How to Start a Consulting Business

Are you a seasoned professional with a wealth of industry knowledge? Are you considering channeling that expertise into a consulting business? With relatively low initial investment requirements ranging from $500 to $5,000+ and the flexibility to operate from a home office, consulting offers an attractive entry point for aspiring entrepreneurs. Essential to your success will be a strong command of communication, analytical problem-solving, and business development skills, combined with up-to-date industry insights.

While the profit margins are tempting, potentially ranging from 30% to 70%, building a robust client base and setting competitive yet profitable pricing will be your pivotal challenges. Ready to enter the intricate world of consulting? Let’s discuss the blueprint to kickstart your consulting business.

Benefits of Opening a Consulting Business

Opening a consulting business is the easiest way for an experienced professional to tap into their own business opportunity. Many consultants do it because it’s easy to start with relatively little startup costs. Plus, being the owner of your own small business means you have unlimited earning potential. In most consulting industries, you can get up and running from home with just a computer, internet connection, and client list.

Most consulting businesses are what you would call a lifestyle business. This means that while you have unlimited earning potential, you aren’t likely to grow the business large enough to sell it. Instead, it exists as a way for you to bring in your own income. It’s not impossible to grow your business to seven figures and find an exit, but most successful consultants are single operators without any full-time employees.

How to Start a Consulting Business Checklist

Starting a consulting business isn’t radically different from starting any other type of business, with a few differences. Following the step-by-step process we’ve put together here will help you be ready for many common struggles and prepare you to take advantage of opportunities that could help you succeed through your first year and beyond.

 You can start a consulting business by following these items:

1. Create a Business Plan

Creating a business plan will help you better understand your market and the validity of your idea. Plus, it can provide specific data for you to operate off of after you launch your business. Business plans generally include completing a full study of your target audience and a rundown of how much money you’ll need to be successful.

Your business plan may include: 

• The objectives and goals of your consulting business
• Who is your ideal potential client? Will you target large multinational corporations, online companies, or SMBs?
• What is your area of expertise? 
• What your target market looks like, with specific locations
• Potential problems or roadblocks, like lack of customers or an economic downturn, and how you’ll address them
• How will you handle pricing? Hourly vs retainer?
• Financials (fixed and one-time costs, cash flow, overall budget)
• Marketing plan, including social media strategy and email marketing

2. Choose a Business Structure

In order to protect your personal assets from all business activity, choose a business structure that fits your personal situation. The two most likely choices for a consulting service are an LLC or a sole proprietorship. Both can work but only one provides protection to keep your personal assets safe.

While choosing a sole proprietorship is typically less costly than an LLC and has less administrative work, an LLC provides a layer of liability protection that is invaluable to small business owners. It separates all of your business assets from your personal ones, which is important to companies with a single employee, like a consulting business.

Before making a choice, consider consulting an accountant or performing an analysis on how the structure could impact your taxes.

3. Determine Your Consulting Company Costs

When you complete a business plan, determine how much money you’ll need to operate your business on a monthly or weekly basis. This will help you create a budget that you can operate your business off of. 

Consider including the cost of any business-related activities such as computers, equipment, software, or marketing, and any funds you need to survive personally each month. The goal is generally to make sure you have enough cash, conservatively, to last 6–12 months in the event your consulting practice receives $0 in revenue.

4. Name Your Business

When choosing a company name, there are a few goals to keep in mind. First, you have to pick a name that you can register in your state, which means it must be unique so that you don’t run into any legal issues with an existing company. Also make sure your name is easy to market to your target customers. 

When choosing a legal name, remember that you can market yourself as a completely different name than the one you legally register for your business. You do this by registering a DBA (doing business as) name in the same state you end up registering your business.

5. Register Your Consulting Business and Open Financial Accounts

Once you have chosen your business structure and found the right business name, it’s time to register with the state’s secretary of state office. Every state’s process for registration varies slightly, but typically you’ll complete these tasks: 

• Get an employer identification number (EIN) from the IRS
• Check for the availability of the name you want on your local secretary of state website
• Complete all required documentation and paperwork to file with your state
• Pay any required fees
• Create an operating agreement (not all states require these, but they’re often recommended anyway)
• Apply for any needed state or local business licenses

Once you’ve registered your business, consider opening a business bank account and getting an appropriate insurance policy. Consultants will want a business bank account to separate their personal finances from their business finances or your liability protection may not be completely valid. Additionally, business insurance is important in the consulting world because it can protect you against any mistakes that you may make on behalf of your clients. Many providers offer specific business insurance for consultants.

6. Purchase Equipment for Your Consulting Business

Starting a consulting company business will require less equipment to start than most businesses. In fact, in many industries all you need is a computer and access to reliable internet. Many consultants like to have a dedicated space to meet with clients, whether that’s a home office or rented space, but it’s not a necessity for plenty of niches where most of your work takes place online or on the phone.

Here’s a list of some of the most common equipment needs of consulting business owners: 

• Smartphone
• Computer
• Reliable internet
• Printer
• Basic office supplies (paper, pens, sticky notes, presentation folders, etc.)
• Software related to your expertise or business operation needs

7. Market Your Consulting Company

Now that you’re ready to open for business, it’s important to start networking and getting your company name out to customers. The more people who know what you’re doing, the better off you’ll be. As a consultant, there are two important things to know about marketing your business.

• First, 37% of consultants get the majority of their business from referrals, so it may take a bit before you build your client base.
• Second, over 50% of consultants that spend at least $5,000 in marketing efforts end up bringing home more than $150k per year. Spend time finding out where your target customers are, and put in the time and money necessary to reach them.

At a bare minimum, establish a strong presence on LinkedIn, join a professional association in your industry, and volunteer in the association. You may also want to attend (and speak at) trade shows (don’t forget your business cards!), offer your expert advice on free webinars, appear on podcasts or start your own, and launch a website that explains your new business.

Here’s a great resource full of consulting marketing tips to help you find new clients.

Examples of Consulting Businesses to Start

The best consulting businesses are typically in fields that are in-demand for skilled or experienced workers to complete work that is vital to the success of a business or industry. Some of the most popular types of consulting firms include: 

• Accounting and bookkeeping
• Marketing
• Writing and editing
• Product development
• Human resources
• Public relations and communications

The sky’s the limit for the types of consulting businesses you can start. Even if it isn’t on this list, it doesn’t mean you can’t make a lot of money starting your own consulting business in that niche. Just do your research to determine its potential before getting started.

Bottom Line

Starting your own consulting business can be both rewarding and profitable if you choose the right niche and properly prepare your business to succeed. It’s important to not only register your consulting company but also to get the right insurance while setting up your bank account so that you can protect your personal assets from the dealings of your business. Starting your consulting business depends on what state you live in but can typically be done in 1 to 3 days.

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• 7 Steps To Starting Your Own Freelance Business