For many, the height of their career is starting their own business. In the absence of a product to sell, starting a consulting business is the best way to make this dream a reality. It’s also a good way to profit from the know-how you’ve accumulated throughout your career, especially if your speciality is in demand. In fact, business services (like those done through consulting) were the number-one type of company registered in 2020.
The majority of people start their own consulting business because they want to be their own boss or feel like they’re reaching their full potential. These two groups made up 60% of all new consulting businesses in 2019. This leads to most consultants creating businesses around their areas of expertise, which they’ve often cultivated in the workforce for many years.
While it isn’t difficult to start a consulting business, it’s important to understand how to go about it the right way. Most consulting businesses (80%) fail within the first year. In order to prevent your business from reaching the same fate, you must take the time to prepare with proper planning and setting up the correct financial resources.
Opening a consulting business is the easiest way for an experienced professional to tap into their own business opportunity. Many consultants do it because it’s easy to start with relatively little startup costs. Plus, being the owner of your own small business means you have unlimited earning potential. In most consulting industries, you can get up and running from home with just a computer, internet connection, and client list.
Most consulting businesses are what you would call a lifestyle business. This means that while you have unlimited earning potential, you aren’t likely to grow the business large enough to sell it. Instead, it exists as a way for you to bring in your own income. It’s not impossible to grow your business to seven figures and find an exit, but most successful consultants are single operators without any full-time employees.
Starting a consulting business isn’t radically different from starting any other type of business, with a few differences. Following the step-by-step process we’ve put together here will help you be ready for many common struggles and prepare you to take advantage of opportunities that could help you succeed through your first year and beyond.
You can start a consulting business by following these items:
Creating a business plan will help you better understand your market and the validity of your idea. Plus, it can provide specific data for you to operate off of after you launch your business. Business plans generally include completing a full study of your target audience and a rundown of how much money you’ll need to be successful.
Your business plan may include:
In order to protect your personal assets from all business activity, choose a business structure that fits your personal situation. The two most likely choices for a consulting service are an LLC or a sole proprietorship. Both can work but only one provides protection to keep your personal assets safe.
While choosing a sole proprietorship is typically less costly than an LLC and has less administrative work, an LLC provides a layer of liability protection that is invaluable to small business owners. It separates all of your business assets from your personal ones, which is important to companies with a single employee, like a consulting business.
Before making a choice, consider consulting an accountant or performing an analysis on how the structure could impact your taxes.
When you complete a business plan, determine how much money you’ll need to operate your business on a monthly or weekly basis. This will help you create a budget that you can operate your business off of.
Consider including the cost of any business-related activities such as computers, equipment, software, or marketing, and any funds you need to survive personally each month. The goal is generally to make sure you have enough cash, conservatively, to last 6–12 months in the event your consulting practice receives $0 in revenue.
When choosing a company name, there are a few goals to keep in mind. First, you have to pick a name that you can register in your state, which means it must be unique so that you don’t run into any legal issues with an existing company. Also make sure your name is easy to market to your target customers.
When choosing a legal name, remember that you can market yourself as a completely different name than the one you legally register for your business. You do this by registering a DBA (doing business as) name in the same state you end up registering your business.
Once you have chosen your business structure and found the right business name, it’s time to register with the state’s secretary of state office. Every state’s process for registration varies slightly, but typically you’ll complete these tasks:
Once you’ve registered your business, consider opening a business bank account and getting an appropriate insurance policy. Consultants will want a business bank account to separate their personal finances from their business finances or your liability protection may not be completely valid. Additionally, business insurance is important in the consulting world because it can protect you against any mistakes that you may make on behalf of your clients. Many providers offer specific business insurance for consultants.
Starting a consulting company business will require less equipment to start than most businesses. In fact, in many industries all you need is a computer and access to reliable internet. Many consultants like to have a dedicated space to meet with clients, whether that’s a home office or rented space, but it’s not a necessity for plenty of niches where most of your work takes place online or on the phone.
Here’s a list of some of the most common equipment needs of consulting business owners:
Now that you’re ready to open for business, it’s important to start networking and getting your company name out to customers. The more people who know what you’re doing, the better off you’ll be. As a consultant, there are two important things to know about marketing your business.
At a bare minimum, establish a strong presence on LinkedIn, join a professional association in your industry, and volunteer in the association. You may also want to attend (and speak at) trade shows (don’t forget your business cards!), offer your expert advice on free webinars, appear on podcasts or start your own, and launch a website that explains your new business.
Here’s a great resource full of consulting marketing tips to help you find new clients.
The best consulting businesses are typically in fields that are in-demand for skilled or experienced workers to complete work that is vital to the success of a business or industry. Some of the most popular types of consulting firms include:
The sky’s the limit for the types of consulting businesses you can start. Even if it isn’t on this list, it doesn’t mean you can’t make a lot of money starting your own consulting business in that niche. Just do your research to determine its potential before getting started.
Starting your own consulting business can be both rewarding and profitable if you choose the right niche and properly prepare your business to succeed. It’s important to not only register your consulting company but also to get the right insurance while setting up your bank account so that you can protect your personal assets from the dealings of your business. Starting your consulting business depends on what state you live in but can typically be done in 1 to 3 days.
You can use ZenBusiness to file your LLC, corporation, sole proprietorship, or DBA online for as low as $49 plus state fees. You can register your business with your state’s secretary of state office too, but you’ll need to understand and follow all state rules and proper filing procedures.
It will be difficult for you to qualify for a business loan for a consulting business. Banks view consulting as a risky venture where they may not get their money back. You can use credit cards or get a personal loan for business expenses but we recommend saving the money before you get started.
You can use your consulting work to earn extra cash until you have a few consistent clients. This approach takes longer and lowers your chance to succeed.
Yes, you can start a consulting business without experience. It’s very common for consultants to launch their own operation without any business management experience.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Consulting Business Resources