How to Start a Consulting Business

Do you have expertise in a particular area?

Then people may be willing to pay you for your advice. This business model is called consulting.

The US consulting industry has experienced consistent growth between 2015 and 2019, reaching the value of $64.4 billion in 2020.

And it’s already recovering from the Covid-19 pandemic. Say, the US management consulting market is projected to grow by 2.3% this year.

Follow our guidelines on how to start a consulting business in 2021.

Table of contents

1. What does a consultant do?
2. 4 things to consider before starting a consulting business
3. How to start a consulting business in 7 steps
4. Step 1. Choose your industry and specialization
5. Step 2. Decide on your services structure
6. Step 3. Create a pricing strategy
7. Step 4. Figure out the legal aspects of running a consultancy business
8. Step 5. Lock in your main value proposition
9. Step 6. Build a system for attracting repeat clients
10. Step 7. Run and scale your business
11. Conclusions
12. FAQ (Commonly asked questions)

Ready to build a successful consulting business and be your own boss?

Let’s find out how.

Last updated: Mar 2023

Start your LLC the easy way

Forming your LLC is a checkbox that needs to be ticked. Easy, fast and worry-free. We reviewed the 13 most popular LLC formation services to figure out who truly understands what new founders need. Our recommendation:

LLC Formation: $39 + state fees

Pricing:

Turnaround Time:

Help & Support:

Customer Satisfaction:

Ease of use:

We don’t make up scores.

Best LLC Service 2022

• Formed 1,000,000+ LLCs
• $39 formation includes registered agent service
• Fast formation & same day filing
• Exceptional customer reviews

Visit Northwest

Last updated: Mar 2023

What does a consultant do?

Consultants provide expert advice on a specific subject.

For example: When asked what areas they used consultants to help with business strategy and execution, 49% of CEOs spoke about purchasing a new software.

Consultants specialize by:

• Industry.
• Business type.
• Problem type.
• The scale of business.
• Business methodology.

Generally, they tend to target a narrow niche because that makes it easier for the consultant to establish themselves as an expert, provide consulting services, and get new clients.

4 things to consider before starting a consulting business

Before you jump into consulting, there are a few things that you need to consider.

Your niche

You won’t build a successful consulting business if you come across as a jack of all trades, master of none. Specialize in something.

It’s best to pick a target market in which you have years of experience, a solid network of professional connections, and credentials that prove your expertise.

Extra training

Formal qualifications, such as university degrees or professional certifications, can help reassure potential clients that you’re the real deal.

That being said, not all qualifications are made equal, so you want to think carefully about whether you should pursue a particular degree or certification.

Is it worth the investment of time, energy, and money?

Customer acquisition channels

Think about how you’ll acquire new clients.

You might find potential clients among your LinkedIn connections. But you don’t want to be completely reliant on your network.

Sure, if you’re a good consultant, you’ll probably start getting referrals through word-of-mouth once you prove yourself by doing great work.

However, you should also build a system for attracting new clients. More on that later.

Is this right for me?

Be honest with yourself about whether consulting is the right career for you. Maybe it isn’t. And that’s fine.

Here are a few questions that you might want to ask yourself.

Do you have the expertise required to advise on this subject?

Look at your track record. What have you achieved in this specific area so far?

You might want to continue working in the industry as an employee if you don’t yet feel confident in your ability to produce results in your area of expertise.

Do you have the sales skills required to sell consulting services?

Being an expert in a particular subject is not enough to build a successful consulting business. You also need to know how to sell.

It’s alright to admit that you have the expertise but not the skill set required to sell that expertise.

Do you have what it takes to be an entrepreneur?

Be honest with yourself.

Do you have the personality traits required to succeed as an entrepreneur (e.g., ambition, drive, high-risk tolerance)?

Note that you don’t need to become a full-time consultant right away. Consider starting as a freelancer. Keep your job, set up a home office, and do consulting on the side. See how you like it.

By doing so, it will help you understand whether entrepreneurship is for you.

How to start a consulting business in 7 steps

Now you understand the requirements for building a successful consulting business.

What’s next?

Here’s the seven-step guide to starting a profitable consulting business:

• Step 1: Choose your industry and specialization
• Step 2: Decide on your services structure
• Step 3: Create a pricing strategy
• Step 4: Figure out the legal aspects of running a consultancy business
• Step 5: Lock in your main value proposition
• Step 6: Build a system for attracting repeat clients
• Step 7: Run and scale your business

Step 1: Choose your industry and specialization

Start by choosing:

1. A consulting niche.
2. A specialization within that niche.

Let’s take a look at the most popular types of consulting and the specializations available within them:

Management consulting

Management consultants give expert advice on various aspects of business management.

Here are a few examples of specializations available in this niche:

• Operations consultants help companies identify pain points and streamline their business operations.
• Change management consultants help companies implement change on an organizational level.
• Human resources consultants help companies acquire, train, and retain top performers.

The average salary for a management consultant in the United States is $102,287.

Strategy consulting

Strategy consultants provide expert advice on various aspects of business strategy.

Here are a few examples of specializations available in this niche:

• Go-to-market consultants help companies bring new products and services to market.
• Business development consultants help companies grow their businesses.
• Business acquisition consultants help companies acquire other businesses.

The average strategy consultant salary in the United States is $109,116.

IT (technology) consulting

IT consultants, also known as technology consultants, provide expert advice on information technologies.

Here are a few examples of specializations available in this niche:

• Cloud migration consultants help companies migrate data to a cloud computing environment.
• Infrastructure consultants help companies improve their infrastructures to create more efficient, robust, and secure systems.
• Cybersecurity consultants help companies protect themselves from various cyber threats.

The average IT consultant salary in the United States is $78,935.

Marketing consulting

Marketing consultants provide expert advice on marketing.

Here are a few examples of specializations available in this niche:

• Brand consultants help companies to create, strengthen and manage their brand image.
• Sales funnel consultants help companies to convert site visitors into leads, leads into customers, and customers into repeat customers by implementing sales funnels.
• SEO consultants help companies get more organic search traffic from Google.
• Paid advertising consultants help companies create and manage paid advertising campaigns.

The average marketing consultant salary in the United States is $70,317.

Financial consulting

Financial consultants provide expert advice on various aspects of business finance.

Here are a few examples of specializations available within this niche:

• Audit consultants help companies better understand their financial situations by performing an audit of their finances.
• Tax consultants help companies save money by taking advantage of various tax loopholes.
• Investment consultants help companies grow their capital through wise investments.

The average financial consultant salary in the United States is $66,320.

How to choose your consulting niche

Here’s what you should consider when choosing a consulting niche:

• Do you have expertise in this niche?
• Do you have contacts that could help you get new clients in this niche?
• Do you have a genuine interest in this niche?

You want to go into a niche where you have as many advantages as possible from the get-go, such as experience, credentials, and contacts.

Step 2: Decide on your services structure

Once you have chosen your niche and specialization, it’s time to think about the structure of your consulting services.

Here are the three most popular options:

Advisory (hourly-based)

Charging an hourly rate is the most straightforward consulting service structure.

It works best when the client only needs advice on their situation but doesn’t require help implementing that advice.

Example

They want you to help them pick the best software for their company’s needs, but they intend to set the software up themselves.

Productized services (with a range of deliverables)

Productized service business model can also work well for consulting.

You create a clear scope of the consulting service you’ll provide that includes a set of deliverables.

Then you set a fixed fee for that consulting service package. It can be either a one-off fee or a subscription.

It works best when the client needs your advice and wants you to help them implement that advice.

Example

They want you to help them pick the best software for their company’s needs, set that software up, and teach them how to use it.

Retainers

Retainers are another popular consulting service structure.

They are either monthly productized service subscriptions with limited scope or a monthly fee in exchange for which you agree to be on call and help the client quickly solve problems should they arise.

In the latter case, the retainer is compensation for being on call. You charge extra for the work that needs to be done in case of an emergency.

You can combine a monthly retainer with an hourly rate, where you charge the retainer for being on call and the hourly fee for fixing the problem.

That way, you won’t have to negotiate the pricing with the client in an emergency where time is of the essence.

Example

Say that you have just set up the cybersecurity infrastructure for a client.

You can then offer them to be on call and help in case of a cyber attack.

Should they ever find themselves in such a situation, they can call you and get immediate help before things get entirely out of control.

How do consultants bill hours?

Consultants that bill hours typically have a clear definition of what counts as billable work and then charge the client for every hour they have spent performing those tasks.

Usually, they use timekeeping software to keep track of the billable hours.

Step 3: Create a pricing strategy

Cash flow is king, no matter what you offer or how you do business. Set prices that make sense for your target audience and allow you to make a great living.

What should I charge per hour for consulting?

Research the hourly rate range for the type of consulting that you want to do. Salary.com and Glassdoor are great resources for this. Then set a rate that falls within that range.

How to price consulting services?

Here is how you should go about pricing your consulting services:

• Research the price range for similar consulting services.
• Pick a price point that falls in the middle of that range.
• Start reaching out to potential clients and pitching your services.

Avoid the temptation to compete on price. Don’t be the cheapest consultant in your area.

Step 4: Figure out the legal aspects of running a consultancy business

You need to make sure that you operate your consulting firm legally.

Here are some of the things that you should think about.

Business registration

As a small business owner, you can operate under a sole proprietorship or a limited liability company (LLC) business structure.

The former option is more straightforward, but it leaves you exposed to all kinds of legal risks.

The latter option is more complicated because you need to set up an LLC, but it provides legal protection should something go wrong.

It’s recommended you go the LLC route if you want to protect your personal assets.

Business name

You might need to register a doing business as (DBA) name if you want to operate under the name of your company (as opposed to your legal name).

Note that this might be necessary for opening a business bank account.

Tax obligations

Being a small business owner means that you have tax obligations such as:

• Federal taxes.
• State taxes.
• Local taxes.

Consider hiring an accountant to help with bookkeeping and taxes. You don’t want to get in trouble with the IRS!

Do you need a license to start a consulting business?

Whether you need a license to start a consulting business depends on what type of consulting you want to do.

You might want to consult a lawyer on this.

Should I create an LLC for consulting?

You might want to form a limited liability company (LLC) for consulting.

That way, you won’t be personally responsible for business liabilities, which will protect your personal assets should something go wrong.

Step 5: Lock in your main value proposition

Consulting is fiercely competitive.

That’s why you need to develop a unique value proposition. Why should potential clients hire you?

Ultimately, companies hire consultants to improve their bottom lines, meaning they want help with:

1. Cutting costs.
2. Increasing revenue.

You want to focus on one of these two things in your value proposition. How exactly will you help your clients do that?

Step 6: Build a system for attracting repeat clients

It’s true that consulting businesses primarily run on referrals.

However, if you want to build a successful consulting business, you can’t just sit there waiting for them. You need to get out there, promote your services, and attract new clients.

Here are some ideas that you might want to include in your marketing plan:

• Attend industry events. Local, virtual meetups and conferences are great places to network. Always have business cards at hand so that you could give potential customers your contact information.
• Get on industry podcasts. By doing so, you’ll reach a wider audience and strengthen your credibility.
• Connect with others. Set up business profiles on social media and promote your services there. LinkedIn is probably the best platform to start with.
• Build a blog. It will allow you to get organic search traffic from Google. Building a blog takes time, but it’s worth it.
• Create a YouTube channel. Whoever your potential customers are, they probably watch YouTube. Why not tap into the vast user base of this platform?

These marketing efforts should help you get your new business off the ground.

Also, when you land a new client, you want to convert them into a repeat client.

You can do that by having a retainer package, offering an ongoing mentorship program, and creating various upsells (templates, guides, courses).

Finally, you want to incentivize referrals, figure out a way to reward existing customers who send new customers (e.g., offer them a special discount, set up a loyalty program).

Step 7: Run and scale your business

You don’t want your income to be solely reliant on the consulting revenue that you generate yourself.

Here are some ideas for additional revenue streams:

• Create an online course.
• Offer coaching services.
• Start a consulting firm.
• Host workshops.
• Write books.

You might want to create a business plan that outlines your strategy for growing your business beyond being an independent consultant.

Conclusions

Charging for your advice might feel weird.

However, if you’re an expert that can produce results, then consulting is a valuable service. It helps companies improve their bottom lines.

Do you have what it takes? You should consider starting a consulting business despite the high stakes and fierce competition.

While it’s not for everyone, it will be an adventure one way or the other.

Commonly asked questions (FAQ)

Here are the answers to some of the most frequently asked questions about starting a consulting business.

Last updated: Mar 2023

Start your LLC the easy way

Forming your LLC is a checkbox that needs to be ticked. Easy, fast and worry-free. We reviewed the 13 most popular LLC formation services to figure out who truly understands what new founders need. Our recommendation:

LLC Formation: $39 + state fees

Pricing:

Turnaround Time:

Help & Support:

Customer Satisfaction:

Ease of use:

We don’t make up scores.

Best LLC Service 2022

• Formed 1,000,000+ LLCs
• $39 formation includes registered agent service
• Fast formation & same day filing
• Exceptional customer reviews

Visit Northwest

Last updated: Mar 2023