You’ve put in the years to learn your industry inside and out, but now you’re starting to feel like a little change would do you good. Maybe it’s time to cash in on your expertise and take the next step by becoming a consultant in your field.
Don’t worry if you don’t have the salesman’s shiny smile. A consultant isn’t a guru who hawks how-to guides on talk shows; it’s a professional who helps people by sharing real knowledge. Credibility, authenticity, and positioning are what matter most, not your style or a fancy logo.
But transitioning from doing to consulting isn’t always easy. And if you have never looked at how to start a small business, getting started can seem intimidating. This article will guide you through the more practical matters of structuring your consulting business and offer strategies for choosing a niche and getting your first clients.
What is a consulting business?
Before starting a consulting business, you’d better know what it is. Or, better yet, what it isn’t.
A consulting business is not freelancing, coaching, or being an agency. Consultants give their clients battle-tested advice, strategies, and specific solutions to solve their pressing problems. That’s it. They don’t implement the solution, oversee those who do, or cheer on management.
Often, businesses bring in outside consultants for complex matters, but other companies prefer to have a consultant on retainer for quick answers to important questions.
While most consultants focus on assisting businesses, some work with individuals. These can include career and academic consultants. Whether you are working with a business or an individual, the goal is the same: timely and actionable advice.
Choose your consulting niche and problem focus
Consulting in the US is big business, and if you want to stand out, you need to find ways to differentiate yourself from others. Choosing a specific niche or problem area is key. For example, avoid generalizing your services by calling yourself an IT consultant. It’s better to pick a particular aspect of IT you want to specialize in, such as being an IT consultant for manufacturers.
After narrowing your niche to a particular industry, drill down even further. Maybe you are an expert in one region of the country? Or perhaps most of your experience is with companies at the startup stage? The more unique you position your offering, the better your marketability.
But whatever niche you select, it must be directly related to your proven industry experience. A huge selling point for your future consulting firm is being able to provide potential clients with verifiable examples of how you previously solved the exact same issue they are currently facing.
Once you have what you think is a great business idea for your consulting focus, don’t rush ahead without first determining whether there are unserved clients in that niche. You want to be a big fish in a small pond, not a dead pond.
The best consulting business to start
Unfortunately, no one can tell you which consulting service is best because there isn’t just one. However, there is probably the best consulting business for you. Most of the time, the best one for you is where your expertise and a strong market demand intersect.
The following market sectors are generally in high demand:
- IT and cybersecurity. Helping companies with technology problems, finding solutions to protect networks from hackers and other cybercriminals.
- Marketing strategy. Creating an overview of a long-term marketing plan that matches the goals of the business.
- Operations improvement. Streamlining how a business works to save money and time while creating better outcomes.
- HR and compliance. Assisting with creating plans to manage a company’s workforce efficiently and ensuring the business is following labor laws.
- Financial advisory (non-regulated guidance only). Giving financial advice on non-regulated topics, including budgeting, cash flow management, and debt restructuring.
- Healthcare administration. Focusing on optimizing the business side of healthcare facilities by conducting operational and regulatory audits.
But succeeding as a consultant takes more than just choosing the right niche. It takes strong preparation and good planning.
Structuring your consulting services
Setting up your consulting service correctly is often the difference between reliable profitability and disappointment. When structuring your business, determining your fee model and setting expectations for you and your clients are essential.
Consider:
- Hourly vs project pricing. Billing per hour can be an administrative and customer service nightmare, but it protects against scope creep that can occur in project pricing.
- Retainer agreements. A monthly retainer fee guarantees steady cash flow, but you should set limits on time and availability.
- Diagnostic audits as entry offers. Offering to identify what a business is doing wrong for a discounted price may get your foot in the door, but it tends to attract “cheap” clients.
- Clear deliverables and scope definitions. Define the scope of a project, and have specific deliverables and a timetable when they are due to reduce disputes or underpayment.
- Contracts and engagement letters. Work with an attorney to create templates for contract and engagement letters.
How to start a consulting business with no money
The good news is that you can definitely bootstrap a consulting business, but you may need to get a little creative with how you do things.
It’s completely unrealistic to start any business totally broke, and the more money you have access to, even if you never use it, the less stressful the first few months will be.
Consultants may find that these money-saving hacks can help:
- Leverage existing network for first clients. The people you already know are more likely to hire you. As an added bonus, you won’t need to spend time and money marketing yourself.
- Offer pilot engagements. Help potential clients say “yes” to you by giving a low-cost “trial” contract to decide if you are a good fit for their company.
- Use simple tools instead of expensive software. Automated software subscriptions can simplify your life, but they can cost thousands of dollars a year. If you need to save money, choose cheaper subscriptions or offline tools instead.
- Start with contract-based agreements. Short-term contracts start bringing in cash without locking you into a long-term commitment. You can build a reputation and explore the market.
- Use personal credibility before branding spend. Your reputation is what matters most when it comes to getting and keeping clients. Marketing helps, but you need to create something worth marketing first.
Although you can cut some corners when starting a consulting firm, you can’t eliminate all expenses, like registering your business or purchasing required insurance. And remember, a big investment in your time is often the trade-off for a small investment in capital.
How much does it cost to start a consulting business?
Creative approaches can help you minimize the money you need to start a consulting business. But there are always startup costs and so you’ll still need some cash for the essentials.
When creating a budget for your new consulting firm, consider these expenses and rough estimates for planning.
- Business registration fees. State fees for registering an LLC range from $40 – $520, but additional expenses, such as a DBA, can increase the cost.
- EIN (if forming an entity). It is free to get an EIN from the IRS.
- Professional liability insurance. $600 – $1200 yearly.
- Website. $500-$ 2,500 for design, domain registration, and annual hosting.
- Software subscriptions. $1200 – $1800 yearly.
- Legal contract drafting. $200 – $2500, depending on complexity.
If you are just starting out, you can keep your costs low, but as you grow, so will your expenses.
Legal and structural setup
Now that the planning stage is over, it’s time to take action by establishing the legal and structural framework for your consulting firm. It can certainly be intimidating for those new to business, but it isn’t complicated, just time-consuming.
You need to think about:
- Forming an LLC or similar entity. Decide whether you need the protection of an LLC or prefer the lower cost of a sole proprietorship.
- Obtaining an EIN. Get an Employer Identification Number from the IRS. You may need one, even if you don’t have any employees or plan to have any.
- Separating business finances. Open a business banking account to keep your business dealings separate from your personal accounts. You may need a business checking account for billing or other paperwork.
- Drafting client contracts. Having an attorney create a legal client contract template in advance will help protect you and allow you to take on new work quickly.
- Considering professional liability insurance. Protect yourself from legal costs and damages that result from negligence or mistakes that cause economic loss to your clients.
While you can definitely register your business on your own, many businesses prefer to bypass the stress and ensure they are doing it the right way by using a company formation service like Tailor Brands. Though it’s important to note that it won’t guarantee you will attract clients or be financially successful.
Finding your first consulting clients
Without paying clients, even the best-structured consulting firm won’t be profitable. But you don’t need a lot of clients to succeed, just good ones. That leaves the question: how do you go about getting your first?
Many starting consultants begin by:
- Leveraging past colleagues. People you have worked with in the past know you and are the ones most likely to hire you in the future. They are also a wonderful source of referrals, which are much more effective than cold-calling.
- Industry networking. Getting out there and meeting people face-to-face develops connections and trust. Many consultants find networking is both fun and effective.
- Speaking engagements. Being seen as an SME is a great way to market your consulting business. Besides communicating with the people in the room, you can use the video of your speech for content marketing in the future.
- LinkedIn outreach. Target your audience directly with strategic, not spammy, articles on LinkedIn. Leaving thoughtful comments is a great way to get your name in front of people.
- Partnerships with agencies. Working with an agency significantly reduces your marketing time. Partnership set-ups can vary from swapping referrals to being brought in by the agency to work on a specific project.
However you market yourself, always remember to protect your name and reputation, because that’s your entire brand.
Conclusion
At the end of the day, you don’t need much money to start your own consulting firm, but you do need time, credibility, and appropriate market positioning. Success is earned by delivering reliable, clear, and actionable solutions to real problems over time, but starting with a solid, well-planned business structure is a strong first step.