5 steps to starting a consulting business

The consulting industry is huge. Entrepreneurs who know the ins and outs of certain fields may want to get in on this market and offer consulting to clients. They can teach clients how to operate their businesses more efficiently and boost their bottom line.

If you are looking into starting your own consulting business, first you need a plan. Here are five steps you can take to learn how to set up a consulting business.

1. Choose a specialty

With any business, the riches are in the niches. And when it comes to starting a consulting business, it's better to focus on one or a few specialties and types of clients you can help.

For example, Karli Jaenike, founder of JuiceBox, became an expert in search engine optimization (SEO). It took her years to learn how to do it right, but now companies hire her because she's knowledgeable. “You can become an expert by working in the field for some time and gaining experience working with companies of different sizes and niches," she says.

Once you figure out which industries you're going to work in, define your target market. Jo Barnes, founder of Your Lifestyle Business, says you should ask yourself: What kind of people do I want to work with? This could include individuals, groups, CEOs, or working moms.

“Include both demographics and psychographics in your definition," Barnes says. "To identify that you absolutely only want to work with energetic action-takers will help when deciding on whether [you'll] accept a client."

2. Research your competitors

Consulting is a competitive field. Thousands of consultants may already be targeting the same clients you are. Before you start a consulting business, you must do your research, says business coach Janet Zaretsky.

“Are there a number of competitors in the space you intend to consult in? A lack of competitors indicates a lack of need," Zaretsky says. “Also, what are your competitors doing? You want to do as much research as possible on how to market offerings that sell as well as have a marketing consultant work on a marketing plan and messaging."

3. Set your prices

Part of your research is going to include looking at how competitors price their services.

According to Michael Garbade, founder of Education Ecosystem, you should “determine the strategies you will implement to deliver your services and how you will be charging the customers. This could be on an hourly basis or per-project rates."

Since many consultants charge by the hour, you'll need to come up with your hourly rate. Divide your ideal annual salary by 2,080 if you plan to work 40 billable hours a week, 52 weeks a year. So if you want to make $200,000 per year, you'd need to charge clients about $96 per hour. That being said, you need to make sure your pricing is competitive and you're not charging too much. Otherwise, potential clients may just go elsewhere for help.

“Start with competitive pricing and raise your prices as your schedule becomes more booked up," Jaenike says.

4. Promote your business

Promoting your services is essential when starting a consulting business. According to Stephen Gagnon, founder of CodeWeb, you can post high-quality content about your area of expertise on your social networks and your website. You can also create social media pages on LinkedIn, Facebook, Twitter, and Instagram, and promote your business with Google My Business, Yelp, and paid ads online.

Barnes recommends starting a Facebook or LinkedIn group as well. “Pick a platform that suits your personality and works with how you'd like to deliver your content," she says. “Don't try to be everywhere at once; master one platform at a time."

5. Find clients

Once you know whom you're going to target and how much you'll charge, you can go out and search for clients. You need to prepare a pitch that will convince people to utilize your services. The numbers were a little higher for S corporations, with 397, or .01%. However, in late 2020, the IRS announced it would be adding auditors to allow the agency to increase its audits by 50% in 2021, which means that your odds of being audited just went up.

Once you get your first clients and do a great job, ask them for reviews, which will help you secure more clients, Jaenike says.

Even though starting and growing a consulting business can be challenging, in the end, it could be well worth it.

“Consulting is a flexible and profitable way to have an impact on the world," Barnes says. “It's a fantastic career choice for the right person, and, right now, if you have the skills, the world needs you more than ever."