Consultants are experts that provide information and advice to clients in exchange for fees. They work solo or as part of a consulting firm, hiring or partnering with other experts. Consultants specialize in areas such as IT, marketing, management, finance, or logistics.
If you've gained a lot of experience in a certain field, you may have considered becoming a consultant. But in order to hang your independent consultant shingle, there are several steps you should take to understand how to start a consulting business.
1. Define Your Niche
Instead of trying to serve everyone, get hyper-focused. Your experience and background will help you define your niche. Companies hire consultants because they have certain knowledge the company does not.
The more specific you can get about your expertise, the better. Someone who is proficient in management, for example, could specialize in a variety of areas. You could create a consulting firm that offers management consulting to startup companies that often need help when filling their senior-level spots. Or your business could focus on management consulting for a certain industry, such as energy or education.
"Consulting is all about reputation," says Marah McMillan, a consultant to the apparel industry. "Trying to consult on a topic that you do not know well enough will lead to negative reviews and poor reputation. If you want to be a consultant but do not have an area of expertise, spend time gaining experience and insights. Look for ways to get right in the middle of what you want to be an expert about."
2. Form Your Business
"If you are an individual, starting out as a sole proprietor will be fairly straightforward," says McMillan. "However, if you plan on setting up a team or you have personal assets that you want to protect, an LLC might be right for you."
You'll also need a separate bank account, and you should have a contract for your services that spells out important information, like deliverables, timelines, rates, and payment times.
While consulting is a low overhead business, make sure to have enough money in the bank until you build up a good cash flow and have a budget in place, says Carlos Castelán, founder and managing director of the startup The Navio Group, a management consulting firm.
"It's important to continuously monitor expenses in relation to current and projected revenue to ensure [you're] not making decisions that could jeopardize a businesses' solvency," he says.
3. Set Your Rates
As a consultant, you provide services that are intangible. Deciding what to charge for your knowledge is a challenge. You have a few choices. One option is to charge by the hour, which is a simple way of pricing and it's often a good way to start out. Set your hourly rate based on what others in your market are charging.
You can also charge by the project, which helps clients understand their total cost. This is a good method of pricing if you're delivering a specific service, such as an IT consultant hired to set up a remote working network for a company's employees.
A final pricing option is by retainer. This is a good structure if you provide ongoing support to a client. For example, a website design consultant may charge a retainer to manage a company's website, including any changes to content or software updates.
"One common mistake when starting a consulting company is charging too much or too little," says Scott Cairns, founder and CEO of Creation Business Consultants. "Study your industry's rates so you know how much you would charge as a starting rate. Cheap rates will generate leads, but it would not help the business because when you adjust your rates, clients might leave. On the other hand, an expensive rate will make it difficult for you to gain customers."
4. Create a Web Presence
When companies look to hire a consultant, many will turn to an internet search. Create a website that advertises your services and showcases your experience, background, and any certifications or designations you have. Be sure to use the keywords a potential client would use to find you. If you've provided similar services before—even if it was as an employee—ask for feedback and get permission to post testimonials.
"Add your business to as many social platforms as are appropriate for your industry, such as Google, Yelp, LinkedIn, Facebook, Instagram, YouTube, and Pinterest—as well as any other platforms that are applicable for your trade," says McMillan. "Remember that the more places that you show up on the internet with the same brand image and clear message, the better for SEO and customer attraction."
5. Set Goals
Setting business goals, such as landing your first client within 30 days or sending 10 letters of introduction each week, can help you stay on track.
"Make sure, right from the start, you have set a vision for where you want to head and goals to help you get there," says Castelán. "One failure I had initially was not setting goals for my business. I discounted the importance of doing so and, as a result, did not have a clear strategy or path for growth. Setting goals and tracking progress is important to building a business because it helps you make choices along the way that lead you to the desired successful outcome."
6. Find Clients
To be in business, you need to find clients. While your website and social media platforms can generate leads, one of the most effective actions is networking. Don't be afraid to ask your current clients for referrals—word-of-mouth advertising is golden. Also, participating in industry organizations and events can help you build your network. You may also find opportunities online by large corporations or government agencies that post Requests for Proposal.
"Write down the [names of ] people who you have relationships with who can be helpful to your company and what role they will be able to play, such as mentor, client, or referral source," says McMillan. "Then start reaching out to your contacts and spreading the word about your new business."
Castelán believes that entrepreneurship can be very rewarding. "Don't be afraid to take a risk and pursue something you've always wanted to do," he says. "What separates consulting entrepreneurs from so many others is the ability to take risks and be comfortable making mistakes."
As more professionals decide to go out on their own, having a strong plan in place and a commitment to succeed can help you build your own thriving consulting company. Being your own boss and helping others can be the best job of all.