services and when you’ll complete the project.”

Consulting is a broad phrase that refers to the provision of business advice on a variety of topics such as marketing, information technology, operational improvement, and corporate strategy. However, when most people talk of consulting, they are referring to management consulting. Top strategy firms such as Bain, BCG, and McKinsey are examples of management consulting firms. To assist their clients, these firms use business-savvy problem solvers:

  • Define the issues or opportunities that their companies confront.
  • Collect and evaluate data to gain a better understanding of the problem/opportunity and to determine a recommended course of action, and
  • Plan the adoption of the solution throughout the organization.

Consider consultants to be “doctors” for firms, hired to determine the fundamental cause of a problem and then prescribe and implement therapies with the patient’s permission.

What Exactly Is Consulting?

There are numerous approaches to answering the question “What is consulting?”.  To delve deeper, let us continue our analogy of consultants as business physicians.
Assessment of symptoms: When a client realizes they have a business problem (such as declining sales or a new competitor in their industry), they turn to a consultant for assistance in determining the core cause, just as a sick patient would turn to a doctor.

Diagnosis: The consultant will evaluate the client’s business performance, taking into account comparable difficulties they’ve observed at previous clients, just like a doctor would compare their patient’s symptoms to recognized ailments.

Prescription: The consultant would offer a plan of action to increase revenues or address a competitive threat, similar to how a doctor would tell a patient what’s wrong with them and prescribe drugs or recommend a medical operation.
Bedside manner: As a doctor would advise a worried patient, the consultant has the experience to guide a client to the best course of action.
Follow-up care: The consultant will walk the client through a step-by-step procedure to improve their company results, just like a doctor would walk a patient through the steps required to restore their health.

Why do people trust doctors? Because they are specialists in their profession and have studied the human body, drugs, and other related topics extensively. Consultants, like lawyers, are strong problem solvers with business acumen, and they can guide clients through the process of conducting a data-driven analysis of their business problem and evaluating alternative courses of action. They can also draw on their firm’s collective knowledge and experience to bring extensive industry and functional knowledge to bear in order to solve the problem.

Furthermore, consultants can provide expert capabilities on topics that businesses rarely face. For example, a manufacturing company may only consider a merger or acquisition once every ten years; therefore, having M&A experts on staff full time makes no sense. However, M&A decisions are high-impact business decisions that a client will not want to get wrong.

Consulting firms are constantly looking at M&A transactions, and by engaging consultants, a client may acquire this specific experience when they need it.

What Are the Duties of Consultants? So, what exactly do consultants do?

“In summary, consultants use their expertise and knowledge in specific industries or roles to solve complicated company challenges ranging from cost saving to sales growth to appraising a new market the client is considering entering.”

7 Advantages of a Consulting Career

There are numerous advantages to pursuing a career in consulting:

  1. Travel. A consultant’s (pre-Covid) job brings you all around the world. You will have the ability to travel the world with ambassadorship options to work in a foreign office, study abroad programs, and a worldwide clientele.
  2. Friendships. These are created throughout your first several weeks of training in a consulting firm. They develop when you work together, attend social events, and advance in your jobs.
  3. Mentorship. Mentorship ties begin at an early age as well. Sometimes you are partnered with a mentor, and other times they grow naturally with team leaders. These connections can help you much beyond your initial few weeks and throughout your career.
  4. Impact. Few careers allow you to leave a legacy of your work behind in some of the world’s largest companies and industries, especially as a recent college graduate.
  5. Ongoing education. Because consulting organizations understand the value of information, they are dedicated to training their personnel. Consultants are continually learning, both through official training and on-the-job problem solving, as well as from the bright professionals around them. Many people believe that one of the best benefits of being surrounded by the world’s smartest individuals is the amount of knowledge you get to absorb on a daily basis. You get to work in teams with people from a variety of backgrounds, opinions, and experiences, which is ideal for personal development.
  6. Opportunities for education In exchange for a time commitment to the firm, consulting firms typically support business school or other educational options for their consulting personnel
  7. Opportunities for exit Exit opportunities are positions that you take after leaving consultancy. Working for clients, other firms in industries on which you’ve done projects, private equity, and other things are among them. When consultants move on to work for customers, it is welcomed since they are continuing the long-standing relationship between the consulting firm and its current clients. Sometimes consultants quit consulting after a year or two, and sometimes they leave after ten years to take C-suite positions.
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Cons of Working as a Consultant

A career in consulting may be energizing, engaging, and rewarding! However, everything has a cost, and it’s necessary to be able to judge whether these benefits are worth the difficulties that a consultant’s life might bring:

  • Working hours that are excessive,
  • Extensive travel (pre-Covid),
  • Time spent away from family,
  • An inconsistency in the schedule,
  • Not seeing the long-term effects of your work and
  • Burnout is a possibility.
    Early in your consulting job, you sacrifice personal time for what may be one of the highest-paying salaries among your recent grad friends. Many consultants are under pressure to work long hours in order to solve the client’s problem, and as a result, they struggle with work-life balance. Most consultants improve their ability to strike a balance over time.

What Is the Average Consulting Salary?

Typical consulting salaries vary little between businesses and just modestly year to year. Base wages for associate level consultants typically range between $72,000 and $90,000. MBA graduates can expect to earn between $150 and $170,000 per year as consultants. On top of their base income, consultants got performance bonuses.

How to Launch a Consulting Firm

Launching any type of business is difficult but starting one with the objective of assisting others in running theirs more efficiently is doubly difficult. When deciding how to start a consulting business, a niche is a good place to look, whether your area is HR (managing a company’s workforce, including sourcing, selection, hiring, and ensuring compliance), strategy (improving performance, perhaps through workflow management), technology (delivering and implementing new software solutions), or some other consulting service that will help other businesses improve and grow.
In any of these cases, the client wants help but does not want to hire the advisor full-time. This is when you come into play. If you have skills and knowledge to offer and enjoy the concept of being your own boss, you could be on the verge of launching your own consulting firm.

In 9 steps, learn how to start a consulting firm.

The demand for good consultants has never been stronger as work processes get more sophisticated and our economy becomes more worldwide. According to IBISWorld, consultancy business sales will top $261 billion in 2020. “It’s cool to claim you’re an independent consultant right now,” says Christy Hopkins, founder of 4 Point Consulting in Chicago. “I provide human resources consulting for numerous small businesses across the country, and my services vary based on the customer.” If the culture and needs differ, the same job might be done in different ways.”Once you’ve identified a niche for the type of consulting you provide, explore the steps below to position yourself as an industry leader.

Step 1: Evaluate your abilities and skill set.
Consultants are frequently recruited to solve problems that organizations cannot solve on their own. Otherwise, why would they pay you, someone with no knowledge of their business, to come in and advise them what to do? When launching a consulting business, it is critical to have extensive knowledge in a specific field in order to provide value to your clients. There are numerous types of consultancies that you might choose for your company. For example, if you are knowledgeable about computers, you could work as a computer or IT consultant. There are also several prospects for public relations experts, accountants, internet marketers, and business strategists.

Examine your strengths to see where you may contribute. It’s also worth taking an objective look at any flaws or holes in your talents so you can work on filling them. Also, depending on your area of expertise, you may need to obtain special certificates or licenses before becoming a consultant. For example, if you work as a fundraising consultant, having a certification from the National Society of Fund Raising Executives is advantageous.

Step 2: Determine what your market requires.

After you’ve determined your specialty, consider the types of queries, challenges, and pain points that firms in your chosen field face. It is not enough to merely have a diverse skill set and extensive knowledge in your profession. If businesses do not have challenges that your consulting firm can solve, you will be treading water. Asking what your market wants and needs is the greatest approach to find out. Begin by conducting an online search for blogs in your industry. What do thought leaders write about? Where does there appear to be a lot of ambiguity? Is there a heated argument about a specific topic in any forums or comment sections?

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You can also use your network to identify market pain points. For example, if you want to start a digital marketing consultancy, who do you know who owns their own company, works directly with digital marketers, or is a digital marketer themselves? You probably know a lot of people. Inquire about the obstacles they have in achieving their short and long-term objectives. Then consider how you and your company can assist.

Step 3: Get on board the organic marketing train.
As an independent consultant, it will be entirely up to you to expand your customer base and ensure that business comes in on a constant basis. This is best accomplished through marketing, but organic marketing is always the greatest marketing. Hopkins began her business with a simple post on Upwork, a freelancing site that was less well-known a few years ago and offered more profitable contracts, according to Hopkins. Hopkins claims that her first client is still with her today, and that she has expanded almost entirely without the need for advertising. “I’ve been quite lucky in that my business has grown organically.” I’m not sure if that’s usual, but in my experience, I always do my best. “I’m very honest, ethical, don’t overcharge, and am prepared to work within budgets, which has resulted in a lot of organic referrals,” she adds.

Organic marketing provides business owners with two different advantages. The first is that business owners frequently know one another and can provide referrals for you. Like attracts like, therefore if you get along with someone, you’ll probably get along with one of their pals. The second advantage of organic marketing is that it is free. “I’m biased about how well it works for business since it’s free,” Hopkins jokes.

Step 4: Invest in your trade’s tools.
Hopkins created her company using technological tools that allowed her to connect with clients, prospective workers, and her assistant. “I utilize three types of recruitment software—web-based software that assists with job posting,” she explains. Mighty Recruiter, for example, offers a system that feeds to Indeed, Monster, LinkedIn, and any other employment site you can think of, saving time and consolidating applicants into one place. ZipRecruiter is a wonderful option for entry-level positions. For proposing applicants or referrals, LinkedIn offers a two-tiered recruiter service.

MightyRecruiter costs $300 every month, whereas ZipRecruiter costs $1,000 per year. LinkedIn Recruiter Lite costs $150, while corporate costs $700. Hopkins spends approximately $500 per month for these recruiting tools, which provide her with access to people looking for everything from culinary employment to data scientists. Hopkins also advises video conferencing software, which costs around $200 per year and can help you communicate with clients more effectively.

“They connect in and feel like they know me,” she says. “They know I’m 5’2″, have a huge personality, blue eyes, and talk with my hands, and they understand all of that despite the fact that I don’t have an office space.” Aside from these consultant-specific tools, new consultants should invest in the same things that almost all new small business owners do: create a website ($2,000 for a great, navigable site plus around $200 for hosting), order business cards, form an LLC (prices vary by state), open a business checking account and credit card, and hire an accountant to check the books and file taxes (around $700 annually for a small business).

Step 5: Choose your employees prudently.
Working seven days a week and 12-hour days isn’t sustainable, no matter how zen you are, but it’s certainly a possibility if you’re successful in building your company. Hopkins, for one, sees no benefit in taking on more work than she can handle at the moment; nonetheless, she has hired an on-demand assistant who lives overseas and conducts the dirty work of consulting on a part-time basis. “I can do the work with the client, get the spec [job description] together, and he can find the résumés, the people, the LinkedIn profiles, which is the arduous uphill battle,” she says. “He has his own business, too, and we have a B2B relationship. Some months he logs 50 hours to me, and some months he logs none.”

She communicates with her assistant via Skype because he is an American living in Budapest; she would not normally hire someone outside the United States because “there’s a ton of talent right here,” but the two of them hit it off right away over Skype; otherwise, she may hire an intern or two from her old graduate school to assist with sourcing.

Step 6: Rehearse your elevator pitch.
It’s pointless to have an amazing skill set, a good marketing plan, and cutting-edge equipment if you can’t make and seal the sale. Convincing potential clients to choose your consulting firm begins with your elevator pitch. Although you may be highly passionate about the services you offer and the industry challenges you perceive, it is vital to keep your pitch to roughly three words maximum. Your elevator pitch is your value proposition in the large picture; if you offer the condensed form of your value proposition and a potential client wants to learn more, you may proceed to explain your narrative and discuss your consulting services in greater depth.

Step 7: Develop client proposals
Creating a client proposal is often the final step in taking on a new client, and it usually happens right before the client signs on, essentially closing your deal. As a result, writing proposals is a vital aspect of gaining business for your consulting. Client proposals are your opportunity to demonstrate how you can serve your client and solve their problem. As such, it’s critical to be clear about what the project is, why you’re lending your consulting services, and when you’ll complete the project. It’s also critical to be very clear about all the details that will go into the project, including deliverables, budget, and how you’ll measure results.

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Step 8: Determine your pricing.
Along with your proposal, you’ll need to include a pricing. It can be difficult to know how to price your services when you’re just starting out, but Hopkins has a very simple formula to follow. “When I initially started moonlighting, I took my HR manager income and converted it into an hourly rate, which is undercharging for a consultant, and that’s been a progression,” she says. When it comes to moving past that starting converted hourly rate—because as an independent, you are taking on more risk and should be compensated more than an in-house option—Hopkins recommends demonstrating to customers how much value you provide to their firm.

I produced a cost/benefit write-up for each of my [existing] clients to show them how much money they saved over working with a typical recruiter or a different independent consultant,” she says. “From there, I told them my rates were going up 25%, this is the new hourly rate, and every single one of them said ‘done, fine.’ I just showed them the math. Now… I’ve only pitched clients at the new rate, and no one has told me I’m overpriced. I’m probably still undercharging, but I like to work with small businesses and startups, and if I want to work with them, I can make it work.

Step 9: Maintain organization and achieve outcomes
Once your consulting business is up and running, make sure to stay organized and deliver results so that you can get repeat clients and referrals. Staying organized is important to ensure that you don’t lose valuable information, deliver past deadlines, or forget to remind clients to pay you. Delivering results is a little more difficult to advise on, but it is critical to the viability of your consulting business. Stay on top of industry trends and check in with your clients to ensure you’re delivering results that they want and that help their businesses achieve their objectives.

Considerations Before Becoming a Consultant

What certifications and special licensing will I need? Depending on your profession, you may need special certification or a special license before you can start working as a consultant. For example, fund-raising consultants do not need special certification, though you can become certified through the National Society of Fund-Raising Executives. Additionally, in some states, you may need to register as a professional fund-raising consultant before you can start your business. Is it possible for me to become a consultant? Before you hang out your shingle and hope that clients start beating down your door to hire you, make sure you have the necessary qualifications. For example, if you want to be a computer consultant, make sure you are up to date on all the trends and changes in the computer industry.

Are you organized enough to become a consultant? Do you enjoy planning your day? Are you an expert at time management? You should have responded “yes” to all three questions!
Do I enjoy networking? Networking is essential for the success of any type of consultant nowadays, so start creating your network of connections right away.
Have I identified long-term and short-term goals, and do they allow me to become a consultant? If your goals do not align with the time and energy required to launch and effectively build a consulting business, you should reconsider before proceeding!

Concoclusion

Setting business objectives, such as acquiring your first client in 30 days or sending 10 letters of introduction per week, will help you keep on track. As more professionals decide to go it alone, having a solid plan in place and a strong dedication to success will help you develop your own flourishing consulting firm. Being your own employer and assisting others can be the most rewarding profession of all.

As with any business, having a plan for what happens next, both short and long term, will help you be a more effective consultant. In the short term, before you start working with your first client, make a plan for how you will approach the job. Be ready to spell out a timeframe and expectations for how the process of working with you will proceed from start to finish, as well as supply any necessary resources to get started, if a customer says yes.

Long-term, you need to determine how you will position your business within your market, how you will advertise your services, and what your income and growth aspirations are. Making a business plan will assist you in planning and setting goals for the following one, five, and ten years. Once you’ve prepared your strategy, look over it periodically to verify you’re making decisions that are in accordance with your market and goals, and make any required changes along the way.