How To Start A Consulting Business

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How To Start A Consulting Business In 2021: The Definitive Guide

The consulting sector is huge. Organizations worldwide spent over $155 billion on consultants and consulting companies in 2018. Approximately 2%-5% are spent on consultancy support by 75% of businesses. Another 13% allocate over 5% of their overall budget on consulting services.

Life as a consultant offers several advantages, so much that you can quit working for someone else by putting up your own consulting firm or working as a freelance consultant.

If you’re like many aspiring consultants, you’re most likely unsure where and how to begin.

The shift from salaried employee to launching a consulting firm might be difficult for most. Often, they ask these following questions:

  • Is a license required to establish a consulting business?
  • How can I launch a consulting firm with no prior experience?
  • How do I go about starting a consulting business?
  • Is it tough to set up a consulting business?
  • How can I get clients?

If you’re ready to take the plunge, we’re here to teach you all you need to know to launch your consulting career.

Towards the end of this article I’ll answer some of the most frequently asked questions about starting a consulting business…

But most importantly, I’ll show you the exact system I used to build my own investment portfolio to over $40,000 a month in mostly passive income.

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Table of Contents

How To Start A Consulting Business in 2021: The Definitive Step-By-Step Guide

STEP 1 Choose Your Niche.

When you fully embrace and commit to your niche market, you are already walking towards a profitable consulting business.

You may be an expert in marketing, finance, or whatever industry or sector.

But so do many other people.

When beginning a consulting firm, specializing will make it much simpler to set yourself apart from all of the other generic consultants, especially in the long run.

If you specialize, you establish yourself as an expert in that field. And this gives you more credibility, enabling trust to grow between you and your clients.

As a specialist consultant, you will look more competent and appealing to potential clients.

According to Dana Anspach, a qualified retirement expert, financial planner, and consultant:

Don’t strive to provide for every client’s requirements. By applying your knowledge to a niche market that requires what you offer, you will be a lot more successful as a consultant. You may customize your services in this way so that they provide value to a certain group of businesses or people.  

However, if you are having difficulty identifying your niche or expertise, consider the following strategies:

  • Determine whether there are any underserved specializations in your field.
  • Identify specialties that are going to be potentially underserved in the future.
  • Identify which aspects of your field clients have the greatest difficulty with.
  • Check if your niche expertise is unique and if your knowledge is rare and easily found in the job market.
  • You’ve likely previously helped friends address their company/ business issues and challenges.. What areas did you concentrate on when working with them?
  • Is your consultancy confined to assisting clients in the United States, or will you give services to clients all over the world?

Whichever niche you decide to pursue, do not attempt to be the perfect match for every client. A good consultant identifies a specialized target and advertises their expertise to that group.

Perhaps what you’re doing now inspires you. When beginning a consulting firm, you might also consider the following areas:

  • Accounting
  • Advertising
  • Auditing (Auditing of financial, human resources, or legal records)
  • Coaching other consultants.
  • General business (Coaching and general business consulting to assist business owners in overcoming a wide range of challenges. You can even establish a formal or informal coaching program for current and prospective clients)
  • Business writing (A large number of business owners and entrepreneurs are bad writers. Successful consultants may frequently educate or shadow business owners on how to write better)
  • Career consulting
  • Communications
  • Computer programmer or technology
  • Editorial services
  • Grantsmanship
  • Insurance
  • Marketing
  • Payroll management. 
  • Public relations
  • Publishing.
  • Supply chain management
  • Taxes. Everyone must pay taxes
  • Writing services

You’ll also need to select a business model or company strategy that matches your goals and skill set.

Starting A Consulting Business: Types of Consulting Business Model

The Solo Consultant Model

With this model, you will collaborate directly with your customers and finish the project, as well as, all deliverables on your own. This is a fantastic approach if you desire a lean and flexible consulting firm.

The Consulting Firm Model

When you start a consulting business, you are in charge of operating it and working on client tasks.

The Productized Consulting Model

Here, rather than delivering direct consulting services via a consulting business or as a solo consultant, you build products based on what you know.

The Hybrid Consulting Model

This is a combination of two or more consulting models mentioned above.

STEP 2 Define Your Consulting Services.

Consulting is a somewhat ambiguous and broad term.

Both existing clients and potential clients, on the other hand, do not pay money for ambiguous promises.

If you want your consulting to thrive, you must tell new and prospective clients what exactly your services are and their scope.

To do this, you must first define your services and deliverables, as well as your consulting business plan.

Begin by analyzing your skill set and conceptualizing the broad consulting services you’d want to provide. However, before you engage with any customers, you must define the parameters of your consulting service.

This is necessary for three reasons:

  • To persuade potential clients that your consulting services hold value, you must be able to confidently show them what your your consulting service is all about.
  • You’ll need to charge fees that allow you to run a viable firm.
  • Specificity aids in the creation of reasonable expectations for your current and prospective clients.

This final tip is beneficial to both you and your clients. With this, your clients will be able to make confident, well-informed judgments. You can also avoid clients who may take advantage of you.

Entrepreneur and business planning evangelist, Tim Berry advises:

Anticipate scope creep—clients requesting for more apart from the agreed deliverables and price—and handle it gently, implying that the extra labor necessitates further money. This is one of the most difficult challenges you will face, and there are no simple answers.

Business owners hire consultants for the following reasons:

  • For expertise
  • To reinforce their workforce
  • To identify issues
  • To encourage change, to instruct, and to make difficult decisions
  • To persuade key decision-makers at other firms
  • To generate ideas
  • Lastly, consultants are hired by businesses to help them establish new firms and products.

STEP 3 Write A Business Plan.

Develop a business plan as soon as you’ve decided on a niche and defined your services.

People make a lot of blunders when starting a new business and rushing into things without thinking about the important parts of running one. Although it is not required, drafting a business plan may help you solidify your ideas and avoid a lot of pitfalls.

STEP 4 Hire An Experienced Business Attorney.

Most consultants hate talking with and employing a business lawyer.

Some are too worried that they might wind up paying expensive legal fees or that they would obtain terrible advice that will ruin their firm. Others are stressed over finding an affordable and qualified lawyer.

Below are some tips to help you find a competent lawyer:

Hire A lawyer Who Adds Value.

Typically, lawyers with very cheap fees are mostly the least experienced – particularly in the fields or areas where you may want assistance.

Spending a lower hourly rate may seem appealing at first, but you may wind up paying considerably more than if you had engaged an experienced (more costly) lawyer on the outset.

Hire A Lawyer Responsive To Your Needs.

Since a lot of agreements and deals are time-sensitive, make sure your lawyer will be available whenever you require their attention, particularly when examining or evaluating a proposed consulting contract.

When To Hire A Lawyer

The ideal time, typically, to begin working with a lawyer is before launching your consulting firm.

STEP 5 Decide Your Legal Business Structure.

Before you launch your consulting firm, you must first identify which business entity is most suitable for you.

Everything is affected by your legal business structure – from filing your taxes to your personal liability, and if you must adhere to any particular compliance restrictions at the local, state, or national levels.

Check which business structure is most beneficial to your company and how each business structure may help you achieve your professional and personal objectives.

Starting A Consulting Business: What Are The Four Types Of Business Entities?

  • A Sole Proprietorship
  • A Partnership
  • Limited Liability Company (LLC)
  • A Corporation

Consider which entity will perform effectively for your present needs while also keeping future company objectives in mind.

STEP 6 Set Up Business Accounting And Bookkeeping.

Part of your preparation for starting a consulting business is to have a bookkeeping and accounting system in place to monitor your finances. This is crucial for understanding your company’s cash flow, and are required for tax filing.

Below are important points about accounting and bookkeeping to consider for your new consulting firm.

Start By Hiring A Bookkeeper.

An excellent bookkeeper is not like an accountant. Most business owners employ bookkeepers for these three key objectives:

  • Keep me organized.
  • Pay my bills.
  • Prepare for the tasks that will be turned over to the accountant.

A Bookkeeper Can Help You Organize Your Financial Information.

Data is generated by every business, from the smallest hot dog stand to the biggest publicly traded corporation – data about sales, inventories, employees, and customers. The list goes on and on.

And, like any other type of data, if it is not structured and accessible, it is completely worthless.

This will be extremely useful to your consultancy business.

Review Your Accounting Processes Annually And Make Adjustments.

Some points to consider:

  • Are you handling your accounting in the most productive and cost-effective way possible?
  • Is your CPA knowledgeable enough in the business to offer advice?
  • Is your tax preparer equipped with the knowledge and experience to keep you (and your investors) on the right side of the law?
  • Lastly and most importantly, are you able to identify methods to cut costs while keeping high-quality controls?

Consider your entire accounting approach and look for methods to enhance and improve it.

STEP 7 Assess Your Finances.

When starting a new consulting firm, it is critical to examine your financial situation. These figures include measuring your sales and earnings. However, a business like this must account for much more than just sales.

Business finance makes use of the financial data of your company to assist you in managing your money and making your business operations lucrative and sustainable.

STEP 8 Develop Your Brand Identity.

Brands aren’t only for huge businesses. Branding is much more important for small businesses, such as freelance consultants.

Branding gives a good degree of professionalism that small businesses may struggle to achieve.

To win the trust of their clients, consultants must be perceived as competent specialists. That credibility will be undermined by a lack of brand identification.

If you have good design, then you have a good business, not only for your clients, but for you as well.

So, before you attend your first networking event, consider the following essential questions:

  • What identity/ personality do I want to convey through my consultancy brand?
  • Who will be interested in or require my services?
  • What benefits do consulting customers receive from my services that they do not receive from other consultants?
  • What benefits may customers derive from working with me that they cannot have from other consulting firms?
  • What are the core values of my brand?
  • What is the most important aspect of my clients’ experience?

Your responses to these and other similar questions will form the foundation of your brand. All subsequent branding decisions should build on these concepts.

Starting A Consulting Business: Marketing Psychology Can Help You Increase Revenues.

Marketers who are savvy will most likely use psychological concepts in their content marketing, and sales strategy, and marketing campaigns.ltricies. Phasellus a erat eu diam hendrerit cursus. Donec sit amet viverra leo, at tincidunt nisl. Mauris viverra eget eros non tincidunt. Pellentesque habitant morbi tristique senectus et netus et malesuada fames ac turpis egestas. Donec in nunc massa. Ut tempor, ipsum nec cursus aliquam, tellus dolor convallis orci, nec sodales justo tortor eget augue. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Donec ante elit, consectetur non aliquam ornare, varius id urna. Aliquam metus risus, dapibus convallis convallis eu, eleifend vitae magna. Etiam ac ipsum vitae.

STEP 9 Fill In The Business Blanks.

Once you’ve defined your brand, you can start thinking about the crucial elements of actually beginning and maintaining a consulting firm.

Choosing a business structure, pricing, licenses and permissions, and business strategy are all important considerations.

Your preferred business structure isn’t a simple matter. It will have an influence on you and your business in the future.

An expert company attorney can assist you in this matter.

After you’ve decided on the legal structure of your company, you’ll need to file the required documents.

According to the US Small Business Administration, almost every sort of business requires some kind of license or permit.

Plan for all of the required legal and logistical business concerns, and you’ll have a solid basis for the future success of your consulting firm.

STEP 10 Crunch The Numbers.

It is critical to grasp the numbers while establishing your new consultancy.

You would want to measure your sales and earnings for your consulting firm, but there’s a lot more to consider before you get there. You must begin with your start-up costs.

Running sophisticated calculations to get the cost of running your business will help you with your pricing.

Setting Your Fees

To develop an innovative and successful pricing structure, you must first understand how your operating costs are.

The Competition And Perceived Value

The amount that a consumer believes a product or service is worth is known as perceived value. And your competitor’s prices contribute to that image. However, this is not the entire picture.

Your time is valuable, and you must earn a livable salary. However, that won’t matter to your current and future prospects.

A high-end brand positioning and an elegant logo will result in a greater perceived value than a cheap brand positioning. Clients, particularly new ones, might be willing to pay extra if they have greater confidence in your consulting brand.

So, when developing your price tactic, keep your brand and your competitors’ pricing in mind.

Finally, consultants bill their clients in one of three ways:

  • Hourly Rate
  • Project Rate
  • Retainer

STEP 11 Build An Online Presence.

One crucial ambassador of your consulting brand is none other than your website. This is a no-brainer.

The graphic design and marketing content of your website should reflect your brand’s voice and identity. Here are a few ideas:

  • Make use of your brand’s colors.
  • Display your company logo prominently.
  • Marketing copy should be written with your target audience in mind.
  • Also, demonstrate your particular consulting style.

STEP 11 Create A Sales Plan.

Designing a logo and developing a website are obviously not the only things you need to do.

To draw in and close clients, you’ll need a sales plan.

Client proposals are your opportunity to demonstrate how you can assist your client in resolving their concerns.

You’ll have to be explicit about the scope of the project, your services, the fees for those services, i.e., hourly rate and/ or retainer, the outputs, and the time period.

Also, demonstrate how you and the customer are capable of measuring the results.

STEP 13 Spread The Word.

Yes, you might be a great consultant, but if you don’t market yourself, nobody will know.

The only way to assure a continuous flow of clients and potential clients is to market your business. You need to start concentrating on informing your target market about your consulting services.

Sharing your experience with as many people as you can is one of the most successful methods in building a reputation in the consulting profession and in turn, acquire clients.

According to John Jantsch, a marketing expert, small company marketing speaker, and popular author,

A key component of your prospecting strategy should be to get your message in front of as many people as possible…. go to as many podiums as you can in the beginning. You’ll discover that speaking leads to more speaking, which leads to better speaking, which leads to clients.

If attendees wish to learn more about your services, bring business cards and brochures with you whenever you make a personal appearance, and put a phone number and other vital contact details on your business card.

It is difficult to build confidence with new clients just through email even though most clients prefer this method.

Experts from Entrepreneur advise consultants to put the following content in each marketing brochure.

  • A concise description of your services
  • A justification for why you have the best service
  • Some compelling reasons why you should get employed
  • A short biography with pertinent information
  • Some information about your other clients

Social Media

Keeping at the very least a Twitter, Facebook, and LinkedIn presence will significantly help you in building a loyal online audience.

Make it simple for visitors to understand what your consulting services cover by providing suggestions and insights, and contributing any articles you’ve authored.

Maintain an engaging presence to establish yourself as an expert in your field and to create and strengthen relationships with existing and prospective clients.

This will convince your audience that you are approachable, knowledgeable, and trustworthy.

You may even take part in discussions about how to start a consulting business because you are starting to be an expert on the subject as you operate your own consulting business.

STEP 14 How To Find Partners Or Investors

To save sufficient capital to maintain and build a business is one of the toughest challenges for any new business.

In an ideal world, we would all be able to support our own businesses without the assistance of others. However, most people are unable to do so on their own.

This is where outside investors or business partners come into play.

You can do this by seriously considering how this can affect and impact your business. To get you started, here are some questions:

  • What do I want to achieve from this collaboration or investment?
  • How much involvement do I want from them?
  • Do I want a long-term or a short-term relationship?

Relationships with partners and investors may take several shapes. Are you just seeking for someone to invest money in your company? Or are you searching for leads, a cost-sharing partner, or visibility and success through affiliation with a well-known brand?

Before engaging with any possible partner or investor, you should be clear about your objectives.

Once you’ve identified your relationship objectives, you may now consider the kind of partnership that would best achieve those objectives.

Below are some alternatives that you can take into account:

Crowdfunding

Crowdfunding websites such as Kickstarter and Indigogo allow you to raise funds from a large “crowd” of people.

These are simple to operate and enable you to generate funds without giving any partner or investor control over your business. However, you must fulfill  any commitments you’ve made to your backers.

As we have stated earlier,

Since the Great Recession of 2008, there has been a continuous growth in crowdfunded investments, according to reports. Based on a recent World Bank report on the Crowdfunding Sector, the crowdfunding market may grow anywhere between $90 and $96 billion, which is almost 1.8 times today’s global venture capital industry.

Crowdfunding may not be the best option if you desire a real business collaboration. It’s also not always a suitable fit for consulting firms.

However, every business, including consulting firms, is different. If you intend to pursue crowdfunding, read “Design Tips From the World’s Most Successful Crowdfunding Campaigns” first.

Angel Investors And Venture Capitalists

Venture capitalists and angel investors are a more conventional way to fund your new consulting firm. They may be an alternative to explore if you want to start a consulting firm rather than do it on your own

However, you will need to put in the effort to convince business investors of your company’s financial sustainability.

This is particularly the case on the outset. Only a few investors are prepared to put money into a consulting firm early on.

But, if you’re considering scaling your already successful consulting business, finding potential investors will be much easier, especially if you are in the technology field.

Having said this, be prepared for these investors should to play a substantial part in your company.

After all, they are putting their money into your consulting firm expecting a return on their investment.

As a result, they would want know that you’re operating in a manner that will assure them of that return.

Partnership

Business partners can take many different shapes. When both partners participate equally in the success of the firm, they form a real business relationship.

They contribute equally in terms of finances, resources, and labor.

If you don’t have yet a highly devoted partner, you can form more informal or temporary collaborations with other consultants or  established brands.

Instead of competing for your business, search for consultants or brands that complement your services.

Also, ensure that both of you are aiming for the same goals.

Here are two examples:

Example 1

Who: Collaborate as a partner with a consultant from a relevant field.

What: To provide complementary or supplementary services as equal partners

Why: To provide more value to clients and attract a larger client base.

Example 2

Who: Collaborate with a software company in your industry.

What: To create a lead exchange program

Why: To attract high-quality leads to each other

There are several more innovative methods to collaborate with an established firm or another expert consultant. And, with the same goals in place, you will be compelled to work as a team in order to attain them.

STEP 15 Find The Right Help.

Almost all entrepreneurs have felt alone in their journey.

And there’s a high possibility you will be especially when you start your consulting business.

However, you would definitely help if your objectives include scaling and growing your business.

If everything goes well, you will eventually recruit workers to alleviate you from other work load so you can shift your focus on servicing your clients.

Employees, on the other hand, must be compensated. So  initially, only hire for jobs that would give the maximum immediate advantage to your company.

There is no single correct answer for what those jobs may be – each consulting firm is unique. However, while deciding which jobs to fill, examine which areas of the business are presenting the most critical issues.

Also, keep in mind of your limitations.

If you’re new to marketing, think about employing a marketing manager to assist in strategizing your business operations.

If you are unsure about invoicing and numbers, employ a billing professional to handle accounts and collect money.

Employ someone who is a specialist in the areas where your company is currently weak. Developing a solid and well-rounded staff will provide a strong foundation for your company.

Let me point out a few things your business needs.

  • You could choose to recruit a part-time assistant as your first hire. Look for a jack-of-all-trades who is willing to acquire new talents and has a strong work ethic.
  • You’ll sleep easier at night knowing you have someone you can rely on even if you are not around. 

The Legal Stuff

Of course, employing personnel for your consulting businesses entails dealing with a lot of paperwork and most importantly, its legalities. 

Indeed’s recruiting specialists suggest that you:

  • Apply for an Employer Identification Number (EIN) on the IRS website. You’ll obtain your number right away!
  • Register with the labor department in your state.
  • Fill out the necessary papers to deduct federal taxes from your employee’s pay.
  • Arrange for workers’ compensation insurance if your state requires it.

Before You Go...

After you’ve invested a lot of your years in a salaried employment, the idea of starting your own business might be intimidating, let alone one that’s in the consulting industry.

Perhaps you’ve reached your wits end on working a 9-5 job. And I’m sure you wouldn’t have reached this far if you weren’t seeking for a way out or if you don’t see it as a problem.

This guide hopes to have provided you with sufficient information on how to start a consulting business.

Starting a consulting business could be the most gratifying and life-changing choice that daring men and women decide to do. Will you be one of them and establish your own consulting firm?

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