1. Write down everything you have to offer clients
When you start a consulting business, you are the product you’re marketing. It’s your expertise that clients will pay for. Upfront, you need to determine what you have to offer. That will shape how you plan and market your business.
Look at everything of value you can provide clients now, and plan how to increase that value in the future. Break your audit down into three categories:
1. Skills and certifications
What concrete skills and certifications do you have specific to your target niche? And what broader business skills can you use to support your clients?
For instance, Annie wants to become a consultant for studio potters. Her concrete skills include all the practical aspects of making pottery (throwing on the wheel, trimming, glazing, and firing), best practices for maintaining and running a small- to medium-sized pottery studio, and teaching classes. She also knows the ins and outs of selling pottery at craft fairs, in stores, and online.
As far as other skills, Annie has an MFA Ceramics degree, and a Diploma in Business Administration. So not only does she have a broad and expert knowledge of the world of pottery, but she’s also formally educated in the business world.
Experience is a major selling point for many consultants. If you were to hire a consultant, would you choose the professional with 10 years experience in your industry, or 30 years?
It’s more than time, though—experience includes where you’ve been and what you’ve done. This can affect which clients you market to. For instance, running your own small business, versus managing a department within a major corporation, will determine whether you’re more likely to work with up-and-coming entrepreneurs or large offices restructuring their staff.
Annie potter’s experience audit might include:
Has run her own pottery studio for 25 years
Has managed volunteers, apprentices, and part-time employees during her time in business
Scaled up from a home-based business with one wheel and one small 120 volt electric kiln to a large workshop with twelve wheels and two large 240 volt electric kilns
Established and run her own ecommerce store
Note that Annie focuses on business experience, not just her experience as a potter. This should be your priority—not just showing how good you are at what you do, that you know how to make it profitable. After all, that’s what your clients are aiming for as well.
3. Room to grow
The final part of your experience audit includes a section on where you can develop both within your field and as a consultant. You won’t use this section to appeal to clients—it’s for your own planning. By constantly upgrading your skill set, you expand what you have to offer clients, and potentially open up new sections of the market.
For instance, Annie specializes in earthenware and stoneware, both common types of pottery. But during several artists’ residencies, she’s been able to experiment with porcelain—which uses a special, stiff type of white clay, and fires at much higher temperatures. She decides to continue building on her skills with porcelain, and incorporate it into her own practice. That way she’ll be better able to consult studios working in that medium.
Also, she knows that social media has changed the way potters market and sell their products. Annie decides she’ll set aside funds and time next year to get an Online Marketing Diploma, making her better able to consult businesses that do most of their selling online.
Planning ahead like this may seem unnecessary when your consultation business still hasn’t gotten off the ground. But developing your skills is an investment in your business, and has a concrete financial impact. Making plans now can help you better project the future of your business.
2. Research your consulting business
Before you launch your business, you need to get the lay of the land. That means researching competitors and clients.
Research consulting business competitors
Once you’ve determined who you’ll be consulting—in Annie’s case, it’s studio potters—research consultants that cater to the same crowd.
First, create a list of your competitors. Then look for:
Online reviews by customers. What do your competitors do well? What are their weaknesses?
Website and social media profiles. How do your competitors present themselves online? Do they seem to have a social media marketing strategy in place? How are they engaging with followers?
Public records. If you’re going up against a corporation—like a large consulting firm—their financial filings are public. They’re free to read at the US Securities & Exchange Commission website.
And don’t be afraid to do some primary research. Get in touch with them as a potential client, so you can learn how they court new business. Or better yet, contact some of their previous customers, and hear what they have to say. And subscribe to their newsletter, follow their blog, add them on social media—a little light stalking could give you the clues you need to get the upper hand.
Research potential clients
To find out what potential clients are looking for, you need to know what they’re already saying. A few ways to do that:
Crack open the Rolodex
If you’re already established in your industry, you likely have contacts you can reach out to for advice. Annie might reach out to her friend Kevin, who runs his pottery studio, and interview him. What would he look for in a consultant? What parts of his business does he most need consultation on?
You may also want to see if any of your business contacts have experience hiring a consultant before. They could be able to tell you what worked and what didn’t, what their experience was like, and what they would change if they could do it again.
Interview consultants in adjacent fields.
Try contacting some other consultants—not competitors, but people in adjacent fields.
For instance, Annie has a number of contacts who run textile studios. Like her, they take commissions from clients, as well as creating and selling their own stock, and teaching classes in-house. And some of them have acted as mentors to other textile artists.
Annie can contact these business owners and talk to them about their experiences acting as mentors, and how they were able to translate their own business experience into actionable advice for their clients. That can help her plan her own services.
Dive into online communities
Online communities can tell you what potential clients are talking about. Who knows? You might already be a member.
Annie belongs to a group called Pottery Entrepreneurs. She doesn’t use Facebook that often, but for the sake of researching her business, decides to take a deep dive into a year’s worth of conversation topics.
Turns out, a lot of studio potters find it difficult balancing their teaching schedules with the time they need to produce their own pottery for their clients and stores. Annie resolves to make that one of her value propositions—helping her clients find a way to manage both revenue streams for their studios.
Visit local meetups for your customer base
Time to do some field work. Attending meetups in person can be a great way to find out what troubles face potential clients, and find ways to appeal to them.
Meetings of a local business association, networking events, workshops, business seminars—these are all great potential venues. For something more casual, and easy to access for free, try Meetups.com. You may be able to find a meetup where local business owners in a certain industry—restaurants, for instance—get together to socialize and gripe about business.
Not only will you learn more about potential clients, you may be able to establish relationships with a few, and sign them up for your services later on.
3. Decide how much you’ll charge clients
The best way to decide how much you’ll charge is to approach other consultants for quotes. Once you’ve collected quotes from as many consultants as possible, you’ll have an idea of what clients are willing to pay based on consultants’ experience and reputation.
Your business is new, so you won’t be able to charge top-of-the-line prices. But shoot for somewhere in the middle, or slightly less than average. You can always increase your rates once you’ve built out a list of clients.
Translating your services to value
To show a potential client how your consulting services can have a tangible impact on their business, tell your own story. Put together a short, easily digestible document that tells potential clients how you were able to grow your own business and increase your income. That includes an approximate financial history, and the steps you took to scale your business up—such as reorganizing operations, hiring staff, or opening new revenue streams.
4. Figure out how you’ll bill clients
There are three ways you can choose to bill each client that comes your way: Hourly, per project, or on a retainer basis. Certain methods may work better for some clients than others. Figure out your preferred method—as well as how flexible you are when it comes to using other methods—right away, so you’re ready to onboard new clients from the get-go.
A not about retainerships: Many clauses in retainer contracts will prevent you from working for your client’s competitors at the same time—potentially limiting your overall income.
5. Write a business plan
A business plan is like a road map for your business. It tells you where you are now, plus where you’re going in the future. And, as time goes on, you can refer back to it to make decisions.
On top of helping you make smart decisions, your business plan is important in case you apply for a small business loan or line of credit in the future. Even if that’s a far-off goal, it’s wise to have your business plan prepared now, and ready to go when you need it.
Your business plan will include:
- A cover page
- The value you offer clients
- How your consulting business makes money
- The resources you rely on to operate
- Ways you’ll expand your services in the future
- Your position in the market versus competitors
- How you plan for your business to grow
- Current financial report
- Financial projections
Our article on how to write your first business plan gives you a thorough walkthrough, so you can create one for your business.
6. Choose a business structure
Your business structure affects how you’ll report and pay taxes. It also determines your liability—whether your personal assets are on the line in case your consulting business can’t pay its debt or gets sued.
To choose the right structure for your consulting business, check out our guide to business entity types.
7. Name your consulting business
Whether you need to register a name for your consulting business depends on its structure, as well as whether you’ll be operating under a name other than your own. Our main article on how to start a business has the full step-by-step.
8. Open a business bank account
Even if you’re a freelance sole proprietorship, you should open a business bank account. In fact, even if you’re running your consulting business as a casual side hustle, you can benefit from a business bank account.
A separate account allows you to draw a clear line between your personal and business assets. That makes bookkeeping and small business tax filing much easier—you won’t have to work as hard to take advantage of tax deductions, for example, because all of your professional expenses will be taken from your business account.
Looking to save on fees, earn credit card rewards, or get an SBA loan? Check out our guide to the best banks for small businesses.
9. Obtain licenses or permits
Depending on your state, you may or may not need licensing to open your consulting business. Our how to start a business guide covers the main types of small business licenses.
10. Invest in must-have consulting tools
To keep your consulting business running smoothly from day one, invest in the best tools for the job now. Those include::
Proposal writing software. Once your business kicks off, you’ll be writing a lot of proposals for clients. Proposal writing software lets you automate some of the process and track which proposals you’ve submitted where. One of the most popular choices for consultants is Practice Ignition.
Project management software. Whether you bill hourly or per project, it’s essential to keep track of how much time you invest in each client’s needs. And the more clients you get, the harder it becomes to track every project you have underway. Project management software helps. Mavenlink is a popular choice, and designed for collaboration in case you hire employees.
CRM. Tracking leads and clients lets you stay on top of the work you’re doing, as well as the clients you’re trying to bring on board. Hubspot CRM is an affordable option.
Bookkeeping. Up to date books let you plan your business and take advantage of tax deductions at the end of the year. Bench gives you a dedicated remote bookkeeping team and intuitive software—so you can spend less time managing finances, and more time helping your clients.
Invoicing. The invoicing cycle can quickly become an invoicing dead end if you don’t have an organized billing system in place. Freshbooks is head and shoulders above the competition, and makes the process simple.
12. Insure your consulting business
As a consultant, you won’t exactly spend your days jumping over school buses on a motorcycle. So why worry about insurance?
Business insurance can protect you in the event of a lawsuit from a disgruntled client. It can save you from being sued by employees if you miscalculate wages. And it can even protect your home office in case of extreme weather events.
To help choose exactly which coverage is right for you, check out our guide to small business insurance.
This guide gives you the essentials you need to start your consulting business. But there are other topics—like figuring out a federal tax ID—that also impact your business.