Give advice to somebody and you’re a good friend. Give advice to a working professional about their finances or business matters, and you’re a consultant. If you know the ins and outs of expert business advice and you have specialized knowledge to share, you could be ready to strike out and figure out how to start a consulting business.
Starting any kind of business is a challenge, but starting one where your goal is to help others run their own more efficiently is doubly challenging. A niche tends to be a good place to start out, whether your area is HR (managing the workforce of a company, including sourcing, selection, hiring, and ensuring compliance), strategy (improving performance, perhaps through workflow management), technology (delivering and implementing new software solutions), or some other consulting service that will help other businesses improve and grow.
In any of these categories, the client wants guidance but doesn’t want to bring on the advice-giver full-time. That’s where you come in. If you’ve got expertise and knowledge to offer and you like the idea of being your own boss, then you could be on the brink of starting your own consulting business.
Here’s How to Start a Consulting Business
As work processes become more complex and our economy becomes increasingly globalized, the need for good consultants has never been greater.
“It’s hip right now to tell people you’re an independent consultant,” says Christy Hopkins, the founder of 4 Point Consulting in Chicago. “I do human resources consulting for various small businesses throughout the country, and I provide various services that change depending on the client. The same thing can be done different ways if the culture and needs are different.”
Once you identify a niche for the kind of consulting you do, consider the following steps to establishing yourself as a leading voice across the industry.
1. Invest in the tools of the trade (and the tools of all trades)
Hopkins broke into independent consulting in 2014 when she began moonlighting while working as an “unhappy” in-house HR manager full-time. The startup costs of building an HR consulting business are small, especially if you aren’t looking to start as a firm.
Having already owned two brick-and-mortar businesses and tired of the headaches that managing a physical space engenders, Hopkins built her business with technological tools of the trade that let her forge and maintain connections with clients, prospective employees, and her assistant.
“I use 3 types of recruitment software—web-based software that helps you to post jobs,” she says. There’s MightyRecruiter, which has a system that feeds to Indeed, Monster, LinkedIn, and all the job sites you can think of, which saves time and concentrates applicants into one space. There’s ZipRecruiter, which is good for low-level jobs. LinkedIn has a two-tiered recruiter service for propositioning applicants or referrals.
MightyRecruiter is $300 a month, while ZipRecruiter is $1,000 for the year. LinkedIn’s RecruiterLite is $150 and Corporate is $700. In total, Hopkins pays about $500 a month for these recruiting tools, which give her access to people searching for everything from culinary jobs to data scientists.
Hopkins also recommends video conferencing software, at about $200 per year, for making a better connection with clients.
“They click in and they feel like they know me,” she says. “They know I’m 5’2’’, big personality, blue eyes, talk with my hands, and they get all that even though I don’t have an office space.”
Beyond these consultant-specific tools, new consultants should also invest in the kinds of things almost all new small business owners do: develop a website ($2,000 for a great, navigable site plus around $200 for hosting), order business cards, declare an LLC (prices vary from state to state), open business bank accounts, and hire an accountant to check on the books and file taxes (around $700 annually for a small business).
2. Aim to ride the organic marketing train
As an independent consultant, it will be all on you to grow your client base and make sure the business rolls in at a consistent pace. This is best done with marketing—but as always, the best marketing is organic marketing.
Hopkins started her business with a simple post on Upwork, the freelancer site that a few years ago was less well-known and had, according to Hopkins, more lucrative contracts. Hopkins says her first client is still with her today, and she has grown almost exclusively without having to advertise.
“I’ve been very fortunate that my business has built organically. I don’t know if that’s typical, but my personal experience is that I do the best I can. I’m very honest, I’m ethical, I don’t overcharge, I’m willing to work within budgets, and that has led to a lot of organic referrals,” she says.
Business owners have 2 distinct advantages with organic marketing. One, business owners tend to know each other and can make referrals for you. Like tends to be with like, so if you work well with somebody, you’ll probably work well with one of their friends.
The second upside with organic marketing is the cost—there isn’t any. “I’m biased on how well it works for business, because it’s free,” Hopkins says with a laugh.
3. Start small when it comes to staffing
Whether you need (or want) a staff to help you depends on the amount of work you have to do. Working 7 days a week and 12-hour days isn’t sustainable no matter how zen you might be, and is certainly a possibility if you’re successful at growing your company.
Hopkins personally doesn’t see the upside in taking on more work than she can handle at this point. She did hire an on-demand assistant, who lives overseas and handles the dirty work of consulting on a part-time basis.
“I can do the work with the client, get the spec (job description) together, and he can find the résumés, the people, the LinkedIn profiles, which is the arduous uphill battle, and I can outsource those hours to him,” she says. “He has his own business as well, and we have a B2B relationship. Some months he logs 50 hours to me and some he logs none.”
She communicates with her assistant via Skype, since he’s an American living in Budapest. She wouldn’t normally hire someone outside the U.S. since “there’s a ton of talent right here,” but the two of them hit it off right away over Skype. She might otherwise collect an intern or 2 from her old graduate school to help with sourcing.
“We communicate at least every Monday if not every other day. I have him waiting on deck right now,” she says.”
4. Figure out what you’re worth to your clients
When starting out in consulting, it can be difficult to know how to price your services. Luckily, Hopkins has a pretty easy formula to follow.
“When I first started moonlighting, I took my HR manager salary and turned it into an hourly rate. For a consultant, that’s undercharging. Now I charge double that hourly rate, and that’s been a progression,” she says.
As for the HR manager salary, that depends on the size of the company as well as the person’s experience. In-house managers can make around $60,000 a year without performance bonuses. HR directors make more in the range of $90,000.
When it comes to progressing past that starting converted hourly rate—because as an independent, you are assuming more risk and should be billed higher than an in-house option—Hopkins suggests showing clients just how much value you bring to their company.
“For the clients I had at the end of 2015, I made each of them a cost/benefit write-up to show them how much money they saved versus either working with a traditional recruiter or a different independent consultant,” she says. “From there, I told them my rates were going up 25%, this is the new hourly rate, and every single one of them said done, fine. I just showed them the math.
“Now in 2016, I’ve only pitched clients at the new rate and no one has told me I’m overpriced. I’m probably still undercharging, but I like to work with small businesses and startups, and if I want to work with them, I can make it work. If they have a good mission and vision, if they’ll be ethical and treat the new hires well, I want to help them because I know there are a lot of recruiters and consultants that won’t.”
Whether your business is going to be big or small, brick-and-mortar-based or online-only, expensive or economical, you need to have the experience, resources, and confidence to help other business owners get back on track. Everything else is about managing workflow and expectations. Good luck.
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from Fundera Ledger https://www.fundera.com/blog/how-to-start-a-consulting-business