How to Start a Consulting Business
Are you a passionate entrepreneur with a respected expertise that exceeds others in your industry? The consulting profession is calling your name. This guide provides insight on everything you need to know about starting a consulting business.
Table of contents
Due to job variability and the stigma of the profession, consulting can be a confusing career to get into. First, let’s tackle the definition of a consultant and the general functions provided by a consulting firm.
What is consulting?
Before you learn about how to start a consulting business, it’s crucial to understand the role of a consultant.
Consulting is the business of giving expert advice to other professionals. While it sounds simple enough, your success as a consultant is dependent not only on having expertise in the industry but also a natural ability to solve problems and make decisions.
Consulting can be categorized into two main sectors:
Strategy consultants focus their efforts on beating the competition and elevating business profit. When clients are struggling with a specific business direction, strategy consultants address the question of how to do it.
Management consultants are responsible for the process of developing or improving business strategies. Management consultants often specialize in a particular industry, some of which include:
- Human resources consulting: An HR consultant addresses human resources tasks and processes in the overall business model.
- IT consulting: An IT consultant specializes in optimizing information systems and has a sound understanding of technology services. Sometimes referred to as technology consultants, they work with clients to improve the structure and efficiency of technical systems.
- Health care consulting: A health-care consultant is responsible for identifying efficiency gaps to improve the structure and operation of health-care organizations.
What does a consultant do?
Consultants are hired for a variety of reasons that span from implementing simple changes to completely overhauling current business systems.
Here are five reasons you might be hired as a consultant:
To teach expertise
Many businesses lack expertise in certain departments and need a consultant’s help to drive growth. In these situations, you’re hired to come in and educate staff on processes that elevate their business.
To identify problems
Using your expertise, you may be hired to identify problems in a business model. If you are hired in this scenario, it’s your responsibility to identify weaknesses that are bogging down the business.
To improve processes
Some businesses can identify the problem but can’t find the solution. In these situations, a business hires you to create a plan to remedy key pain points.
To execute new methods
While some consulting businesses advise, others actually implement. A business may ask for your counsel regarding the health of its business, but you may also follow up with the implementation of your suggested plan.
To oversee business development
When entrepreneurs decide to open a business, they might ask a consultant to oversee their business’s development. Depending on your niche, you might advise on entering the market or provide financial oversight.
Whether you are ready to open your consulting business tomorrow or you are just beginning to think about it, it’s important to understand what consultants specialize in so you can define where you fit in the market.
How to start a consulting business
Once you’ve pinpointed your consulting skillset, it’s time to take the steps to actually become a consultant and start a consulting business. Here’s where you need:
1. Research certifications
Having certifications can help attract clients. The certified management consultant (CMC) certification is awarded to consultants who have met global standards of performance in technical competency, ethics, consulting competency, project management, and personal conduct.
2. Take care of your finances
Starting a company is a spendy proposition, so it’s important to create a budget that lays out all your costs. You may decide that you need additional capital to be successful. If you do take out a loan, make sure that you know how you will spend it. A problem many consultants face is separating personal finances from business finances when they first start. To avoid spending mishaps, implement ways to distinguish your business costs from your personal costs.
3. Set your consulting fees
What are customers willing to pay for your services? This is an important question to hash out when you frst start a consulting business. Consulting fees should be based on the value of your work and there are different consulting fee models. Ultimately you want to base your rate on your clients, the services you offer, and the time a proposal takes.
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After you determine your consulting fees, you need to select a software that allows your clients to pay for services. Many consultants use contracts and invoices to bill clients for the hours worked. With a robust invoice system, you can fill out your client’s information (which is saved in a customer directory) and send the billing statement in seconds via email. If your rely on your phone when running your business, an invoicing app can allow you to be flexible and send professional invoices to your clients in a snap.
4. Create a business plan
Now it’s time to write a business plan. Your value proposition and target market are the base of your plan and should be highlighted at the beginning of the document.
From there, you want to create a plan that includes a competitive analysis as well as financial considerations, which include the cost of your consulting business and your forecasted profit.
Take note that business plans change over time and that’s okay. Don’t be afraid to modify your business plan when long-term goals evolve and new opportunities arise.
5. Create a marketing plan
Because the consulting business is competitive, a marketing plan is crucial. Networking is the best method to secure consulting work. You want to become a reputable source whose opinion is valued in the industry. To do so, you have to constantly network and build loyalty among your client base.
How to stand out above the rest
Anyone with knowledge in a specific industry might try their hand at consulting, but expertise alone won’t make you successful. Effective consultants have an appetite and drive for excellence, which allows them to stand out above others.
Don’t let the competition or market saturation scare you away from the profession. Here are a few ways to separate and elevate your work.
Find ways to exploit knowledge gaps
Each industry has unique challenges, which is where opportunity lies for consultants. Being able to provide answers to tough questions in the industry isn’t easy but it does guarantee success.
Focus on your clients, not the cash
Each client has a unique story, and it’s important for you to invest in the entire landscape. Let the client’s challenges motivate you rather than the money being offered to solve them.
Sell your results, not your services
The proposal you create to win a client should be based on your previous results. To win their business, show them how you have helped solve a problem similar to the one they’re facing.
Constantly question your value proposition
The value you add to your client’s business is the ultimate measure of success. Be sure to constantly check in on the work you’re doing and be sure it is unique among competing consultants in the industry.
Keeping your cash flow organized and orderly might sound simple enough, but a small slipup can lead to a major headache. By learning how to manage your invoices effectively, you can decrease the risk of error and improve your business cash flow.
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