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How to Start a Consulting Business

Written by:

Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.

Edited by:

David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.

How to Start a Consulting Business

Fast Facts

Investment range

$3,900 - $8,800

Revenue potential

$58,000 - $144,000 p.a.

Time to build

0 - 3 months

Profit potential

$52,000 - $130,000 p.a.

Industry trend

Growing

Commitment

Flexible

Over the years, in your work experience, you have probably developed some sort of expertise. Maybe it’s general business expertise, or vast knowledge of marketing, management, taxes, or financing. You could leverage this expertise to start your own consulting business, share your abilities with the world and make a good living while building a profitable company.

Starting any kind of business, however, takes a lot of work. The key is to have the knowledge you need before you start so that you avoid common mistakes. Lucky for you, this step-by-step guide lays out all you need to know and do, to put you on the road to entrepreneurial success.

Step 1: Decide if the Business Is Right for You

Starting a consulting business requires time and effort. Before you jump in, you need to fully understand what is involved before you decide if a consulting business is right for you. 

Pros and cons

Pros

  • Do good — help businesses achieve their goals
  • Flexibility – work at home, often when you choose
  • Profit potential – consulting has strong margins

Cons

  • Competition – many established consulting services out there
  • Marketing — you’ll need to spend to draw clients, build name

Consulting industry trends

Consultants provide advice in various fields. The largest market segment is operations consultancy, followed by financial advisory consulting.((https://www.consultancy.org/consulting-industry/global)) Technology consulting is also a large and growing segment due to the increase in remote work.

Management consulting includes assistance on organizational planning, financial planning, budgeting, and marketing, according to market analyst IBISWorld.

Industry size and growth

consulting industry size and growth

Trends and challenges

Trends in the consulting services industry include:

  • Rise of digital consulting
  • Many companies are undergoing digital transformation 

Challenges in the consulting services industry include:

  • Regulatory changes
  • Highly competitive landscape
consulting business Trends and Challenges

What kind of people work as consultants?

consulting industry demographics

How much does it cost to start a consulting business?

Startup costs for a consulting business can range from $3,900 – $8,800. Office equipment and a website are the largest investments, so if you already have a computer you’re way ahead of the game. 

Start-up CostsBallpark RangeAverage
Setting up a business name and corporation$200 - $200$200
Licenses and permits$200 - $300$250
Insurance $100 - $500$300
Business cards and brochures$200 - $300$250
Website setup$1,000 - $3,000$2,000
Initial marketing budget$200 - $500$350
Computer, office equipment, and software$2,000 - $4,000$3,000
Total$3,900 - $8,800$6,350

How much can you earn from a consulting business?

Your profit will vary depending on:

  • How many customers you can acquire through marketing and referrals
  • Your ongoing expenses, particularly if you hire employees at some point

The only expenses that you will encounter with each client are generally limited to materials you need to prepare, which should be minimal. So you should be able to achieve a profit margin of around 90%. The average hourly rate for services depends on your level of expertise and experience, with a range between $50 – $150 per hour. These calculations will put your hourly rate at $100.

In your first year or two, you might average 12 hours per week and work for 48 weeks, giving you annual revenue of around $58,000 and profit of $52,000, assuming that 90% margin. As your brand gains recognition and you begin to get referrals and repeat customers, you might work 30 hours per week and make $144,000 in annual revenue and a tidy profit of $130,000. 

consulting business earnings forecast

What barriers to entry are there?

There are very few barriers to entry for a consulting business. Your biggest challenges will be:

  • Standing out from the competition. You will need to market your expertise.
  • You need to have excellent consulting skills and a specific area of expertise.

Related Business Ideas

If you’re still not sure whether this business idea is the right choice for you, here are some related business opportunities to help you on your path to entrepreneurial success.
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Step 2: Hone Your Idea

develop a business idea

Now that you know what is involved in starting a consulting business, you need to hone your idea further in order to be able to enter a new market with tough competition.

Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.

Why? Identify an opportunity

To establish a foothold in the consulting world, it’s crucial to differentiate yourself, especially as a new entrant without a track record.

Conduct thorough research on existing consulting businesses to understand their service offerings, pricing strategies, and client feedback. This investigation aims to uncover a niche or a market gap that you can fill.

For example, if there is a lack of expertise in digital transformation or sustainability practices in your local market, these could represent valuable opportunities.

You might consider targeting a niche market by specializing in a certain aspect of your industry, such as budgeting or tax consulting.

In addition to market gaps, consider current industry trends and future demands. Staying ahead of the curve in areas like technology adoption, environmental compliance, or remote workforce management can position you as a forward-thinking consultant. This strategic positioning can kickstart your word-of-mouth marketing, helping to draw in early clients and build your reputation.

What? Determine your consulting services

Begin by cataloguing all potential consulting services you can offer, aligning them with both market opportunities and your own expertise. Consulting services can span a wide range, including but not limited to:

  1. Business Strategy and Management: Advising on business models, strategic management, growth strategies, leadership, and organizational design. Discover how Matthew Curtis differentiates his business consulting services through trusted problem-solving.
  2. Marketing and Sales: Specializing in market research, branding, digital marketing strategies, and sales optimization.
  3. Financial and Accounting: Offering expertise in financial planning, budgeting, auditing, and tax advisory.
  4. Human Resources: Focusing on talent acquisition, training and development, performance management, and communication consulting. Read how Jennifer Opare-Aryee offers HR consulting services in sectors like health, hospitality, and social care.
  5. IT and Technology: Assisting with IT strategy, cybersecurity, software implementation, and data analytics.
  6. Operations Management: Streamlining operations, supply chain management, and quality control.
  7. Sustainability and Environmental Consulting: Providing guidance on sustainable practices, environmental compliance, and green initiatives.

Once you’ve identified your area of expertise, it’s time to actively seek potential clients. Research companies in your chosen niche that could benefit from your services. Direct outreach through phone calls, emails, social media, and professional networking sites like LinkedIn can be effective. Personalized messages that address specific challenges or goals of potential clients can increase your chances of engagement.

Remember, as your business grows, client referrals and word-of-mouth will become invaluable. Satisfied clients not only bring repeat business but also serve as ambassadors for your services. Thus, delivering exceptional value and maintaining strong client relationships is fundamental.

How much should you charge for consulting services?

When you are just starting out, you may have to charge a lower rate until you have a track record. Consulting generally runs $50 – $150 an hour. You’ll need to make a name for yourself and show your experience and success to command a price that is at the higher end of the range.

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Where? Choose your business premises

In the early stages, you can operate from home to keep costs low. But as your business grows you’ll likely hire staff and need to rent out an office. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

  • Central location accessible via public transport
  • Ventilated and spacious, with good natural light
  • Flexible lease that can be extended as your business grows
  • Ready-to-use space with no major renovations or repairs needed
consulting rating

Step 3: Brainstorm a Consulting Business Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

  • Short, unique, and catchy names tend to stand out
  • Names that are easy to say and spell tend to do better 
  • Name should be relevant to your product or service offerings
  • Ask around — family, friends, colleagues, social media — for suggestions
  • Including keywords, such as “consulting” or “business services”, boosts SEO
  • Name should allow for expansion, for ex: “StrategyWorks Consulting” over “HR Heroes Consulting”
  • Avoid location-based names that might hinder future expansion

Discover over 460 unique consulting business name ideas here. If you want your business name to include specific keywords, you can also use our consulting business name generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that set your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Consulting Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

  • Executive Summary: A concise summary highlighting the key points of the consulting business plan, including its mission, objectives, and potential for success.
  • Business Overview: An overview of the consulting business, detailing its structure, industry, and the specific consulting services it will provide.
  • Product and Services: Clear and detailed descriptions of the consulting services offered, emphasizing their unique value proposition and benefits to clients.
  • Market Analysis: Examination of the target market, including size, trends, and opportunities, to justify the demand for the consulting services.
  • Competitive Analysis: Assessment of competitors in the consulting industry, identifying strengths and weaknesses to position the business effectively in the market.
  • Sales and Marketing: Strategies for promoting and selling the consulting services, encompassing target audience, pricing, and promotional channels.
  • Management Team: Introduction to the key individuals leading the consulting business, emphasizing their relevant skills and experience.
  • Operations Plan: Details on the day-to-day operations, outlining how the consulting services will be delivered, and the necessary resources and logistics.
  • Financial Plan: A comprehensive financial overview, including startup costs, revenue projections, and a break-even analysis, demonstrating the business’s financial viability.
  • Appendix: Supplementary information, such as detailed market research, resumes of key team members, and any other relevant documents supporting the consulting business plan.
what to include in a business plan

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to consulting. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your consulting business will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

  • Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
  • General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
  • Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
  • C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
  • S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just needs to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.
types of business structures

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.

Form Your LLC

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Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

The IRS website also offers a tax-payers checklist, and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

  • Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
  • SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
  • Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
  • Angel investors: Reach out to your entire network in search of people interested in investing in early-stage startups in exchange for a stake. Established angel investors are always looking for good opportunities. 
  • Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
  • Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
  • Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best options, other than friends and family, for funding a consulting business. You might also try crowdfunding if you have an innovative concept, or angel investors if your expertise is considerable.  

jewelry store financing

Step 8: Apply for Consulting Business Licenses and Permits

Business Licenses and Permits

Starting a consulting business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your consulting business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

  • General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
  • Business Property: Provides coverage for your equipment and supplies.
  • Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
  • Worker’s compensation: Provides compensation to employees injured on the job.
  • Property: Covers your physical space, whether it is a cart, storefront, or office.
  • Commercial auto: Protection for your company-owned vehicle.
  • Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
  • Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.
types of business insurance

Step 11: Prepare to Launch

Launching a Business

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.  

You may want to use enterprise resource planning solution Netsuite, online workspace Bitrix24, and project management software CONREP to manage your day-to-day operations such as customer relations, accounting, HR, and others. 

Accounting

  • Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero
  • If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.

You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

Marketing

For your consulting business, the marketing strategy should focus on showcasing your expertise, experience, and the tangible results you’ve achieved for clients. Emphasize your ability to understand and solve complex problems, offer tailored solutions, and drive growth or improvement for businesses. Here are some powerful marketing strategies for your future business:

Kickstart Marketing

  • Professional Branding: Your branding should communicate expertise, trustworthiness, and professionalism. This includes everything from your logo and business cards to your presentation templates and professional attire.
  • Direct Outreach: Network with industry professionals, attend business events, and connect with potential clients through direct outreach, including LinkedIn networking and industry-specific conferences.

Digital Presence and Online Marketing

  • Professional Website and SEO: Develop a sleek, professional website showcasing your services, case studies, client testimonials, and a blog. Optimize your site for search engines to ensure visibility for those seeking consulting services in your area of expertise.
  • Social Media Engagement: Use platforms like LinkedIn for B2B networking, sharing industry insights, and engaging with potential clients. Twitter and Facebook can also be used for broader engagement and sharing thought leadership content.

Content Marketing and Engagement

  • Expert Blog: Regularly publish articles demonstrating your expertise on relevant subjects, offering valuable insights and solutions to common industry challenges.
  • Client Success Stories: Share case studies that highlight how you’ve helped clients achieve their goals, focusing on measurable results and unique problem-solving strategies.
  • Webinars and Online Workshops: Host webinars or workshops on topics pertinent to your target audience, offering a taste of the value you provide.

Experiential and In-Person Engagements

  • Speaking Engagements: Seek opportunities to speak at industry events, conferences, and seminars, positioning yourself as a thought leader in your field.
  • Networking Events: Regularly attend or host networking events to build relationships with potential clients and industry peers.

Collaborations and Community

  • Collaborations with Complementary Businesses: Partner with businesses that offer complementary services to provide a broader value proposition to clients.
  • Community Involvement: Engage in community or charitable events to increase local visibility and network with potential clients in a non-sales context.

Customer Relationship and Loyalty Programs

  • Referral Programs: Implement a referral program to incentivize existing clients to refer new business to your consulting firm.
  • Retainer Services: Offer retainer-based consulting packages to encourage long-term relationships and steady revenue streams.

Promotions and Advertising

  • Targeted Online Advertising: Use platforms like Google Ads and LinkedIn to reach businesses that might benefit from your consulting services.
  • Email Campaigns: Develop an email marketing strategy to nurture leads, share regular insights, and keep your firm top of mind with potential clients.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your consulting meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your consulting business could be: 

  • Boost efficiency with our innovative operations guidance
  • You won’t believe your finances!
  • Improve remote work with better tech and IT 
unique selling proposition

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a consulting business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been providing consulting services for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in consulting. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business. 

Step 12: Build Your Team

Building a Team for a New Business

You may not need to hire any employees if you are starting out small from a home-based office. However, as your business grows, you may need to recruit full-time employees for various job roles. The potential employees for a consulting business include:

  • General Manager 
  • Consultants 
  • Marketing Lead 

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.

Step 13: Run a Consulting Business – Start Making Money!

Running a Business

Market analyst IBISWorld says a potential increase in corporate profits in the years ahead presents opportunities for the consulting industry. When corporate profits improve, businesses tend to hire consultants to find new revenue streams and identify areas where they can invest their excess cash. Even when profits are down, some consultants are still able to land lucrative contracts with clients seeking to improve their profit margins. Either way, it’s important for you to build a good business reputation first.

You’ve now got all the business knowledge you need to get started, so it’s time to get out there and start consulting your way to success. 

Consulting Business FAQs

How can I start a consulting business with no money?

If you already have expertise in an area, a computer, office equipment, and software for presentations and documents, you could start your business with a minimal investment. You need to set up your business entity and obtain insurance, but you could do only free marketing such as social media. A website, however, is very important for marketing.

Should I form an LLC for consulting?

While you don’t require an LLC to do consulting work, an LLC has many benefits, making it a great choice for many startup companies, including consulting companies. As a consultant, you often give advice on your areas of expertise. If your guidance has negative consequences for your clients, they may, unfortunately, take legal action. With an LLC your personal assets will not be at risk. An LLC also gives you a lot of flexibility in terms of management, as well as tax advantages.

How much money do I need to start a consulting business?

Start-up costs range from $3,900 to $8,800. But if you already have a computer and office equipment and can build your own website, your costs will be much lower.

What type of consulting pays the most?

The highest-paying consulting fields can vary, but management consulting, IT consulting, and financial consulting are known for their higher earning potential.

How do I start a consulting business on the side?

To start a consulting business on the side, define your niche, develop your offerings, build your network, establish an online presence, manage your time effectively, and start with smaller projects.

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How to Start a Consulting Business