Saturday, August 21, 2021

How to Start a Consulting Business

Starting a consulting business takes time, effort, and patience.

But the rewards are worth it.

You can work from home if you wish, choose your hours, and set your own prices. The flexibility is unmatched.

Additionally, the consulting field has relatively few barriers to entry, especially if you have in-demand skills and expertise.

Don’t know where to start? I’ll take you through the process of creating a consulting business step-by-step.

The Easy Parts of Starting a Consulting Business

There are numerous avenues to enter the consulting business. Factors like the increasing number of new enterprises, soaring profits in some sectors, and growing private investments mean constant demand for consultants. Some industries with the greatest need for consulting services include media and technology companies, manufacturing, non-profit organizations, life sciences, and healthcare.

Additionally, setting up a consulting firm doesn’t always have to be a long and complicated process. For example, you could set up your business as a sole proprietorship. While this option doesn’t offer the personal liability protection of LLCs and corporations, you may not need to register your business. This option allows you to set up quickly and scale your business as you grow.

Many niches don’t require you to have special certification or degree to be a consultant. Continuing your education can help you remain competitive in your specific industry, but, in many cases, you can get by with the knowledge and experience you already have when starting your business.

Similarly, the consulting business generally has few financial barriers to entry. You can start your business at home with little more than a phone, project management software, and your expertise. Project management software is beneficial for automating many monotonous tasks, so you may not need to hire staff in the initial stages of your business.

WorkflowMax is an excellent example of project management software that can prove invaluable when getting your business off the ground. This software offers useful features, including lead management, client management, document management, time tracking, job costing, quoting, invoicing, and reporting. It is also affordable, starting at $55 per month for up to three users.

The Difficult Parts of Starting a Consulting Business

Like with any new business, consulting has its challenges. The first significant challenge is cash flow. It takes time to build a client pipeline, and there can be months without work. There will also be a lot of rejection as you work to grow your brand equity and reputation. So it’s a good idea to have at least six months’ expenses saved up before leaping into this business.

The initial period of growing your business also requires you to do a lot of non-consulting work. Many new consulting firms don’t have the budget to hire employees to handle administrative tasks. These tasks may include invoicing, filing taxes, drawing up contracts, managing clients, taking defaulters to small claims court, and following up on unpaid bills. These necessary aspects of your business can take time away from your core competency, which is consulting.

Finding the right audience can also be challenging. You’ll need to identify an underserved target market amidst fierce competition from other consultants. On the other hand, the target market should also need your services and afford your rates. This combination can be challenging to master. It takes intense market research to identify a target market where your business can flourish. Sometimes that might mean relocating to a different area with better and more lucrative prospects or finding a new target market. 

Step 1 – Identify Your Niche Market

The good news is that consulting is a broad market with many points of entry. Consultants are needed in just about any field that you can imagine. Even so, it is necessary to choose a niche. A niche will help you get clients more quickly, deliver more value to your customers, and enjoy greater profits. A niche will also make business easier to brand and potentially allow you to become a leader in a specific market.

Evaluate Your Skills and Experience

Your expertise is the obvious place to start when considering a consulting niche. If nothing else, your clients expect you to have above average or excellent expertise in your chosen field. Your ability to deliver value to your client is also the lifeline for your business. Therefore, choose a niche where you have above-average or exceptional expertise.

Similarly, consider which niche has the most demand for your skills. Also, you’d like to get the most value from your efforts. For this reason, look for high-paying niches or where there is a high possibility of scaling your business quickly.

Research the Competition

The Boston Consulting Group doesn’t have to worry about the other consulting businesses directly competing with them. The firm has the reputation and brand equity that clients flock to do business with. But you are not so lucky. Competition is likely to be a significant headache when you are starting.

Pricing your services appropriately can be challenging. You’ll have to take into account your competitor’s pricing, even if you offer superior services. It will also be harder to attract clients if your competitor has a more solid or longstanding reputation.

Be sure to research other consulting firms in your niche and geographical location. You may need to consider another niche if the competition is too steep. Alternatively, you may have to come up with a unique value proposition to attract clients.

Keep in mind that some consulting can be done entirely remotely; others cannot. So when picking a niche, consider whether you want to work remotely or physically go into your client’s offices. You must also consider your chosen industry’s expectations. If you want to work entirely from home, but the niche you are looking at has a standard of being on-premises, you need to know that and adapt your expectations.

Create A Business Plan

A business plan may not be mandatory at this stage. This is especially true if you plan to start small. However, a business plan can help increase clarity, create a structure for your business, and source funding. The business plan doesn’t have to be complex. Even a one-page business plan is better than nothing.

Start by defining your market and the specific services you offer. Moreover, articulate why you are best suited to serve your niche market. Also, think of your unique value proposition and include it in your business plan. For example, you may be taking clients through a well-defined methodology or offering a service guarantee.

Your business plan should also include details about your target market. This includes your pricing strategies, competition, and how you intend to go to market. Also include details about your marketing plan and whether you plan to hire employees.

Step 2 – Get Project Management Software

Most startups have limited budgets, so hiring employees might not be possible right off the bat. But project management software can be a trusty tool to help you develop and grow your business. The software can help you handle multiple aspects of your business, including managing clients, projects, job costing, and invoices. I like WorkflowMax for its transparent and affordable pricing.

Choose Your Plan

WorkflowMax has a straightforward and transparent pricing structure. You pay according to the number of users. WorkflowMax pricing is as follows:

  • 3 Users – $55
  • 5 Users – $80
  • 10 Users – $120
  • 20 Users – $190
  • 50 Users – $275
  • 100 Users – $350

You also have the option to tack on more features if needs be. But, of course, you’ll have to pay extra for these features. For now, the three–user plan has enough features to help you set up and run your consulting business.

Set Up Your Account

WorkflowMax is easy and intuitive to set up. Even so, the software comes with instructional videos in your dashboard. You’ll get step-by-step instructions on how to set up your account.

Create Systems

Ideally, you wouldn’t want to start over every time you begin a new project or acquire a new client. Templates are a great way to save time and effort on many of your repeatable tasks. Consider creating templates for tasks such as client proposals, onboarding templates, data gathering forms, and contracts.

WorkflowMax comes preloaded with templates to simplify your work. These include templates for generating new leads and creating new jobs. You can also create custom templates for quotes, invoices, job briefs, tax letters, and statements. Besides increasing efficiency, templates also help you work efficiently and maintain quality between projects.

Step 3 – Set Your Prices  

Creating a pricing structure can be tricky, especially in the beginning. It might take a few tries before you can narrow down on the perfect structure. But it is still crucial that you create a clear structure to present to prospective clients. Pricing is one of the most important considerations for clients, so take your time to think it through and research it.

Consider Pricing Factors

There are a few things to think about when coming up with your price. Some of the important considerations at this point include:

  • Your industry standard
  • How much your competition is charging
  • The time and resources you expect to invest in your projects
  • Your experience and expertise
  • The amount you need to earn to support your business
  • Your desired income

Be sure to include a miscellaneous line item in your pricing. As you will soon find out, additional resources and expenses are almost inevitable when doing business. This is something most clients understand, as long as it’s reasonable.

WorkflowMax has a job costing feature that can help you to establish your prices. You can also estimate the cost of your projects broken down into individual tasks. You can also create job quotes, calculate profits, and compare each project’s estimated and actual cost. This feature is handy for determining if your price is too low or high.

Choose Your Pricing Model

There are three main ways you can structure your pricing. The option you choose depends on your industry standards and what works best for your business. Each pricing model has its advantages and disadvantages.

Per-project pricing – This pricing model means you get a fixed amount for each project. Many clients prefer this option since it’s easy to estimate the total cost of the project. You’ll usually get paid in installments during the contract. Most consultants using this model charge a fixed monthly fee. A potential pitfall of this model is late payments. This is particularly true for large agencies and companies with long pay cycles. You can help avoid this problem by billing the first and last month before the project commences.

Hourly fees – Hourly fees can be great for ensuring you get paid for all the hours you spend working. This pricing model ensures that no billable task falls through the cracks. WorkflowMax has a time tracker to ensure that you capture all your billable hours. You can then generate automatic invoices based on your timesheet data. The downside of this pricing model is some clients might think you are too expensive. Billable hours can also be unpredictable, making it difficult to accurately estimate the cost of projects.

Retainer fee – Experienced consultants with strong reputations typically charge a retainer fee. This means the client pays a fixed rate every month in exchange for an agreed-upon number of hours. This option can be great for generating consistent cash flow. But some clients may include a clause in the contract that you can’t work with competitors for the duration of the contract. This model can also be expensive for small businesses that prefer a fixed project fee or hourly rates.

Step 4 – Register Your Business

Registering your consulting business isn’t mandatory if you plan to do business as a sole proprietorship. But registering your business has advantages, including personal liability protection and opening business bank accounts, hiring staff, getting loans, and building a reputation with customers.

Set Up an LLC

A limited liability company (LLC) is the way to go for most beginning consultants. While the rules vary slightly from state to state, the process of starting your LLC is relatively straightforward.

You’ll first need to find a unique name for your company. Then choose a registered agent. A registered agent is a person who’ll be receiving official and legal documents such as subpoenas and lawsuits on your behalf.

Next, you’ll need to prepare an operating agreement. You’ll need this if you’re going into business with partners. The operating agreement outlines how the LLC will be run. Details in the agreement include how profits and losses will be allocated, member voting rights, ownership interests, and how the business will be governed.

You’ll also need to file an Articles of Organization with the state. This document contains the particulars of your business, including the business name and address, the purpose for forming the LLC, and the length of its existence. Finally, you’ll receive a certificate indicating that your company exists if your application is successful.

Get Certified

Most consulting fields don’t require any special certification. But some specialized fields may come with these requirements. Even where not required, the appropriate certification can help build your credibility. This credibility is especially critical when you are just starting.

There are also certifications tailor-made for consultants in different industries. Some popular certifications for consultants include:

  • Chartered Enterprise Analyst (CERA)
  • Certified Human Resources Consultant
  • Certified Educational Planner
  • Accredited Agricultural Consultants

Step 5 – Start Reaching Out To Prospects

Clients are the lifeblood of your consulting business. You’ll need to be aggressive to market your business and reach out to prospects. You’ll also need to create a roadmap for how you intend to sell your business.

You can start with your immediate network, including family members, friends, and work contacts. Speak to your network about the services you offer. They’ll be happy to refer clients to you.

Create a Business Website

A business website is a must-have in today’s business environment. Most of your clients will look you up online before hiring or find you on the internet while searching for related services. So, create a professional business website to showcase what you have to offer. This is also a great place to show off your credentials, certifications, licenses, and anything that can help boost your credibility.   

Leverage Social Media

Social media is a great platform to get the word out about your business. LinkedIn is beneficial for finding professionals in your industry. Also, consider joining groups in your industry. This is a great place to contribute to discussions, offer valuable insights,  and network with others in the business.

Write Client Proposals

A client proposal is an effective tool for closing sales. The proposal is also your chance to show your clients how you will solve their problems and serve their needs. Some of the important aspects to cover in your client proposals include:

  • The specific problem you are solving
  • Why you are offering your services
  • What the project is
  • Timelines for the project
  • The budget for the project
  • Deliverables
  • How you measure results

WorkflowMax easily lets you create proposal templates for your clients. You’ll only need to customize your templates with each client to save time. Templates are also a great way of sending out a consistent image.

Step 6 – Build Your Brand

It may take some time for clients to start coming in. But building your reputation can help accelerate the process. Most of your initial clients will be referrals. So, go above and beyond to make your clients happy.

Stay Organized

The key to getting referrals and repeat clients is to stay organized. This means keeping all your essential information in one place, delivering projects on time, and following up with invoices and payments. You’ll be juggling many tasks and responsibilities in the beginning. That’s why project management software like WorkflowMax is so useful.

WorkflowMax has a robust document management feature to ensure you never misplace crucial information. You’ll be able to keep all your important files securely in one place. You can also send documents and attachments directly to a job on Workflow Max. The software integrates with Google Drive, Box, and Dropbox to make document management even more effortless.

Hire Staff

It may be necessary to hire employees as your business grows. However, taking more business than you can handle is a recipe for disappointing your clients. At the very least, consider hiring a virtual on-demand assistant. The assistant can take care of some of the dirty work like chasing payments or doing market research while you focus on revenue-generating work.

Deliver Results

You’ll need specific metrics for tracking your results. You can also talk to your clients about what they hope to achieve. Ultimately, you’ll need to deliver results to be successful in your consulting business. Finally, be sure to stay on top of industry trends to provide top-notch consulting services to your clients consistently.

from Quick Sprout