Below you will learn the key steps to starting a software consulting firm.
11 Steps to Starting a Software Consulting Business
1. Conduct Market Research To Determine Demand
An important step to starting a software 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: The first way is to survey your target market. This can be done in a number of ways, including online surveys, focus groups, or interviews. You can also send out a survey to your current and potential clients.
- Look for industry trends: The second way to conduct market research is to look for industry trends. This can be done by reading trade magazines, attending industry conferences, or subscribing to newsletters.
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.
2. Name Your Software Consulting Business
Once you have analyzed your market and determined what services clients want, it’s time to name your software 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 software services you offer and your target market’s needs.
- Keep it Memorable: Using clever ideas and words, help your audience connect with your business.
- Focus on Your Target Market: Make sure that whoever sees or hears your company name understands who you are targeting as 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 software consulting firms:
- Consulting Firm Model: This is the most common type of consulting 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 software 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 firm.
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 software 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 software 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 a Software Consulting Business Plan
A business plan is a document that outlines your business goals, strategies, and how you plan to achieve them. For a software 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 software 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 software 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 Software Consulting Company Efficiently
As a software consulting firm, you will need different types of technology to complete projects and keep track of your company’s 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 software 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 several 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.
Other software used by software consultants may include software for programming and graphic design.
Once you have the necessary technology in place, it’s important to create systems and procedures that will help you run your business efficiently. Having these systems in place from the beginning will save time and frustration down the road.
Read our article about the technology and software you need to run a consulting business.
9. Market Your Software Consulting Firm to Potential Clients
Once you’ve established your software consulting company, the next step is to market it to potential clients.
Here are some common marketing strategies used for software consulting firms:
- Networking: Meeting people in person and building relationships is a key part of marketing your business. Networking can help you find new clients, share ideas with other professionals, and learn about new opportunities.
- 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.
- Direct Mail: Sending physical mailers to potential clients can be an effective way to reach them, especially if you include a personalized message or offer.
- Public Relations: Getting publicity for your own company can help it stand out from the competition and attract new clients.
When marketing your software consulting firm, it’s important to tailor your approach to fit the needs of your target audience. For example, if you’re targeting small businesses, you may want to focus on online marketing and networking. If you’re targeting larger corporations, you may want to focus on direct mail and public relations.
No matter how you choose to market your company, it’s important to be consistent in your marketing efforts. By regularly promoting your business, you increase the chances that people will take notice.
You should also consider ways to incentivize potential clients to choose you over another software 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 companies.
- Free consultation: Providing potential clients with a free consultation can help them determine if your company is the best one for their needs.
Learn more about how to market your consulting business.
10. Establish a Price Structure and Billing System
There are a few factors to consider when establishing your price structure:
- Hourly rate: Charging by the hour is a common way to price services provided by a consultant. This allows clients to budget for your services and gives you the flexibility to charge more for complex projects.
- Project rate: Charging a flat fee for a project can be beneficial for both the client and the 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.
- Retainer: 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 regular or ongoing 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 software 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 software consulting firm, 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 with your software clients include:
- Regular communication: Keep in touch with your clients on a regular basis, whether it’s through email, phone calls, or face-to-face meetings.
- Responding promptly to inquiries: Respond to client inquiries as quickly as possible – ideally within 24 hours.
- Setting expectations: Make sure that you and your client are on the same page when it comes to expectations for the project.
- Establishing a timeline: Work with your client to establish a timeline for the project and stick to it.
- Delivering on time: Make sure that you deliver projects on time, or even ahead of schedule.
Delivering projects on time and within budget is essential for a software consulting firm. 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.
Learn more about how to effectively manage client relationships.
Starting a Software Consulting Firm FAQs
There are many reasons to start a software consulting firm. Perhaps you are an experienced software developer and are looking for a way to use your skills in a new way. Maybe you are tired of working for someone else and want to be your own boss. Whatever the reason, starting your own business can be a great way to make money while enjoying the flexibility of setting your own hours and choosing your work environment.
There are no special requirements to start a software consulting firm. However, you will need to be familiar with the basics of business ownership, such as bookkeeping, marketing, and client relations. In addition, you will need to have the necessary skills to provide software consulting services. This could include experience in programming languages, software development, and/or project management.
- Do your research: It's important to do your research before starting a business. This includes studying the market for software consulting services and learning about the various types of clients who might be interested in your services.
- Establish yourself as an expert: One of the best ways to attract new clients is to establish yourself as an expert in the field. This can be done through writing articles, speaking at conferences, or networking with other professionals.
- Have a clear pricing structure: When setting your prices, it's important to have a clear understanding of the costs involved in running your business. You'll also need to factor in how much you want to make per hour.
- Offer support and maintenance: Many clients will need support and maintenance after the initial project is completed. Be prepared to offer these services long after the project is finished.