How to Start a Consulting Business

Is now the time to start your own consulting business?

It’s almost always a good time to start a consulting business. With low startup costs and lots of opportunity for growth, the rewards are often greater than the risks. Many consultants start as solo operators working from home, which means you’ll have plenty of flexibility. And because consultants often charge per project or work on retainer, your income can be relatively stable and scalable.

Consulting is also a growing and dynamic field: Modern businesses are facing complex challenges like digital transformation, changing buyer behaviors, increased regulations, and globalization—and they need specialized expertise. The U.S. Bureau of Labor Statistics estimates 13.5% growth in the consulting industry through 2031, with more than 220,000 jobs added. Scientific, technical, and management consulting services, as well as market research, will be most in-demand.

Starting a consulting business in 10 steps

Ready to learn how to start your own consulting business? Follow these 10 steps to set yourself up for success in the consulting industry.

Step 1: Define your niche

If you’re researching how to start a consulting business, you probably already have an idea of which of your skills and experience might be useful. Have you worked in finance or accounting roles? Do you have IT skills or certifications? Maybe you’ve had success in areas like digital marketing, search engine optimization, or advertising.

Choosing a niche that plays to your strengths lets you focus your energy, target specific clients, and take advantage of your skills and expertise. It also makes it easier to build a portfolio and differentiate yourself in the marketplace. Here are some tips for how to define your niche:

• Assess your strengths. Identify areas where you excel and have experience, like HR consulting if you have a background in recruitment or human resources.
• Explore demand. Look into fast-growing fields like IT, environmental, and financial consulting to see where your skills might be in demand.
• Align with your interests. Working within a niche you enjoy helps you stay motivated and adds authenticity to your brand.

Step 2: Research the market

To understand the market landscape, research competitors in your chosen field, noting their service offerings, pricing, and marketing strategies. Then, gather insights on your target audience so you can shape your services to meet their expectations.

Success isn’t as simple as identifying an audience for your skills and experience. To start a successful consulting business, you need to choose a unique business name and market position that differentiates you from the competition, while still being clear about what you offer. Make sure your business name aligns with the branding you need to reach the clients you want.

Step 3: Choose a business model

Your business structure affects liability, taxes, and scalability. A limited liability company (LLC) is a popular choice for consultants because it provides personal liability protection without the complexity of a corporation. To start an LLC, you’ll file articles of organization with your Secretary of State.

For an independent consultant, a sole proprietorship is simpler to set up because you don’t need to register with the Secretary of State. However, it doesn’t provide liability protection. Here’s a comparison of business structures for consulting services:

• Sole proprietorship: Easy to set up and maintain because you don’t need to register your business, but does not provide any personal liability protection and may look less professional.
• LLC (limited liability company): Offers liability protection for your personal assets, flexible tax options, and the ability to scale, making it ideal for small business consulting.
• Corporation: While complex and costlier to set up, corporations provide maximum liability protection and can help attract larger clients.

Step 4: Write a business plan

A consulting business plan outlines your objectives, market strategy, and financial expectations. Investors and lenders rely on business plans to evaluate your vision and determine how likely you are to succeed—and whether they should take the risk.

A detailed plan also keeps you focused because you can use it as a guide to make business decisions that align with your long-term objectives. Here’s what to include in your consulting business plan:

• Executive summary. Introduce your consulting firm, the niche you serve, and your core services.
• Service description. Outline the consulting services you provide, how they solve client needs, and any unique methods that set you apart.
• Market analysis. Summarize the market demand, client pain points, and competitors’ approaches that helped shape your own strategy.
• Marketing plan. Explain how you’ll attract clients through networking, content marketing, referrals, or paid advertising.
• Financial projections. Include revenue goals, expense estimates, and profit targets for the first year.

Step 5: Obtain necessary permits and licenses

The permits and licenses you need depend on your consulting business and location. If you’re in fields like healthcare or finance, you might need certifications or licenses. If you have office space, you’ll likely need building permits, and in many areas you also need a license for a home-based business. Check with your county clerk about state and local business licenses.

Getting the right business licenses and permits is important. Here are a few other things you can do to make sure your consulting business operates legally and is fully protected:

• Get certified. Even if you’re not legally required to have them, certifications can make your consulting company look more credible and prove you’re an expert in your field.
• Buy insurance. Liability insurance protects your business, especially for consultants working with sensitive data or high-value advice.

Step 6: Set your pricing

Pricing your services can be one of the biggest challenges of starting a consulting business. You don’t want to undervalue yourself, but you don’t want to scare off clients, either. You’ll need to understand your experience level and the specific value you bring, but also take into account client budgets and industry standards.

Decide on a pricing structure and review other consultants’ rates to make sure you stay competitive. Common pricing models for consulting businesses include hourly rates, project-based fees, and retainers.

• Hourly rates. Hourly pricing is great for flexible, short-term work. It’s also ideal for beginners who may not yet know how to price projects.
• Project-based fees. This model works for well-defined projects with clear deliverables. It provides a steady revenue stream and helps you avoid surprises.
• Retainers. Retainers offer the most predictable income. The ultimate goal is to establish relationships with retainer-based clients who consistently rely on your consulting service.

Step 7: Invest in business software

Even if you’re a solo-preneur or have a small team, investing in the right software helps you stay organized without getting bogged down by administrative work. Learning how to use software early also makes it easier to scale your consulting business and streamline your day-to-day as things get busier.

Simple tools for invoicing, project updates, and client communication are usually enough at first. As you grow and bring on employees, more advanced software can keep everyone connected and projects running smoothly. Some tools to start out with include the following:

• Accounting software. Programs like QuickBooks or Xero track expenses, bill clients, and simplify tax prep.
• Customer relationship management (CRM). CRM software organizes client interactions, sales processes, and notes to improve follow-up and client satisfaction.
• Project management. Manage timelines, task assignments, and deadlines with tools like Asana, Trello, or Monday.com.
• Video conferencing. Video platforms like Zoom or Microsoft Teams make virtual client meetings easy and professional.

Step 8: Create proposal and contracts templates

For a consulting business, proposals outline the scope, approach, timeline, and pricing for potential projects, while contracts formalize the agreed-upon terms, protecting both parties legally. You should create standardized templates for proposals and contracts so you can respond to clients quickly and set clear expectations.

These documents cover different things depending on your business, so you might want to consult a legal expert for a business contract review. That way you can be confident you’re including everything you need, such as scope, payment terms, and confidentiality clauses. In general, here’s what each one includes. 

• Proposal template. Include a summary of your proposed services, project timelines, and cost estimates to give clients a clear view of your approach.
• Contract template. Outline terms, deliverables, payment schedules, and liability clauses to establish clear expectations and legal protections.

Step 9: Brand and market your business

Your brand identity is a unique mix of your values, expertise, vision, and messaging. It shapes how clients perceive your consulting business and is very important for marketing. A clear brand identity helps you build a memorable business that attracts clients.

To determine your brand identity, start by defining your target audience, pinpointing what sets you apart from competitors, and choosing a tone and style that reflect your services. Use this identity—plus the tips below—to create your logo, design your website, and make your other marketing content.

• Pinpoint gaps. Use surveys and market research tools to analyze what successful consultants in your field offer, what potential clients want, and any areas where you can fill gaps.
• Use online tools. Platforms like LinkedIn, Google Trends, and industry websites can provide valuable data on market demand and consulting trends.
• Choose a name. Choose a name that’s clear, memorable, and hints at your expertise. Keep it simple, future-proof, and check if the name is available with your Secretary of State.
• Design a compelling website. Create a professional website that highlights your services, showcases client testimonials, and makes it easy for visitors to understand what you offer. If you’re not a web designer, you can use a service like Wix that has template-based designs.
• Network on LinkedIn. Connect with potential clients, share insights, and join groups to build relationships and visibility.
• Use content marketing. Publish blog posts, create videos, or host a podcast to demonstrate your expertise and build trust with potential clients.
• Start referral programs. Encourage satisfied clients to refer new clients by offering incentives like discounted services or bonus sessions.

Step 10: Launch and scale your consulting firm

If you have employees, you’ll need an EIN (employer identification number) from the Internal Revenue Service for tax reporting. Even if you’re solo, it’s smart to get an EIN so you can open a business bank account: Keeping your business and personal finances separate improves your liability protection and helps simplify your taxes. Opening a business credit card is also smart so you can manage expenses and build business credit.

These steps for how to start a consulting business are just the beginning. To scale, you’ll need consistent marketing and high-quality service. Scaling can also mean diversifying your offerings or focusing on more complex, higher-value projects. Here are a few scaling strategies:

• Expand your offerings. Open up new revenue streams by offering more services based on client demand and your evolving expertise.
• Hire support staff. Add consultants or administrative support as your client base grows so you can manage larger projects. Keeping customers happy keeps referrals coming.
• Boost your marketing. Use advertising, partnerships, or guest speaking to increase your visibility and attract more clients.

How to decide which business structure is right for you

As you research how to start a consulting business, you’ll find that choosing a business structure is one of the most important steps. Each structure—LLC, corporation, sole proprietorship, or partnership—offers unique advantages, and it’s worth exploring things like liability, tax considerations, and more.

• Liability: LLCs and corporations protect personal assets from business debts, unlike sole proprietorships and partnerships, where personal assets are at risk.
• Taxes: LLCs and sole proprietorships offer pass-through taxation, while corporations face double taxation unless granted S-corporation status.
• Management and control: Sole proprietorships and single-member LLCs offer full control, while corporations and partnerships typically involve shared decision-making.
• Costs and complexity: Sole proprietorships and partnerships are low-cost and simple. LLCs and corporations require more paperwork, fees, and compliance steps.

Still have questions about how to start your own consulting business? LegalZoom’s business formation services can guide you through the process, from determining the right structure to handling compliance and more. Rely on LegalZoom to streamline the process, so you can focus on growing your business.

How much does it cost to start a consulting business?

The cost to start a consulting business varies widely. Small one-person operations can be started for free, whereas well-manicured or larger consulting businesses can range from $5,000 to $50,000 or more. It all depends on the type and size of your business and how much you want to invest. Here’s a breakdown of the major expenses you might encounter.

Licensing, permits, and insurance

Certain consulting businesses may need industry-specific certifications, and many cities and towns require a general business license. You should also get liability insurance, especially if you’re handling sensitive information. These costs can vary based on your industry and location.

Software and web design

To build a quality website, you might want to hire a professional. Basic sites cost a few hundred dollars and advanced sites can reach into the thousands. If you’re in an industry like IT or engineering, software costs can also reach into the thousands or even higher.

Marketing

Start with free or low-cost strategies like social media marketing, then gradually expand to paid digital marketing and partnerships as you grow. Marketing costs can be scaled based on your budget as your business grows.

Staffing

Each new hire brings added costs and considerations like benefits, human resources needs, and additional insurance. You might also need office space. Start with contractors if you want to keep staffing costs low, then add full-time staff as you become a more profitable consulting business. If you have questions, talk to an employment attorney.

The 11 most popular consulting niches

With a wide range of client needs, the consulting industry is filled with possibilities. Below are ten high-demand consulting practice areas to consider.

• IT consulting: IT consultants advise businesses on tech solutions and cybersecurity systems. They streamline digital processes to improve efficiency and safety.
• Operations consulting: Operations consultants work on cutting waste and boosting productivity. They help optimize supply chains, workflows, and resource use.
• Strategy consulting: Strategy consultants guide high-level decisions like market expansion and mergers. This type of small business consulting uses data analysis to drive smart growth.
• Financial consulting: Financial consultants give advice on budgeting, cost management, and investments to improve businesses’ long-term financial health.
• Human resources consulting: Hiring an HR consultant can improve recruitment, training, and employee benefits. An HR consultant can also support diversity, wellness, and remote work policies. There’s often overlap between human resources and management consulting.
• Management consulting: Management consultants advise on improving overall business performance and organizational efficiency. Management consultants also work with leaders to boost productivity across teams and departments, including human resources.
• Marketing consulting: A marketing consultant will develop strategies for branding, social media marketing, and advertising. They help businesses harness the latest digital marketing trends.
• Sales consulting: Like a marketing consultant, a sales consultant can help drive revenue and generate leads. They work with sales teams and improve customer relationships.
• Environmental consulting: Environmental consultants advise businesses on eco-friendly practices and sustainability and help them meet environmental regulations.
• Healthcare consulting: Healthcare consultants improve patient care, manage operational costs, and help providers navigate complex regulations.
• Career consulting: Career consulting happens at an individual level, but it’s a booming part of the consulting industry. Career consultants offer advice on skill-building, networking, and career changes.

FAQs

What are the risks of starting a consulting business?

The risks of starting your own business include finding potential clients, managing variable income, and keeping up with your tax obligations. Having a strong network, clear marketing strategy, and the help of an accountant can reduce these risks.

How do I get clients and retain them?

Networking and a strong online presence are key to attracting new clients. Use LinkedIn, referrals, and content marketing to find clients and build relationships. You’ll also want to keep your existing customers happy. Satisfied clients become regulars and also provide referrals.

How much can consultants make?

Independent consultant income varies widely based on industry, experience, and location, with many earning between $50,000 and $100,000 per year. Those with specialized expertise or strong client bases earn more, plus, you can increase your income over time.

Do I need an LLC for a consulting business?

You don’t need an LLC for your consulting business, but it does have benefits. An LLC offers liability protection by separating your personal assets from your business liabilities. Forming an LLC can also make your business look more professional, while remaining flexible enough for growth.