If you’ve been thinking about starting your own consulting firm…
Then it’s time to stop hesitating and take the leap.
In 2020, the global consulting market was forecasted at around 132 billion U.S. dollars…
And the industry is only expected to continue growing!
Plus, a consulting business can be run entirely online.
I'm Ippei, a master of all things online business, passive income, and local lead generation.
And as someone who makes over 50K per month from my online business endeavors…
I decided to do the sleuthing for you and create this 7 step guide to starting a consulting business in 2021.
I will walk you through everything you need to know about this business, plus I’ve included an itemized look at the startup costs that you should prepare for.
Alright, let’s do this!
How to Start a Consulting Business in 2021
Starting a Consulting business in 2021? Here's what you should know:
Starting a consulting business is an exciting way to help other businesses and be your own boss. To get started, you will need to create a business plan, hone in on your niche, and set your pricing. As well as learning how to effectively market your services to your ideal client.
Start Up Costs
While this list is not a comprehensive compilation of every you need to start a consulting business, it provides a snapshot of what you need to add into your business plan.
Source: (https://www.youtube.com/c/VanessaLau/videos)
Training/Education:
Technology/Software:
Legal:
Accounting/Finance:
Outsourcing/Hiring:
Totals:
Sunk Costs Total: $17,222
Monthly Costs (Annual): $42,000
Combined Total: $59,222
Annual Revenue of Established Consulting Business
According to (https://www.salary.com/research/salary/listing/business-consultant-salary), the average annual revenue of this kind of business is:
Average Salary: $60,839 - $90,386
Profit Margins of Established Consulting Business
The average Profit margin of this kind of business is: 25%-40%
7 Step Quick Start Checklist:
1. Consulting vs Coaching
Before we can even talk about how to start a consulting business…
There’s one thing that needs to be clarified first.
And that is the key difference between consulting and coaching.
One of the worst things you can do for your new business is to confuse these two business models.
While consulting and coaching share many similar aspects, their core purposes are actually very different.
If you want to present a clear and marketable service to your potential consulting clients, you will need to know the differences and core purposes of consulting vs coaching.
Business Consulting vs Coaching:
As a consultant of any kind, you are there to offer external expertise and solutions for your clients.
Whereas a coach exists to help their clients learn how to discover solutions and solve problems on their own!
Both are extremely important roles in helping small business owners find success, but they are extremely different from one another.
Depending on what you are passionate about, and on what skills you already possess..l
You will need to determine which career path fits your goals and desires the best.
2. Write a Business Plan
Now that we’ve established this initial groundwork, it’s time to dive into two of the most neglected and yet integral steps to starting your own consulting company.
These two steps are:
At the end of the day, how can you expect to help other small businesses set themselves up for success if you haven’t done your due diligence to set up your business first?
Many people get sidetracked with the more glamorous or exciting steps, like marketing or building their website.
Or they wait until they have their first clients before forming a legal entity for their own business.
I highly encourage you not to handle your business this way.
The reality of being a business owner is that your list of responsibilities and the demands on your time will only increase as you get further along.
So taking the time to get your affairs in order on the back end of your business (before you’ve acquired a single client or received a single dollar) is the way to go.
When writing a business plan for a consulting business, the primary goal of the document will be to help you!
Most likely, you will not be using your business plan to seek external funding or apply for a small business loan…
As the startup costs for a consulting business are relatively low to begin with.
Which means that this document needs to be functional and practical for you.
Keep it simple, direct, and applicable.
Include your long term goals, and a set of actionable steps that will help you get there.
In addition to this, you will also want to include your consulting niche, and an analysis of your target market/ideal client.
Basic Things to Include in a Business Plan:
3. Get Legal
Once you’ve taken care of your business plan you can move on to establishing yourself as a legal business.
Fortunately, there aren’t any official “consulting licenses” or “consulting certifications”...
Those don’t exist.
BUT, the one thing you will need to consider are the education expectations that your potential clients will have for you in your specific niche.
For example:
If you are an accounting consultant, but you don’t have a Bachelor’s degree or even a Master’s degree in accounting, or you don’t have any considerable background working in the accounting field… You will probably lack the credibility that you will need to attract the right clients.
So just keep in mind which appropriate degrees or work experience that you will need to have before moving forward with your consulting niche.
From there you can move on to these legally required steps:
When forming a legal entity for your business, a Limited Liability Corporation (or LLC for short) will probably be the most practical option.
You will automatically be classified in the eye’s of the government as a Sole Proprietorship, but this business structure offers little legal protection for you as the business owner…
And an S Corp is a much more complex business entity structure that will generally not be necessary for someone who is first starting out.
Applying for your EIN number is relatively simple, and can be done for free online with the IRS.
It’s important that you take this step, as you will need your EIN number for filing taxes each year…
And it will also come in handy when hiring employees or outsourcing work.
There are a variety of different insurance policies that might apply to your consulting business, but they well depend heavily on the niche that you decide to go into.
However, the one insurance policy that will be necessary across the board is General Liability Insurance.
General Liability Insurance is like a blank protection plan for your small business, and is an absolute given, regardless of your niche.
4. Find Your Niche and Ideal Client
Here’s what the consulting business boils down to:
Someone has a problem…
They then come to you so that you can help them take action…
And then these actions (hopefully) produce the desired results!
Seems simple enough, right?
It is…
However, there is a wide range of different consulting specialties and niches that fall under the umbrella of a consulting business.
The first niche that probably comes to your mind when you think of a consultant is typically a standard “business consultant”.
But there are so many more potential niches for you to serve as a consulting business!
Consulting Niche Examples:
In all probability, you will not be equipped to offer consulting services for every one of these possible niches.
And this list isn’t even comprehensive!
So one of the most important decisions that you will make for your business is choosing the consulting niche that is right for you.
From there, you will need to further hone in on your ideal client.
You might assume that your ideal client is anyone who needs consulting services within your chosen niche…
And although this is true, targeting your messaging, marketing, and services towards an even more specific group of people can be extremely helpful.
For Example:
Let’s say that you’ve decided to become a sales and marketing consultant. But you have a background in online business and you are really passionate about helping young entrepreneurs market and sell their online courses and digital products. The first decision is your niche, but the second part is your ideal client.
When you are able to ask yourself who you are best equipped to serve, and who you are the most passionate about serving…
You will find a description of your ideal client.
Which will then allow you to speak directly to them through your website copy, marketing materials, and even your specialized services.
When you are able to hone in on your niche and speak directly to the pain points, desire, and fears of your ideal client…
You will discover that gaining new clients will become a whole lot easier!
5. Consulting Business Models
Let me guess, when you first thought about starting your consulting business…
You were probably focused on the idea of using your unique skills to help other people succeed.
But before you can start changing lives and businesses…
You need to establish a clear business model and structure for your consulting company.
There are three primary models for a consulting business structure:
Consulting Business Models:
Solo Consulting
Consulting Firm
Productized Consulting
Hybrid Consulting
When choosing which business model for your consulting business, you should think about which model makes sense for you personally.
Don’t be afraid to be honest with yourself!
If you get bored easily, a productized consulting model might grow stale quickly
Which might not be so bad if your goal is simply to scale and then sell…
But it’s something to take into consideration.
And if you generally hate the responsibility of managing other people…
Then a consulting firm might not be the best fit for you.
Ultimately, you want to enjoy what you’re doing, right?
Or you wouldn’t have gone into business for yourself in the first place.
Ask yourself the hard questions up front so that you will not only have long term success, but long term satisfaction.
Once you’ve gotten these questions out of the way, you can finally ask yourself, “What should I sell?”
Personally, I highly recommend the productized services business model.
I believe there is a greater potential for success and scalability, as well as the added bonus of turning your business into a valuable asset.
It’s all about simplifying what you offer!
tps:
Don’t focus on selling the entire list of potential services that you could offer!
Instead, zero in on the top 20% that you are really good at, and turn that 20% into a clear step-by-step system that you can transform into a product.
It’s much easier for someone to commit to a purchase of services if those services are clearly laid out in a step by step outline:
A road map that shows them how they will get from the initial problem to the end point solution.
And most people don’t want to sort through a giant list of services to find the right fit for their situation anyways…
They want you to tell them the right fit for their business’s needs, and then be really really good at delivering those results!
6. Pricing Your Services
Now that you know what you’re planning to sell, you will be able to direct your attention onto your pricing structure.
People pay consultants to help them solve their problems and achieve their goals.
So when pricing your consulting services, you need to be very clear about what you offer and why your consulting services are different and valuable.
There are three common methods for pricing out consulting services.
Pricing Your Services:
I recommend a slightly different approach, however.
How much is solving this problem worth to my client? How much value am I providing? (vs pricing a service based on how many hours you may spend on the project)
Factor in overhead costs (like paid ads and acquiring leads)
Charging an hourly rate makes factoring in overhead costs difficult.
How big is the problem?
Assign a monetary value to that problem
Then charge 10% of the value that your solution gives the client
Example:
Obviously, determining the value of a given solution is subjective.
But at the core of it all, you want to honestly evaluate the overarching financial impact that your solution will create for your clients.
If the problem you solve for a client will result in a long term breakthrough of over $100,000 in their bottom line…
Then charging them $10,000 shouldn’t make you cringe!
In fact, they’d be getting a really great deal.
However you decide to price your services, the most important thing is that you believe in the value that you are bringing to the table.
If you wouldn’t invest in you…
Then why should they?
7. Marketing Your Services
Consultants are a bridge.
Your advice and expertise becomes the bridge across which your clients can walk to get from where they are now to where they want to be.
But before you can become that bridge…
You need to market your services and get clients!
Some of the best marketing for a consulting business is through social media.
Which probably won’t surprise you.
Social media has forever changed the way that businesses look at marketing and networking…
And regardless of your thoughts or feelings about social media platforms…
They will probably play a huge role in the success of your career as a consultant.
Now, this doesn’t mean that you have to have a business account on every social platform in existence!
But you do need to think about which platforms your target market and ideal clients are utilizing the most.
Then pick 2-3 of those to remain active on.
Such as:
Speaking of being active on social media…
One of the best tips that I can give you for marketing a consulting business is to join in on the conversation!
What do I mean by that?
The purpose of social media is to have a conversation, right?
So if you want to leverage social media to gain new clients, then you have to take part in the conversations that are happening within your niche and ideal clients.
This can be done through niche specific facebook groups or reddit threads.
Once you’ve joined in on the conversations happening in these groups and threads…
Seek to provide value before ever asking for anything in return.
Then continue the conversations with potential clients via DM’s as it feels applicable and appropriate.
These groups are also great because they expose some of the most relevant pain points and needs within your niche that you might not be aware of.
Which allows you to further hone your product market fit.
Engage in the conversation organically and use these interactions to dial in your message!
If you strike up a great conversation with someone who isn’t quite ready to commit to your services…
You can consider offering a complimentary strategy session.
This can be a brief 30 minute phone call that allows them to get a feel for what it would be like to work with you.
You might be wondering, “how do I know how much to give away for free?”
It’s not a matter of how much information or advice to give away for free in an initial conversation…
But a matter of accurately identifying the pain point that prompted them to meet with you in the first place.
Pinpoint that problem, and offer a direct solution…
Without going into long term advice, ideas or solutions for the next year or five years of their business!
If you have effectively answered their question and provided a solution for their pain point, then a potential client will probably respond with:
“That was great! What else can you do?” or something to that effect.
From that point, you can begin to pitch your services.
It’s easy to get carried away when talking with a prospective client, without addressing what they originally asked.
You can offer your big picture advice and expertise if they decide to book your services beyond the initial meeting.
A must-have for your consulting business will definitely be your website!
Especially since you may find that many of your potential clients don’t live anywhere near you, and will probably find you through Google or Social Media.
Your website will serve as the online face of your business.
It should clearly communicate what you do and who you serve.
As well as including a detailed contact form that will help you to evaluate and assess the compatibility of your inquiries.
If building out a website intimidates you, then you can always hire a graphic designer to take care of this for you!
But at the end of the day, there are so many template based website builders out there now…
That even a child can build a website!
So if you don’t have the budget for a graphic designer starting out…
I promise that you can build a beautiful, professional, and functional website yourself!
Here are some of my favorite user-friendly website builders:
Your startup budget will probably be a huge factor in whether or not paid advertising is a viable marketing option for you in the beginning.
But if you are able to invest in paid ads, they can actually be incredibly effective at attractive prospective clients.
There are two “big kids” in the playground of paid advertising:
Google is great for people who are aware of the problem they are having in their business and are utilizing Google in search of a solution.
Whereas Facebook is more ideal for targeting the person who may not be aware of their specific problem yet.
Both are great avenues to take the data, information, and dialed in message from the social media conversations you’ve taken part in…
And apply that to targeting your ideal customer through paid advertisements.
Ultimately, there is something to be said for some old fashioned, in-person networking!
As a consultant, you should take business cards with you everywhere…
And always be prepared to engage in networking opportunities that present themselves in your day to day life.
But in addition to the casual networking opportunities that will present themselves in the moment…
You should also intentionally seek out networking opportunities within your niche.
Attending conferences, joining your local chamber, and attending events…
All of these things should be a consistent part of your schedule as the owner of a consulting business.
Sometimes all the marketing and networking techniques in the world just aren't going to cut it...
Which is why you need a lead generation strategy for your consulting business.
Take a look at our lead gen coaching program, here!
Pros and Cons
of starting a consulting business
Pros
For many aspiring entrepreneurs, one of the greatest draws to launching a business is the freedom to set your own schedule. There’s no boss to dictate your day, or look over your shoulder… You are in control of your time. This can be both freeing, and stressful. But for most small business owners, it is one of the most gratifying aspects of being self employed.
Going hand in hand with not having a boss to report to in your consulting business, is the freedom to set your own schedule. You get to decide what your hours will look like. And while any new business will require hard work and long hours in the beginning, you have the control over your schedule, and setting boundaries with your time.
You might start out as a solo-preneur in your consulting firm, but it doesn’t have to stay this way unless you want it to. A business consulting firm has the potential to grow and scale almost infinitely. You could even turn your consulting business into a franchise someday.
Another major benefit to starting a consulting firm is that you will be building a sellable asset. If you structure your business well, you could sell it down the road for a large profit. And the only thing more valuable than owning a successful business, is selling a successful business.
Cons
Unfortunately, you will still be trading your time for money in the beginning of your business. Getting a consulting firm up and running is no easy task, and it won’t set you up for passive income right off the bat. That will come much later, once you’ve built up a team and are finally able to step away from the day-to-day operations of your business.
A mistake that many beginning consultants make is taking on too many low value clients. Their schedule is full, but they’ve capped their profit by doing busy work for low paying customers. You need to balance your smaller clients with larger accounts that will still enable you to make a decent profit.
Managing a consulting firm is a big undertaking. You will be responsible for the health and wellbeing of multiple business clients, and eventually an entire team that are working alongside you. Some people just want a small business they can run from home, and the consulting firm business model isn’t for everyone. Be honest with yourself regarding what you are looking for in a potential business model, and what you hope to gain from it in the long run.
Much of your success as a firm will be directly tied to your clients’ results. If you fail to help people get to where they are trying to go, you will have very little to show future clients… Which will ultimately stunt your business’s growth. You need to know what you’re doing. Hiding behind good branding, compelling marketing, and empty promises will only get you so far. If the results aren’t there, your business won’t be either.
Starting a Consulting Business Can Be Profitable… If You Know This:
Alright, I'm going to just shoot straight with you here:
Without actual clients to consult with...
Your consulting business won't even be a real business.
It'll probably just be you talking to yourself in an office...
And that's just sad!
So while there are a lot of moving pieces that will ensure your success as a consultant...
You have to get clients coming in before any of that will matter!
Fortunately, I have something that I think could really help you.
You see, when I decided to launch myself into the world of online business...
I was barely paying my bills with the 2K per month that I was making at my job.
Until I discovered the local lead generation business model.
Online lead generation changed everything for me:
In fact, I'm making over 50K a month now in a span of only five years!
Plus, I get to help small businesses with one of their most basic needs:
New leads!
If you will take the time now to learn the art of local lead generation...
You will be able to passively generate new consulting leads for your business forever!
That's the beauty of lead gen:
Once you've don your due diligence, you will be able to sit back and focus on the portions of your business that truly need your attention.
Like your existing clients!
If you're ready to explore the wide world of lead generation for yourself, click here to see how we can help you get started today!
