Want to start a consulting business in 2021? Here’s everything you need to know
A step-by-step guide covering the fundamentals of starting your own consulting business, including how to get more clients and how to remain profitable.
February 27 · 10 min read
So you want to start a consulting business? It’s a great business model with a wide target market. At some point in everyone’s lives, we have turned to experts for help with solving a problem, just like how you would consult a dentist over a tooth issue. That’s basically what consulting is all about.
Many businesses certainly understand the value of consulting an expert. In 2016, U.S. companies spent a whopping $58.7 billion on consulting. So at the very least, you know the industry is widely profitable.
As markets become more complex and the competition continues to thicken, we can safely expect this figure to grow higher in the coming years. Plus, there’s always the allure of being your own boss, maybe even working out of your home office. At the end of this step-by-step guide, you’ll understand all the fundamentals of starting your own consulting business, including how to get more clients and how to remain profitable. Let’s get to it.
Consulting business overview
Consulting is simply providing expert advice and guidance towards solving a problem and then getting paid for it. Doing this as a business, however, requires a streamlined approach, as well as some finesse. But before we even get to the step-by-step process, let’s hone in on the most crucial aspect of being an independent consultant — being an expert.
Before you even start drawing up your consulting business plans and thinking of a suitable business name, you must first be an expert in your field with proven results. This means possessing the right skill set and years of experience so valuable that another entity is willing to pay for it.
Your expertise must be marketable It’s not just about giving advice — but bringing in a fresh and unique perspective to their pain points, diagnosing them, and then providing a lasting solution. Sometimes, business owners need a new set of eyes when appraising a problem. You can offer that unbiased perspective and help them implement the best possible solution.
As a consultant, the kinds of solutions you proffer should have people nodding their heads in agreement and wondering why they didn’t think of it before. Basically, you’re tapping into your wealth of knowledge and expertise to make your clients more successful. The bigger the problems you solve, the higher you get to charge in consultancy fees.
That’s the long and short of how a consulting business works and why it’s such a potentially lucrative venture. So lucrative that as of 2017, there were over 700,000 active consulting firms globally, and the industry was worth over $250 billion.
Types of consulting
There are consultants in just about every field. If you’ve watched the British TV series, Sherlock, the main character (played by actor Benedict Cumberbatch), is a consulting detective. His archnemesis, Professor Jim Moriarty (played by actor Andrew Scott), is a criminal consultant.
The point is, you can be a consultant in practically any field as long as your area of expertise is marketable — people willing to pay for your expertise. With that in mind, let’s look at the different types of consulting in which you can start your business:
This is a broad field and is probably the most common type of consulting out there today. Management consulting primarily involves helping your client’s company run smoothly and successfully.
The kinds of matters you get to consult on revolve around top management challenges — optimizing certain processes, providing valuable advice and insight, mapping out implementation plans for expansion, and so on. There are four main categories under management consulting:
- Strategy Consulting —The client consults you on key business strategies and crucial business decisions. For example, a company wants to launch a new product to appeal to another market segment. Hiring a strategy consultant can help them map out the best way to go about it.
- Financial Consulting—The client needs your expertise and years of experience to make informed financial decisions. Financial consultants typically work in corporate finance, institutional investing, real estate, risk management, and sometimes tax management. Note that financial consulting typically requires a license.
- Operations Consulting—The client needs expert help with the day-to-day operations of their company. As an operations consultant, your primary aim is to make processes more efficient and cost-effective.
- Human Resources (HR) Consulting — The client turns to you for staffing solutions. They can also consult you on basic HR matters like hiring and firing policies, conflict resolution, training and development, remunerations and other benefits, etc.
Examples of management consulting firms include McKinsey & Company, The Boston Consulting Group, Inc., Bain and Company, Deloitte Consulting LLP, and PricewaterhouseCoopers (PWC).
Information Technology (IT) Consulting
IT consulting deals with implementing and managing new technologies used by the client. These include system integrations, enterprise architecture, software and app developments, cybersecurity, and so on. As an IT consultant, your primary focus is on helping your clients leverage information technology to streamline their processes, solve challenges, and meet their goals.
This overlaps with certain aspects of management consulting. Being a marketing consultant means clients come to you for advice and guidance on how to optimize their marketing efforts for better customer acquisition and increased revenue.
Marketing is a humongous field, especially if you factor in the many branches of both traditional and digital marketing strategies. As such, it is not uncommon to find marketing consultants who specialize only in specific fields. For instance, you could have an SEO consultant, social media marketing consultant, billboard ads consultant, and so on.
Not everyone can appreciate a fine piece of art, but those that do often seek help from art consultants. The primary goal of an art consultant is to match their client’s vision with the right art pieces. They can also help with valuations, art sales, and authentications. Environmental Consulting
If you’re genuinely passionate about protecting the environment (we all should be, by the way), environmental consulting may be a great channel for you to promote environmental best practices. You also get to lend your expertise to businesses and non-profits on how their operations impact the environment around them and how to achieve their goals more sustainably.
Career consultants help position you to land that coveted job, as well as help you experience more growth in your career. Their expertise is in skill development, job applications, CV-building, interview questions and answers, among many others.
Setting up your consulting business
Here’s a walkthrough of how to get your consulting business up and running in 2021:
First things first, do an expertise audit
You must be good at what you do if you want to be a consultant. The kind of knowledge you possess in a particular field must be in-depth — deeper than the information you can easily find in a blog post. An expertise audit is simply an introspective look into your skill sets and experiences in relation to your ability to offer an expert opinion on those subjects.
Start by listing everything you have to offer to your clients.
What are your core competencies in those areas? What relevant skills have you picked up over the years? In what ways does your expertise bring value to a potential client? What certifications and licenses have you earned that qualify you to provide expert advice? Remember, in this type of business, you are the product. If you want to attract the high-paying clientele, the product quality must be excellent.
Put in the necessary research, and then some
Running a business is a lot like farming. You need to first get the lay of the land before you even think of planting. In this instance, it means conducting extensive research into the consulting industry. You can start by getting a general overview of the market — profit potential, room for growth, current industry practices, challenges, etc.
You’ll also need to research your competitors — what are they doing right? What areas can you exploit? How do they employ their marketing strategies? You can even contact them directly as a potential client, so you can see how they reel in new customers. This is all precious information.
Lastly, you need to research your potential clients. What kinds of businesses or organizations would make your ideal client? This step is crucial because it helps set the tone for your marketing efforts. If you already know the kind of people you want to work with, then you know where to find them and how to approach them.
Map out your business plan
Again, it helps to write this down as there are so many things to cover. It’s okay if you’re unable to drill down to details yet. The important thing is to have a general idea of all the moving parts of your consulting business.
You can break them down into bite-sized categories for better organization. For example, one category could be about the registration requirements, and another could be about how you intend to go about the branding, and so on.
Your business plan is not just about mapping out how to start the business but also a statement of how you intend to grow and scale your operations in the foreseeable future. A good business plan will include the following:
- Clearly outlined value proposition
- Operations structure
- Your current business resources
- How you want the business to make money
- How you plan to scale the business in the future
- Where you stand in the market against your competitors
- Current financial report and growth projections
Figure out how much to charge clients and how you’ll bill them
As this a new business, you won’t be able to charge premium prices for your consulting services. One of the best ways to go about it is to figure out the valuation of the problem you’re looking to solve. How much of an issue is it to the client? If you’re solving a thousand-dollar problem, then you’re probably charging around that rate too. The more expensive the problem, the higher the amount you get to charge.
Figuring out your billing process is important too. Are you paid upfront, by hourly rate, on a project basis, or is this a retainer-type agreement? Keep in mind that for most retainerships, there’s usually a clause preventing you from working with the client’s competitors for the duration of the agreement. This might limit your income supply.
Register your business
Business registration processes may vary depending on your current location. You may also be required to obtain special licensing before you can register a consulting business.
In most cases, these types of businesses start out as sole proprietorships before advancing to LLCs (limited liability company), to maybe even partnerships and full-blown corporations. The business structure you register will impact your financial reporting and tax payments.
It might be worthwhile to consult a business lawyer if you’re not familiar with these processes. As a business startup, the last thing you want is to run afoul of the IRS.
Invest in smart work It’s 2021, surely there’s no shortage of business processes that you can automate to create more free time in your already busy schedule.
Here are some areas that you should consider utilizing tech solutions to help your consulting business run more smoothly:
- Customer Relationship Management (CRM) tools — A consulting business is a client-centric business. Having a tool to help you track leads and maintain client relationships is a no-brainer.
- Project management software — If you’re billing by the hour, you’ll need an easy-to-use system that lets you track how much time you’re spending on a client’s project.
- Proposal writing software: As a consultant, you’ll be writing lots of proposals. Having a handy tool to help automate some of the processes and track your submitted proposals will make the work easier.
- Invoicing — In the beginning, invoicing is always one of the most fun aspects of owning a business. But over time, the invoicing cycle can become an ordeal that you wish you could automate.
- Bookkeeping — Staying up to date with your business finances is key to staying successful. You need to be able to organize everything about income and expenditure, taxes, and other balance sheet items.
- Professional networking — A good consultant is always ready to network. This means having the necessary tools like business cards, webinars, and teleconferencing solutions.
Marketing your consulting business
As with marketing any service-based business, it all begins with your business’s online presence.
Because this is the digital era, and your target audience is not likely to take you seriously if you don’t have a solid online presence.
Sure, if you’re starting your consulting business as a part-time gig and you already have an established client list, then marketing might not be your primary concern, but in reality, these cases don’t happen quite often. Most consulting businesses require a full-time schedule and a steady inflow of new clients. As such, marketing is something that you must really look into and allocate resources to as well.
The first step to building an online presence is with a professionally-designed website.
How does a website benefit my consulting business?
Your website is the online representation of your consulting business. It can be instrumental in landing your first client.
Anything people want to know about your startup, they can find it on your website. Here are a few other marketing benefits you can get from your website:
- Improved brand awareness — People tend to associate the design of a website with the quality of the brand. In a consulting business, first impressions matter a lot. Your website should exude confidence among visitors as to the level of quality they can expect from your consulting work.
- Suitable landing page for ads — if you’re running paid ads, whether on Google, Facebook, or some other platform, your website makes for a suitable landing page for converting leads into paying clients.
- Information — Your business website can serve as an industry-leading information resource. You could also post educational content about general consulting inquiries and best practices. This helps improve your online credibility and gradually establishes you as an expert resource on those topics.
- Reputation — A well-designed business website can help establish your reputation. More importantly, it is the perfect platform for creating social proof and displaying verified client testimonials.
How much should I expect to spend on a business website?
[That would ultimately depend on the design and functionalities of your website. On average, though, business websites have been known to cost between $500 to over $5,000.
If you’re looking for a fast, affordable, and professional web design service for your consulting business, check out B12. B12 leverages AI and machine-learning technology to build quality business websites more than your standard web design agency.
In terms of pricing, B12 uses a monthly subscription model that covers everything from web design work to maintenance, even to other marketing deliverables like SEO, copywriting, blogging for your small business. There’s also a dedicated support system. The best part is that this monthly subscription is only a fraction of what you would typically pay a traditional digital marketing company.
Exploit other forms of marketing too
Social media is a great way to market your consulting business. Platforms like Linkedin, Facebook, and Youtube are great for promoting massive public relations about your consulting services.
Create and share visual content, engage with your target audience, respond to their questions — all these can help build a strong online following.
Take advantage of word-of-mouth referrals too. If you’ve solved some particularly nasty pain points for your clients, encourage them to spread the word about your consulting work. Satisfied clients are often happy to refer quality services.
Building a successful consulting business will go a lot faster and smoother when you fully understand the fundamentals. The most important thing to remember is that you must be extremely good at what you do, and your proffered solutions must be worth paying for.
Ready to get started with B12?
It’s easy! Sign up and you’ll get a free draft of your new business website in just a few minutes. Once you approve it, the rest of the design can proceed, and you’ll have your stunning, responsive consulting business website in one to two weeks. Easy peasy.