Below you will learn the key steps to starting a business consulting firm.
11 Steps to Starting Your Own Business Consulting Firm
1. Conduct Market Research To Determine Demand
An important step to starting a business consulting business is conducting market research. To begin, you must learn what services your clients want and how much they are willing to pay for them. There are two ways you can go about conducting this research:
- Survey Your Target Market: This can be done through online surveys, focus groups, or interviews.
- Review Consulting Industry Trends: Keep tabs on what’s happening in the consulting industry, both locally and globally.
Once you have analyzed the survey data, determine which types of businesses are likely to hire you and how much they are willing to pay. Use this information to set your consulting prices.
Read our article on other methods of conducting market research for your consulting business.
2. Name Your Business Consulting Business
Once you have analyzed your market and determined what services clients want, it’s time to name your business consulting firm. While naming a business can be difficult, there are a few rules of thumb to keep in mind:
- Keep it Short: Your business name needs to be short enough for clients to remember and say.
- Keep it Relevant: Your business name should be relevant to the business services you offer and your market’s needs.
- Keep it Memorable: Using clever ideas and words, help your audience connect with your business.
- Focus on Your Target Audience: Make sure that whoever sees or hears your company name understands who you are targeting as future clients.
Read our article about choosing the right business name.
3. Determine Your Consulting Business Model
There are four main types of business models for business consulting firms:
- Consulting Firm Model: This is the most common type of business model and it involves hiring other consultants and employees to provide services to clients.
- Independent Consultant Model: This is when a consultant offers their services to clients on their own.
- Productized Model: This is when a consultant offers a fixed set of products to their clients.
- Hybrid Consulting Model: This type of consulting firm offers a selection of business consulting services and products.
No matter which model you choose, make sure that it aligns with your business goals and the services you offer.
Read more about choosing the right business model for your consulting business.
4. Choose Your Business Structure and Set-Up Your Company’s Legal Entity
As with any business, the type of legal entity you set up is critical. After all, you want your company to be treated as a separate entity, not just an extension of yourself. There are several types of structures in which you can start your business consulting company. Three popular options are sole proprietorship, S-corporation and LLC (limited liability company).
- Sole Proprietorship: A sole proprietorship is one in which the business and the owner are considered to be one entity. Therefore, you are personally responsible for all debts and liabilities your business consulting firm may incur. One benefit of this type of structure is that it’s easy to set up and there are no formal filings required.
- S-Corporation: An S corporation is a type of C Corporation that was designed by the IRS to help small corporations minimize their paperwork while still gaining many of the tax benefits of incorporating. It also offers protection for business owners in case of lawsuits and other liabilities.
- Limited Liability Company (LLC): An LLC is a structure in which the company is considered a separate legal entity from its owners. This means that the company is responsible for its own debts and liabilities. This type of structure offers protection for business owners in case of lawsuits.
Read our article comparing the most common consulting business structures.
5. Write Your Own Consulting Business Plan
A business plan is a document that outlines your business goals, strategies, and how you plan to achieve them. For a business consulting company, your business plan should include the following:
- Business Description: Describe what your company does, who your target market is, and how you will differentiate yourself from the competition.
- Industry & Market Analysis: Detail your research on the industry and what services clients are most likely to want.
- Financial Plan: Outline your estimated income and expenses for the next three to five years.
Other sections of your plan will answer other key questions such as the following:
- What are your areas of expertise?
- What services can you offer your clients?
- Who is your target audience?
- How will you differentiate yourself from the competition?
Your business plan should also include several sections that detail your company’s history, current financial situation, and future goals. These sections will allow an investor to learn more about your company before they commit to investing in it.
Read our article about how to write a consulting business plan.
6. Apply for the Necessary Permits and Licenses
You must register your business consulting business as a legal entity with the state in which you plan to do business.
To file your business with the state, obtain the necessary forms from the Secretary of State’s website or local County Clerk’s office. You will be required to pay a small fee for filing your business with the state.
Registering with the federal government may or may not be required. You can register your business on the federal level by obtaining an Employer Identification Number (EIN) from the IRS.
Read our article about obtaining the proper consulting business licenses.
7. Determine Your Budget & Apply for Funding as Needed
As with any business, you will need to use your own capital to finance the initial stages of your business consulting company. Your budget may also include several other costs including marketing expenses and the salary you wish to pay yourself.
After determining how much money you will invest in starting your business, review some options for financing your business. Here are several financing options that may be available to you:
- SBA Loans: The Small Business Administration (SBA) is a government agency that provides financial assistance to small businesses in the U.S.
- Bank Loans: Many small business owners are able to secure loans from their local banks. Often, you can borrow money for any purpose that relates to the growth of your company.
- Friends and Family: You can consider getting loans and/or equity investments from friends and family members..
- Angel investors: Angel investors may provide debt or equity funding to you.
Read our article about the costs associated with starting a consulting business to help you determine if funding is needed.
8. Get the Technology & Software Needed to Run Your Business Consulting Company Efficiently
As a business consulting firm, you will need different types of technology to complete client projects and keep track of your business operations. To simplify the process of starting a consulting business, we’ve provided a list below detailing some items that you’ll need:
Computers: Even if most of your work is done remotely with clients on the other side of the country or world, you will need at least one computer that is dedicated to your business consulting company.
Software: Software is an essential component of any consulting business. The right software can help you manage projects, track expenses, and communicate with clients more effectively.
Here are some popular software platforms that may be beneficial to your business:
- Microsoft Office: This software suite includes a variety of applications that can help you manage your company, including Word, Excel, and PowerPoint.
- QuickBooks: This software is designed for small businesses and can help you track income and expenses, create invoices, and manage payroll.
- Basecamp: This project management software can help you manage multiple projects simultaneously and keep track of deadlines and milestones.
- Gmail: Google’s email platform offers a number of features that can be helpful for businesses, including the ability to access the same email from multiple devices.
- CRM: Customer relationship management software can help you track customer communication, manage leads, and create reports that detail your sales activities.
Read our article about the technology and software you need to run a consulting business.
9. Market Your Business Consulting Firm to Potential Clients
Once you’ve established your business consulting company, the next step is to market it to potential clients. Here are some common marketing strategies used for business consulting firms:
- Cold calling: Calling businesses and asking if they are in need of a business consultant is a common way to market your business.
- Networking: Meeting people in person and building relationships is an excellent way to find potential clients.
- Referrals: Asking current clients to refer you to other businesses is an effective way to get more leads.
- Online marketing: Marketing your business online, such as through a business website and pay-per-click and/or social media marketing, can help you reach a larger audience looking for your services.
You should also consider ways to incentivize potential clients to choose you over another business consulting firm. Some incentives that work well include:
- Lower rates: Many consulting businesses offer lower rates on their services to attract new clients.
- Discounts on services: Offering discounts on certain projects may help you win bids against other consulting businesses.
- Free consultation: Providing potential clients with a free consultation can help them determine if your company is the best one for their needs.
Read our article about how to market your consulting business for more tips.
10. Establish a Price Structure and Billing System
There are a few factors to consider when establishing your price structure:
- Hourly rates: Charging by the hour is a common way to price consulting services. This allows clients to budget for your services and gives you the flexibility to charge more for complex projects.
- Project rates: Charging a flat fee for a project can be beneficial for both the client and the business consultant. It ensures that the client knows what they are paying up front, and it allows the consultant to charge more for more complex projects.
- Retainers: A retainer is a set amount of money that the client pays upfront for services. This can be a good option for clients who need ongoing consulting services.
No matter which pricing structure you choose, be sure to clearly communicate it to your clients. Additionally, have a detailed invoice template that includes all the services you provided so the client knows exactly what they are paying for.
11. Manage Client Relationships and Deliver Projects
After finding new clients and marketing your business consulting business, you should begin delivering the projects and getting paid. This means managing client relationships and making sure that clients are happy with your work. Some of the ways to manage relationships include:
- Regular communication: Keeping in touch with clients on a regular basis via phone, email, and in-person can help improve your relationship with them.
- Feedback: Asking clients for feedback after each project is completed can help you understand what they liked and didn’t like about your services.
- Regular reviews: Meeting with clients on a regular basis to review the progress of the project and update them on your findings is a good way to keep them in the loop.
Delivering projects on time and within budget is essential for a business consulting business. It can be beneficial to create a project management plan that outlines how each project will be completed. This will help ensure that all deadlines are met and that the client is happy with the final product.
Read our article to learn more about what it takes to manage client relationships.
Starting a Business Consulting Business FAQs
There are many reasons why starting a business consulting firm can be a lucrative and rewarding venture. Perhaps the most appealing aspect of this type of business is that it is relatively easy to get started. You don’t need a lot of capital to launch your business, and you can typically start offering services within a few weeks. Additionally, there is a growing demand for business consulting services, so there is a lot of potential for growth.
There are a few key things you will need to start a business consulting company:
- A solid business plan: This is essential for any type of business, and it is especially important when starting a consulting firm. Your plan should outline your goals, strategies, and how you plan to achieve success.
- A strong marketing strategy: In order to attract new clients, you will need to have a solid marketing strategy in place. This should include a mix of online and offline marketing techniques.
- A good website: A professional-looking website is essential for any business consulting firm. It should be easy to navigate and showcase your consulting services and qualifications.
- A great team: To be a more successful consultant, you will want a team of talented and experienced professionals. This includes business consultants, project managers, and support staff.
- A good billing system: You will need to have a system in place for invoicing clients and tracking payments.
The following tips can help you to start a consulting business:
- Start small: Don’t try to take on too many projects or clients right away. Start out small and gradually increase your workload as you grow your business.
- Create a niche: When starting a business, it can be helpful to specialize in a specific area. This will help you to attract new clients and stand out from the competition.
- Network: Meeting other business professionals and networking can help you to build relationships and find new clients.
- Stay up to date with trends: Keeping current on business trends is essential if you want to offer the most relevant services to your clients.
- Offer value: In order to be successful, you need to provide value to your clients. This means offering them high-quality consulting services and delivering projects on time and within budget.