How to start a consulting business in 10 actionable steps

By Indeed Editorial Team

Published 5 May 2022

Starting a consulting business can be a great idea if you have considerable expertise in a specific industry. You can start a consultancy either on your own or with a group of other industry experts. Running your own consulting business lets you set your own hours and work as you see fit instead of answering to someone else. In this article, we outline how to start a consulting business in 10 simple steps.

How to start a consulting business

Here are 10 simple steps to follow if you want to know how to start a consulting business:

1. Select a niche

Your first step is to select a niche to focus on. If you have considerable experience in a specific niche, you can target that. Success with a consulting business depends on your speciality and how good you are at your job. Consultants are typically experts with degrees in their fields and experience spanning several years.

It's imperative to first think about how your business appears to a potential client. Consider why a prospective client may choose to approach you for your consulting services. You can also identify key differentiators from other consulting businesses in the same niche, as that can help you attract clients.

Related: How to become a consultant (with roles and responsibilities)

2. Carry out market research

If you start a consulting business in a saturated market, finding clients is likely to be difficult. Market research can help you to understand the level of competition you're likely to face. Whether you intend to work as an independent consultant or wish to start a consulting firm with other partners, market research helps you to identify where your competitive advantage lies and how you can exploit this for success.

For instance, if there are several professionals within the same industry and they all market themselves as experts, you may want to ask what you can do to stand out. Market research is also important to identify whether adequate demand exists for consulting services in a specific niche or not.

Related: How to conduct market research (with types and benefits)

3. Decide on the business structure

If you're an independent consultant, you can establish a sole proprietorship. You can also choose to start a limited liability company (LLC), as that protects your business interests. If you're working with a group of partners, a private limited company or a partnership is your best option. Depending upon the structure of your business, your personal liabilities and tax payments may vary. Sole proprietorships and LLCs are defined as follows:

Sole proprietor

If you establish a sole proprietorship, the responsibility for the taxes and the business is yours. Sole proprietors have full control over every aspect of the business and are personally accountable for paying the business' taxes. If an issue arises, sole proprietors are responsible.

Limited liability company (LLC)

A limited liability company limits the owner's liability. The law perceives a limited liability company as an 'artificial person' and, therefore, the owners simply file taxes on the basis of their income or losses. The limited liability company itself does not pay any taxes, and owners are generally 'members.'

Related: What are the different structures of a business? (With tips)

4. File the necessary paperwork

Once you know whether you want to start a sole proprietorship or a private limited company, you can file the necessary paperwork. You file the business registration paperwork with the Companies House and register with HM Revenue and Customs. Once you receive your certificate of incorporation and certificate of commencement of business, you can begin offering your services.

The necessary paperwork includes the memorandum of association and the articles of association and information about the company's registered address and other details. When you file the paperwork, it may take several weeks until you receive approval. Until you do, it's important that you focus on other things, such as making a business plan.

5. Create a business plan

A business plan is valuable for creating long-term goals for your business. Every successful business usually has one and it helps considerably in managing goals and evaluating overall business performance. It helps you to make informed decisions for your company.

For a consulting business, start by defining the goals of your business (both long and short-term), what it's about, the services you intend to offer and how you plan on achieving these goals. Adding your market research to the business plan is also important and can help you identify key market gaps. By knowing exactly what path you want to take to secure a good position in the market, you can more effectively plan your marketing strategy.

6. Define your services and pricing

Consulting businesses are generally dynamic, with the nature of their services varying depending upon the needs of their clients. It's important to assess your target client base and establish the sort of services you wish to offer so you can attract them. Consider which services clients ask for the most, how much effort it requires to offer these services and whether there are any overheads or fixed costs to know about. Make sure you define your primary services and price them accordingly to incorporate an effective pricing margin.

Pricing your services is tricky as it requires you to maintain a balance while taking into account your competition. You don't want to price your services too high as it may reduce demand. You don't want to keep prices too low or your business can't make a profit. Finding a balance is essential for long-term sustainability. Consulting business owners require absolute clarity regarding the costs of doing business. Always factor in the fixed costs and any variable costs, including your own hourly charges when working with clients. You can set a fixed profit margin depending upon your costs.

7. Prepare contract templates and draft proposals

As a consultant, having contract templates and draft proposals available to you can make your business operate more smoothly. How you appear before prospective clients is important, and having draft contracts or templates to share with them improves your image considerably. More importantly, such proposals and templates also indicate the value of services that you're offering to clients.

You can hire a law firm or a solicitor to create some draft contracts depending upon the nature of services you plan on offering. It's important to keep these documents as succinct as possible as many clients prefer to avoid excessive paperwork. Preparing contracts beforehand also offers the security of payment and binds both parties to the clauses within.

8. Create a marketing strategy

Success in a consulting business relies heavily on the way you market it. Once you establish the company and receive the necessary paperwork to start offering your services, focus on a marketing strategy. This is necessary if you want to create a list of recurring clients and promote your business.

There are several platforms that you can use to market your products. Apart from relying on word-of-mouth marketing, you can focus on marketing via digital media, including social networking platforms, websites and blogs. Start by creating a social media page on popular platforms and promote your services there.

Related: How to get into digital marketing (with steps and FAQs)

9. Establish a marketing budget

It's also important to define the amount that you can afford to spend on marketing your consulting business' services consistently. Once you know the most effective marketing channels to target, you can then decide how much to spend each month. Marketing is a key component of customer acquisition. Try to hit your targets for customer acquisition while spending the smallest amount on marketing possible to maximise profits.

10. Develop case studies

Once you launch your consulting business and work with a few clients, approach them to create case studies. You can use these case studies to highlight the value that you offer your clients. These can serve as important marketing tools and can help you get more clients and referrals. As a consultant, it's important to know how to track tangible results and the value that your company offers.

As you continue to help clients, expect your portfolio to grow too. It's important to adapt quickly and invest in relevant tools too, as these can help businesses to reduce costs and maximise profitability. It's also good practice to check in with clients regularly and get their feedback so that you know how your business is performing and what you can do better.

Please note that none of the companies mentioned in this article are affiliated with Indeed.