How to Start a Human Resources Consulting Business

Below you will learn the key steps to starting an HR consulting firm.

 

10 Steps to Starting a Huaman Resources (HR) Consulting Business

1. Conduct Market Research To Determine Demand

An important step to starting an HR 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:

1. Survey your target market. This can be done through online surveys, focus groups, or interviews with potential clients.
2. Review industry reports and surveys. There are many resources available online and in print that will help you understand the current trends in the HR consulting industry.

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 HR Consulting Business

Once you have analyzed your market and determined what services clients want, it’s time to name your HR 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 HR services you offer and your ideal client’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 clients.

Read our article about choosing the right business name.

 

3. 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 HR 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 HR 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.

 

4. Write an HR Consulting Business Plan

A business plan is a document that outlines your business goals, strategies, and how you plan to achieve them. For an HR consulting business, your business plan should include the following:

• Business Description: Describe what your company does, who your target audience 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 business 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.

 

5. Apply for the Necessary Permits and Licenses

You must register your HR 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.

 

6. 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 HR 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.

 

7. Get the Technology & Software Needed to Run Your HR Consulting Company Efficiently

As a human resources 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 human resources consulting firm.

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 and medium-sized 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 many 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 specific to human resources consulting may include:

• ATS (Applicant Tracking System)
• Time & Attendance Software
• ERP (Enterprise Resource Planning) Software

Read our article about the technology and software you need to run a consulting business.

 

8.  Market Your Human Resources Consulting Firm to Potential Clients

Once you’ve established your human resources consulting firm, the next step is to market it to potential clients.

Here are some common marketing strategies used for human resources consulting firms:

• Networking: One of the best ways to find clients is to network with individuals and businesses who may be interested in your services. Get involved in industry organizations, attend trade shows, and meet with other human resources professionals in your field.
• 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.
• Website: A website is an essential part of any marketing plan. Make sure your website is professional and easy to navigate, and include a page that describes your services and how you can help businesses.
• Blogging: A blog can be a great way to share your expertise with other businesses and attract new business. Write blog posts that are relevant to your industry and target audience, and include links to your website and social media profiles.

You should also consider ways to incentivize potential customers to choose you over other human resources consulting firms. 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 prospective 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.

 

9.  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 HR consultant. It ensures that the client knows what they are paying upfront, and it allows the human resources 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 regular 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 human resources services you provided so the client knows exactly what they are paying for.

 

10.  Manage Client Relationships and Deliver Projects

After finding new clients and marketing your new HR 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 with your human resources 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. This will help you stay on top of their needs and ensure that they are satisfied with your services.
• Detailed invoices: Make sure to send clients detailed invoices after every project. This will help them understand what they are paying for and how their money is being spent.
• Client surveys: periodically send out client surveys to get feedback on your services. Use this feedback to improve your business and satisfy your clients.

Delivering quality projects is essential to maintaining happy clients. Some tips for delivering high-quality projects include:

• Having a clear understanding of the client’s needs: Be sure to clarify the client’s needs before starting any project. This will help you deliver what they are looking for and prevent misunderstandings.
• Setting timelines: Always set timelines for projects and stick to them. This will ensure that projects are completed on time and within budget.
• Using a project management software: A project management software can help you keep track of all the details related to a project. This will help you stay organized and ensure that all the tasks associated with a project are completed on time.

Learn more about how to effectively manage client relationships.

 

Starting an HR Consulting Business FAQs