How to Start a Consulting Business

If you are working professional looking to set out on your own, getting the business started is not in your wheelhouse. You probably are great consulting clients but aren't comfortable with all the detail of setting up your company with any licensing and operations. In this article, I'll show you a way of setting up your business seamlessly from planning to marketing for business growth. 

Business Planning

As a new consultant, your focus will be on determining how to deliver your services effectively. The industry and space you choose to operate in will dictate how you assist your customers with their businesses or personal lives. Additionally, you should aim to establish a system, which we'll discuss later, to package and market your services.

Identifying your target customers primarily depends on the industry you serve, but there are a few key considerations. Firstly, you should create a client profile that outlines your customers' ultimate goals, identifies the challenges they face, and highlights the benefits your services provide to their businesses. This profile will serve as a guide for tailoring your approach and delivering a customized service.

Now, let's delve into the concept of a productized service. This approach involves offering a standardized package that every customer will receive. For instance, if you provide a marketing service that includes setup, the process will be consistent for each client, with ongoing services serving as upsells beyond the initial trial. You can offer a certain amount of hours or ad spend in our marketing example to by carefully designing and refining this process, you can determine the costs involved and establish appropriate pricing strategies.

Costs & Revenue

Determining the cost and revenue structure for your consulting business is relatively straightforward since it is a service-based industry. Unlike other types of businesses, you won't have to factor in many additional costs. Instead, your main concern should be how to set up and offer technology or other services, as well as understanding the associated costs.

This naturally leads to the question of how you will price your services. Let's take the marketing example again. As a marketing consulting business, you may charge for the initial setup and access to services like social media or Google ads, focusing on building the first campaign. By understanding the costs involved in this setup and the ongoing charges, you can determine how to generate revenue with each customer.

Ultimately, the interplay between costs and revenue forms the foundation of your business model. Your business model encompasses how you earn money and how you allocate those earnings. What remains after expenses is your profit margin. It's crucial to ensure that you charge appropriately for your valuable services, avoiding excessive expenses that could lead to financial losses.

Licenses & Permits

So now that we're getting into how we're going to be starting the business, we need to get into the nitty-gritty of how the business is going to be set up. This entails the business entity formation, and even what licenses and permits you're going to need. Depending on the amount of liability that you are going to be experiencing with your business, will determine what business entity formation you're going to be seeking, whether it be LLC or a corporation for more protection.

Depending on what industry you're looking into will determine also what kind of licenses and permits you're going to be fine. So, for example, if we are in the marketing space, we don't have a lot of licenses that we're going to need to procure for our business. If you were say some kind of financial advisor or financial consultant, you may need a professional license, such as a CPA or a certified financial advisor license to conduct business, and or give advice.

While not a specific license, per se, insurance for your business will be very important. Having some kind of professional liability insurance will protect your business from any minor issue with your service. You'll definitely want to consult with a professional, or even with a local SBDC to help you with specific licenses or permits that you may need to start up before you actually get going with your business. You can contact us here at the University of La Verne SBDC to get help with a licenses and permit report before you get started.

Record Keeping

One of the prominent challenges faced by consultants is their inability to effectively manage their finances. Many consultants lack the foresight to establish proper accounting controls and fail to recognize the significance of utilizing specialized software for financial tracking. It is crucial for them to grasp fundamental accounting principles, such as diligently recording all transactions and comprehending how money is spent or recorded within their business.

To address these issues, consultants can consider utilizing software like QuickBooks or web-based accounting tools as cost-effective solutions for initiating bookkeeping in their business. These tools enable easy creation of invoices for regular client billing and offer features such as expense reports connected to bank accounts, simplifying the categorization of transactions for tax purposes.

For those who are uncertain about handling accounting and recordkeeping tasks themselves, consulting a QuickBooks Pro Advisor is a viable option. These professionals can help set up the accounting system for the business and periodically review the books to ensure accuracy. Alternatively, if QuickBooks is not utilized, there are also part-time or as-needed bookkeepers available who can assist in maintaining accurate records throughout the month and year, thereby saving costs for the business.

Marketing

Marketing and client acquisition can be challenging for consultants, mainly due to uncertainty about effectively communicating the benefits they offer. One effective approach is to implement a content marketing strategy that delivers valuable insights through blog posts, videos on platforms like YouTube or social media.

Another strategy to consider is through email marketing by using a lead magnet—a valuable document or checklist—in exchange for email addresses. This email marketing tactic enables you to build a subscriber list, providing regular updates on blog posts or videos mentioned earlier.

Engaging with your audience through social media is also crucial, but it's important to do it right. Establishing an exclusive Facebook group or social media community specifically tailored to your target market allows you to share exclusive content with them. Additionally, this captive audience provides an opportunity to periodically present relevant products or services.

By implementing these strategies, consultants can effectively communicate the benefits they offer, engage with their audience, and build a loyal customer base.

Conclusion

Starting your own consulting business may seem daunting, especially if you're not familiar with the intricacies of setting up a company. Embracing a productized service approach ensures consistency and efficient upselling opportunities. With the right approach and a solid understanding of the business aspects, you can confidently embark on your consulting journey, knowing you have the tools and knowledge to succeed. 

Funded in part through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, conclusions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.