Want to share the knowledge and expertise you’ve acquired over the years and make great money doing it? Becoming a consultant gives you the opportunity to start a business that leverages your skills, experience and know-how, and helps other organizations succeed. And if you’re just starting out, you don’t need to sweat the financials. Even entry-level consultants can make $150/hour on average, while more experienced consultants can bring in $300/hour or more.
There are currently more than 700,000 consulting businesses in the U.S., with operations and financial consultancy consistently rated the most lucrative. In recent years, more consultants have opted to go out on their own and become independent, reporting 90 percent satisfaction as a business owner.
But before you get started, here are some of the details you need to know:
Why Do Companies Hire Consultants?
If you’re wondering why another business would pay top dollar to have you tell them what they need to change, the answer has many layers. Here are some of the things companies take into consideration when deciding on hiring a consultant:
- Do they have experts on staff who have the skills and availability to meet their needs?
- If not, do they have the budget to hire a full-time employee and cover the costs that come along with that, like insurance, time off and other benefits?
- Are they looking to transform their business in a way their current resources don’t allow?
- Will hiring outside expertise bring them significant ROI?
How to Start a Consulting Business
Understand Trending Industries in Consulting
If you’re an expert in something, you can be a consultant. While that seems like a broad statement, keep in mind that shifting industry trends, developing technologies and evolving business operations will impact how in-demand your particular skills will be. An expert in leadership, for example, might find there’s a wider client base than someone who is an expert in, say, one particular CRM software. Fast-growing industries for consultants include business process improvement, financial management, organizational change, technology and more. Find out which industries might be in line with your skills in our “How to Start a Consulting Business” Guide.
Find Your Niche
Don’t just ask yourself what you’re good at; ask what you’re the best at. Look at some of the biggest challenges to businesses and organizations in your industry. Do you have the ability to solve them? Do you offer something (skills, insights, innovations, resources) that companies can’t source internally? If there’s something you can do that no one else can (or at least, very few), you’ve just found your niche. Remember, it’s important at this phase to also conduct an honest assessment of your weaknesses, too, so you can work to fill in any gaps and be prepared to meet your clients’ needs.
Set Clear Goals
How much time will you devote to a given client? What kind of workload can you handle? Will you be a serial consultant, executing and completing one project at a time before moving onto the next? Or are you adaptable enough to juggle multiple clients at once? Consider your answers, and set goals for what you want to achieve in your first year of doing business and what your business might look like five years down the road. Create a business plan that will help guide your path forward.
Firm Up Your Finances
Starting a business as a consultant can be lucrative when done correctly. With low overhead and very little startup costs, you can be making money in no time. Incfile can help with bookkeeping and accounting services, but there will be many other financial considerations to be made, including:
Taxes: Your tax structure will vary based on the entity you choose to form. LLCs have a pass-through taxation structure, meaning any income you make from your business is reported on your personal taxes. You'll also need to pay self-employment taxes, but you may be able to reduce the amount by filing an S Corp Election.
Employees: How much help will you need to run your business, and how will you pay for it? Hiring employees adds significant costs to operating your consulting business, and it's a decision you'll need to consider carefully. Keep in mind, if you bring on employees, you'll need to have a plan for things like benefits, time off and workers' compensation. You may also need a dedicated office space, which will increase overhead. If you need some admin help, you might consider hiring a remote assistant to keep your costs lower.
Getting Paid: A steady income requires steady checks coming in, but as most independent consultants know, that isn't always reliable. Set up a simple and effective process for invoicing and billing so you always know what's been paid and what's outstanding. Additionally, keep a close eye on your cash flow, and know how much you'll need to cover your expenses if a client misses or is late on a payment.
Develop Skills for Success
Consultants are more than just subject matter experts; they also have the skills and qualities it takes to successfully impart their wisdom to others and implement change. To find success as a consultant, you’ll need to hone these skills:
Networking: In consulting, it’s all about who you know. Making connections will help you find new clients, and it will also help you connect resources and leverage assets when you need them.
Pitching: Why should a business choose you as their consultant? If you have good presentation skills and a strong proposal, you’re far more likely to close a sale. Remember to include a detailed breakdown of pricing, timeline and deliverables, plus a clearly defined scope that doesn’t leave anything to chance.
Analysis: Not only will you need to have a good handle on your clients’ business metrics and pain points, you’ll also need to be constantly analyzing your own performance, so you can show proof of ROI and make it clear you deliver on everything you’ve promised.
Implementing: Your suggestions aren’t going to do much good if they’re never put into practice. You’ll need professional and interpersonal skills to work with project managers and decision-makers to get buy-in and ensure your guidance is implemented properly.
Consulting Business Challenges
While consultants can be high-paid, successful entrepreneurs, they also face challenges unique to this type of work. Here are some of the biggest you’ll need to overcome:
Finding Clients: Your level of expertise doesn’t come for free, but you’ll need to prove your worth to find a steady stream of clients. Lead nurturing is critical at this stage.
Adapting to Changing Needs: Technology advances at the speed of light, but industry trends can shift just as quickly. You need to stay on top of the changes that impact your area of expertise by constantly expanding your knowledge base, participating in ongoing training and education and staying ahead of industry developments.
Delivering Results: Being a consultant is far more than just giving advice. You’ll need to prove that your expertise has an impact. Work on the skills you need to influence and interact with decision-makers, so they will support your recommendations and work toward an implementation goal.
I Want to Become a Consultant. What Now?
If you’re ready to take the leap, you’ve got some big decisions to make. You’ll need to choose the right entity for your consulting business, which, most of the time, is an LLC. From there, you can start planning how to market your business, manage your finances, secure contracts, build business processes, decide whether to hire help or go it alone and stay on top of regular paperwork and filing deadlines.
It might sound overwhelming, but launching a successful consulting business is an achievable goal once you’ve got the info you need to make it happen. Our “How to Start a Consulting Business” Guide is a free overview that walks you through everything you need to know to share your expertise with the world.