How to start a consulting business

Being a consultant means using your own knowledge and experience to help another business or business owner succeed, and that can be a very fulfilling job. Find out how to start a consulting business and what you’ll need to go from idea to industry leader, starting with these seven steps.

1. Assess your skills and determine a focus area

Consultants are considered experts in a specific field. They’re hired to help solve problems that businesses don’t have the bandwidth or knowledge to solve themselves. These businesses typically pay their consultants handsomely, because those consultants offer a ton of value. They may pave the way for a product launch, find ways to save money, or pinpoint problem areas to help improve efficiency and productivity.

As you plan your own career as a consultant, think about what areas or industries you could add the most value to.

Here are some examples of consultancy opportunities and what tasks or goals you might focus on if you choose that path.

• Fundraising: Fundraising consultants help organizations — often nonprofits — plan and run fundraising campaigns, either to back day-to-day operations or to help meet a specific, short-term need.
• Informational technology (IT): Technology changes rapidly, sometimes so quickly that businesses have trouble keeping up. An IT consultant can advise companies on how they can better incorporate tech to enhance services and better meet consumer needs.
• Strategy: Strategy consultants assist companies with long-term planning, often drumming up ways to reach big-picture goals and stay competitive. This might include identifying a brand’s key differentiator and using that to build leverage within the industry.
• Financial: Financial consultants help businesses understand and improve or solidify their financial position. The focus might be on long-term ideas such as investment strategies and risk analysis, or on more immediate concerns like improving daily spending and shaping the quarterly budget.
• Human resources (HR): Human resource consultants deal with employee concerns, often during a time of transition, such as a merger, significant layoffs, or a major surge in recruitment.

2. Obtain certifications

Part of creating a consulting business is understanding what certifications and other professional documentation or training you might need to work in your chosen field. These certifications give you more authority and credibility, particularly when the endorsements come from professional organizations already recognized within your industry.

Examples of consultant certifications include:

• Certified Manager (CM)
• Certified Risk Manager (CRM)
• Certified Management Accountant (CMA)
• Project Management Professional (PMP)
• Certified Sales Professional (CSP)
• Certified Information Systems Security Professional (CISSP)

3. Consider expenses and funding

Starting your own consulting business requires upfront funding. You’ll need to account for quite a few things in your initial budget, which will be built around answers to important questions, including:

• Where will you operate?
• How much money do you need upfront for rent?
• What will your running operational costs be?
• How much do you need to spend on your initial marketing blitz?

Some of these areas will require a certain amount of cash that’s fairly inflexible. For example, you can choose to rent in a high-cost area or a low-cost area, but beyond that, you may likely pay market rates with little room for negotiation.

But there are other areas, like marketing, where you have wiggle room. You can save money by focusing on organic marketing, such as YouTube videos and blog posts, versus investing heavily in paid ads and influencer deals that could quickly drain your resources.

4. Determine consulting fees/pricing model

After figuring out what you’ll need to spend to run your business, you need to determine how you’ll bring in the funds to support your endeavors.

Set up a fee schedule or pricing model. This list should be clear, focused, and consistent — no charging two customers two different fees for the same service or product unless there’s a good reason for the difference. Consistency is how you’ll appear trustworthy to your clientele, but also how you’ll more accurately project revenue.

Your pricing should reflect three things:

• The market value of the service(s) you’re offering
• The value you present to the client
• What you need, financially speaking, to make the project worth your time and energy

You’ll also need to decide how you’re collecting money. Investing in a POS system can help keep you organized and smooth the way for processing payments, and you can rely on tech to send invoices and follow-ups on time, too.

5. Develop consultation contracts

Every consultant should operate under contract. A signed contract protects both the consultant (in this case, the contractor) and the client, ensuring everyone is on the same page from the get-go.

A solid, comprehensive consultation contract may include any or all of the following:

• General info: You’ll need the names of all involved parties as well as the business names and contact information. Also, list the point of contact for your client and who has final say on business decisions. Knowing who has final say can help avoid he said/she said situations where you take action based on the client’s go-ahead, only to have another client representative claim greater authority.
• The expected scope of work: Think of this like a job description, but more detailed. The scope or statement of work (SOW) details the exact duties you will perform and what deliverables you’ll hand over and when — consider exact timelines with deadlines and milestones built in. It may even explain where work is to be done (in office or remote) and who will provide key pieces of equipment and other resources.
• Pay rates and other perks: The rate of pay, including base salary and any other financial considerations, such as a commission or bonus structure, should be a part of every consultant’s contract. Also include information on invoicing, payment terms (net 30 or net 60, for instance), and expenses.
• Confidentiality/non–disclosure agreements and non-competes: Most businesses will ask for some type of confidentiality agreement so you can’t share proprietary info. Some might also ask for a non-compete clause that bars you from working with other companies in the same industry. Be very careful with non-competes — an unfair or overly restrictive agreement could prevent you from growing your business.
• Termination language: If you or the client wants to call it quits, how will that work? Having an early termination fee (a payment the client must make if it wants to end the contract early) can help protect you from wasting your time on a job if the client backs out, but the client may also want protection if it feels like things just aren’t working.
• Dispute resolution: Speaking of things not working out, dispute resolution agreements can help you resolve issues without winding up in a costly legal battle. Decide what types of issues might call for dispute resolution and who you’ll go to for arbitration.
• Legalese: You’ll also need various legal clauses outlining your status as an independent contractor, who has liability for certain places/projects, and who owns work products arising from the partnership. Consult a lawyer to ensure you have everything in place to protect yourself and your business.

6. Write a business plan

Your business plan is your vision put to paper, with plenty of details to help outsiders–such as investors–understand your value proposition, target market, and ideas for your entrepreneurial future.

Your business plan should include lots of financial data as well as a competitive analysis that outlines where you’ll fit within the industry and when you think you’ll start making money — and how much cash it’ll take to get there.

Write a marketing plan, too, that explains how you’ll make your mark and stand out from the crowd. Try to include a wide range of marketing ideas that vary in terms of channel and cost, but be reasonable.

7. Register your business

There are plenty of practical details that come with setting up a consulting business, and one of those is actually registering your company. You need to register your business for tax and banking purposes, and also so you can be recognized by the various agencies that will handle things such as licensing and permits.

At a minimum, you’ll need to:

• Choose an organizational structure (e.g., sole proprietorship or LLC)
• Establish a business address
• Register the business’s name
• Touch base with the IRS
• Register with local, state, and federal agencies
• Reach out to the Better Business Bureau

Tips for building a successful consultancy

Once you learn how to open a consulting firm, you need to understand how to build your startup into a successful, long-running consultancy.

Use these tips for small business as a starting point:

• Have pride in your results: As long as you’re proud of what you’re achieving, you can be fairly sure you’re on the right track. Plus, client testimonials and case studies could help you grow your business.
• Be inclusive when collecting payments: There are so many ways for clients to pay these days, and you should try to accept as many as possible.
• Embrace technology: A POS system for professional services is going to offer exponentially more functionality than an old cash register. Using tech to improve customer service and your own day-to-day operations can help you save time and money.
• Expand strategically: When it’s time to bring on employees, aim for slow and steady growth. Hire people who are in line with your core values.

If you’re looking to start a consulting business, Clover can help. Our business services help streamline operations and position brands just like yours for long-term success. For more information, reach out to a Clover Business Consultant today.

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This information is provided for informational purposes only and should not be construed as legal, financial, or tax advice. Readers should contact their attorneys, financial advisors, or tax professionals to obtain advice with respect to any particular matter.