How To Start A Consulting Business In 2021? (10 Steps)
For most subject matter experts in industries like accounting, finance, sales, marketing, IT services, fitness, etc, a natural course of their career is to secure a job in a reputed firm and eventually evolve into starting their own consulting business.
Many professionals lean towards starting something independently as it gives them the flexibility to decide when and where they want to work, the type of jobs they’d like to take, and the amount they’d charge for their services.
If you are a professional in one of these industries and are looking to start a consulting business in 2021, this blog is for you.
We have put together a step-wise checklist to guide you on how to use your skills and expertise to set up and run a successful consulting business.
Let’s get started.
Steps to follow when opening a consulting business :
- Choose a niche
- Select an appropriate business model
- Structure your consulting services
- Develop a pricing strategy
- Decide on a legal structure
- Choose your office location
- Staff accordingly
- Practice your elevator pitch and write client proposals
- Build your client base
- Stay organized and grow your business
Step 1. Choose a niche
A niche is a specialized or focused area of a broader market that can be defined by its own unique needs, preferences, or identity that makes it different from the market at large.
Finding a niche could be the key to your consulting business’s success as it enables you to increase your visibility, know your target audience, and improve your competitiveness.
Listed below are the steps that you should follow while choosing your niche market.
1. Assess your skills and strengths
You should ask yourself the following questions :
- What makes me an expert?
- What do I love to do and talk about?
- What are my selling points?
These questions will differentiate you from other generic consultants and help you define your strengths.
Understanding your strengths will help you determine what type of consulting services and assignments you can cater to.
2. Leverage your personal brand and connections
You need to identify :
- The areas where your existing client relationships lie
- The domains in which people find you credible and seek out your services
Your existing connections and domain knowledge will guide you towards the market sectors you should target during the initial stages of your consulting business.
3. Do your market research
Pin down the questions, problems, and pain points the people in the selected areas face. You can start doing your research online.
- Read blogs on trending topics
- Find out what the thought leaders are talking about
- Identify the services that are missing in your selected market
- Find out the problems you can solve that no one else is solving
4. Analyze your competitors
Carrying out a competitor analysis will help you to identify :
- What type of consulting services are your competitors targeting?
- The pricing points for their services
- How can you tailor your expertise to add value to the businesses and people in that market?
Once you have identified your niche, consolidate your ideal client’s needs, challenges, and pain points. This will help you better utilize your skills to provide optimum solutions and be on top of the game.
Step 2. Select an appropriate business model
While deciding on a business model, you should make sure that it is the right fit for your chosen niche. In addition, the model should align with your lifestyle and how you’ve been dealing with your existing clients.
The models below will help you get clear on what suits you the best.
1. Solo consultant model
As a solo consultant, you’ll work closely with your clients and handle all the operations and projects by yourself. If you desire a flexible and lean consulting business, this model will suit you.
2. Consulting firm model
In a consulting firm, you’ll be responsible for handling the firm and working on the client’s projects. As a result, you’ll be dealing with additional responsibilities like hiring other consultants and supporting staff to get clients and grow your consulting business.
3. Productized consulting model
This model consists of turning your expertise into a ‘productized service’ that would include a series of steps to deliver a predictable outcome to your clients.
An example of the model would consist of a learning and training program that you would create and sell for a fixed fee. This model would be good for you if ‘day-to-day’ work isn’t your thing, and you want to form a saleable asset.
4. Hybrid consulting model
This model is a mixture of the three models mentioned above. You pick and choose what you want to do and develop your business around that. Many successful consulting firms follow a hybrid model.
Step 3. Structure your consulting services
For your business to grow, you must lay down the specifics of your consultancy services in front of your potential clients. The clients should have proper knowledge of what you’re offering, and you should ensure that the services are structured in a way that’s easy to understand.
One way you can lay down your offerings is by structuring them in the form of options. You can craft and customize the options based on the requirements of your ideal clients, the efforts you’ll need to put in, the amount you’ll charge, and the overall value of your services.
You also need to make sure that the offers have the details laid down specifically, as being specific will help you set realistic expectations for your clients.
For example, let’s say that you are a marketing consultant who handles accounting businesses.
You offer your services in 3 options :
- Option 1 : $5000
- Website audit
- Outreach sequence
- Brand positioning revamp
- Option 2 : $10000
- Website audit
- Outreach sequence
- Brand positioning revamp
- Website content strategy
- LinkedIn content
- Option 3 : $15000
- Website audit
- Outreach sequence
- Brand positioning revamp
- Website content strategy
- LinkedIn content
- Search Engine Optimization
- Mail campaigns
By offering multiple options, the clients get the flexibility to decide how they would like to get their desired results and as the options increase in price, the value the client receives increases too.
You can still expect ‘Scope Creep’. It is a situation where the clients ask for more than what was initially agreed upon. It should be dealt with delicately, and you should suggest that extra work might require an additional fee.
There might also come a time when the clients wouldn’t know the specifics of the consulting services they require. With those clients, you need to understand their pain points thoroughly and propose the services you’ll provide to help tackle the challenges in a manner that is easy for them to grasp.
Step 4. Develop a pricing strategy
Establishing a pricing strategy might seem complex for someone just starting a business. If your rates are too high, potential clients might get turned off, and if you price too low, potential clients might get suspicious and question your legitimacy. Still, you can develop an effective and innovative plan with some analysis and a little bit of trial and error.
To get your pricing right, you should understand what factors will influence your pricing strategy. These factors could include :
- Your revenue goals
- Overheads and other costs
- Your target audience
- The services you offer
- Competitor rates
- Market demand
Now, let’s dive into the strategies that you could adopt to run your consulting business effectively. As we do, it’s important to note that these aren’t standalone strategies, and many can be combined when setting prices for your services.
1. Value-based pricing
Value-based pricing involves setting up your prices based on the value you build through your consulting services. To use this strategy, you need to identify how valuable your services are to your clients and how much they are willing to pay for them.
If used accurately, this strategy can help build a loyal client base because you prioritize your client’s preferences which are reflected in your pricing structure.
On the flip side, value-based pricing requires you to be in sync with your various buyer personas and client profiles and possibly vary your prices according to the differences.
2. Prestige pricing
Prestige pricing, also known as premium pricing, is used by businesses that want to price their services higher than the industry average.
As opposed to value-based pricing, this strategy focuses on establishing a superior business brand image compared to your competitors.
If you’ve established a strong personal brand in your industry, your ideal target market will opt for your services regardless of the price.
So, you can charge a high price for your services due to the perceived value that your brand possesses.
3. Penetration pricing
Penetration pricing strategy involves charging a low initial price to attract customers and effectively draw attention ( and revenue ) away from higher-priced competitors.
As a new consulting business owner, this strategy can help you penetrate the market quickly and maximize the results of your marketing efforts.
Penetration pricing isn’t sustainable in the long run as it might get challenging to raise prices later on once customers have familiarized themselves with your low prices. Additionally, low prices might also lead to questions about your credibility.
Hence, it’s essential to shift your strategy once you build a stable client base.
4. Skimming pricing
This strategy involves charging the highest initial price for a service that clients are willing to pay and lowering it over time.
Price skimming is rarely used in service businesses but can work wonders if you’re offering unique services that no one else is providing in your market.
By charging a high initial price, you can easily cover your startup costs and earn greater profit margins. However, the strategy isn’t always effective in the long run as you may end up upsetting your early clients by lowering the prices later on.
Once you have decided on your pricing strategy, you need to figure out how you’ll charge your clients. Typically, consultants charge their clients in one of the following ways :
1. Hourly rate
The hourly rate model involves charging for your services by the hour. The clients pay only for the time ( total number of hours ) you spend on their projects. It’s essential to track your hours in this approach as the clients might have questions if a task takes longer than initially promised.
This model is ideal for beginners who are working on their first few consulting projects.
2. Project rates
In this approach, you charge the clients on a project-by-project basis. Though the transparent rates are attractive to the clients, it doesn’t provide flexibility when contingencies arise where you might need to adjust the project rates according to scope changes.
3. Retainer agreements
Working according to this arrangement gives you a set of monthly fees in which you agree to be available for work for an agreed-upon number of hours for your client. This system is ideal when you provide an ongoing service that can’t be precisely defined by time. For example, a website manager or a bookkeeper.
To know more about retainers, you can check out this link.
Step 5. Decide on a legal structure
Legitimizing your business builds its credibility and gives you direction regarding taxes, staffing, and other legal details.
The legal structure determines things like which income tax return form you have to file to pay taxes, whether you need to comply with any special additional requirements at the local, state, or national levels as well as your personal liability, and hence, it’s essential to choose a structure that fits your needs and the idea of your business.
The four primary business structures are listed below :
1. Sole proprietorship
If you plan on running the consulting business entirely on your own, with no employees, you should opt for this structure.
Here, the business is a shared responsibility between two or more people. If you’re planning to open your consulting firm with a friend or a colleague from your previous workplace, this is an ideal option for you.
If you want the business to be a separate entity from you, this is the correct choice.
4. Limited Liability Company ( LLC )
An LLC allows owners, partners, or shareholders to limit their personal liabilities while enjoying the tax and flexibility benefits of a partnership.
For more detailed information on this topic, you can check out the IRS website. It would help if you also considered consulting a lawyer to get a more personalized opinion.
Step 6. Choose your office location
As a business owner, it’s important to plan to choose an ideal office location for your business as it affects your day-to-day operations, staff morale, and brand image. You can either choose to start a home-based consulting business or lease office space.
For most new consultants, a home office is an ideal way to go as it has various benefits like :
1. Cash savings
You’ll be able to avoid rent and wouldn’t have to worry about utilities for an office.
2. Flexibility in setting up your schedule
You’ll have the flexibility to decide your working hours and take time off when you need it.
3. No rush-hour nightmares
For people who have had to shuttle to and from the office during rush hours, working from home would be a welcome change of pace.
4. Relaxed rules from IRS
Home office space is most likely tax-deductible, but you should check with your accountant whether you can avail of the benefit or not.
But before deciding on a home office, you should ask yourself the following questions :
- Would you like to work in a home environment with a casual schedule?
- How will you be dealing with your clients? They’ll visit you, or you’ll be seeing them?
- Can you ensure a professional backdrop at home for virtual and telephonic conversations?
Based on the above questions, you might be able to figure out whether you’re inclined towards a home-based business or you prefer to work in a more professional office environment.
Online consulting business
Online consultations have gained a lot of traction in the past year. They involve consulting the clients remotely through platforms like Zoom or Microsoft Team.
One of the factors that have led to the rising popularity of online consultations is the pandemic. Most businesses needed a way to carry out their services without compromising the safety of the employees, and online consultations paved a way out of that problem.
Consulting your clients virtually comes with many benefits. Some of them include :
- Cost savings
- The ability to run the business from almost anywhere
- Flexibility with schedules
- Possibility of having international clients
Once you have set up your online consulting business, managing the appointments and setting up meetings might turn out to be cumbersome.
Appointy’s Zoom integration makes the task much more straightforward and automatically generates zoom meeting links and conference details whenever you schedule a meeting.
Step 7. Staff accordingly
When your consulting practice is in its starting phase, you’ll be able to handle all the operations by yourself, but hiring extra staff might become necessary as the business grows.
There will come a time when you might find it strenuous to manage both the administrative and consulting tasks. Having a good support staff at that point will help you to save time and provide you with an opportunity to channel your efforts more into working on projects rather than doing seemingly small tasks like picking up calls, fixing schedules, and handling paperwork.
As your client base builds up, it would benefit if you have an assistant consultant.
- It’ll help grow your business as you’ll have the ability to take in more clients.
- You’ll have the flexibility of staying out of the office as there will be someone who could cater to the clients when you’re busy with some other work.
- An extra person could bring in a new perspective that could be worthwhile for the business.
Finally, you might want to focus on the marketing aspect too. Marketing enables you to develop a brand around your business and have a community standing. Hiring a marketing manager would be advantageous at this point.
An excellent staff can sometimes mean the difference between success and failure in obtaining new clients, so you should be extra careful while getting someone on board.
Step 8. Practice your elevator pitch and write client proposals
A good elevator pitch and a convincing client proposal can significantly impact how successful your business will be.
There’s no use in having an impressive skill set, a great marketing plan, and up-to-date tools if you can’t make and close the sale.
The following section will highlight what you should keep in mind while building your elevator pitch and client proposals.
1. Elevator pitch
Your elevator pitch should be a short and to the point explanation of your target audience’s problems, how your skills can help provide solutions, and what makes you different from the competition.
The elevator pitch can be considered your value proposition. Once you deliver it and a potential client wants to know more, you can tell your story and talk about your consulting services more in-depth.
You can visit Mindtool’s page to learn more about how to craft a good elevator pitch.
2. Client proposals
Client proposals provide you with an opportunity to illustrate how you can serve your clients and solve their problems. You’ll need to be clear about the services you’ll provide, the project’s scope, the amount you’ll charge, and when you’ll finish the project. You’ll need to be convincing and let the client know how you’ll measure the results.
To know more about how to write a client proposal, you can check out HubSpot’s blog.
You’ll have to personalize your pitch and the proposals depending on your client’s needs, but it’ll help you save time and effort if you craft a basic framework that you could reuse and modify accordingly.
Step 9. Build your client base
A consulting business isn’t a business without clients. Getting those clients is not simple, especially when your consulting company is in its starting phase.
To get your first few clients, adopting marketing strategies that cost less and bring in many people should be the way to go, as spending a lot on elaborate marketing plans would be a waste of time and resources.
Here are a few ways that can help you build your client base :
1. Get listed on Google
The first step should be to create a listing on Google My Business. You should make sure that your profile is filled with all the details and is updated regularly.
Having a Google My Business listing will enable your business to show up in the map list on local Google searches like “consultants near me”. In addition, you can add your business information, website, photos, and working hours so that potential clients won’t have any trouble reaching out to you.
The next thing would be to set up Reserve with Google. It will allow users to book an appointment with you directly from the Google My Business listing.
2. Promote among your pre-existing contacts
Leveraging ‘word of mouth’ referrals from your past colleagues, clients, friends, and family can be highly beneficial in spreading the word about your business.
Tell them what you’re starting and how your services can help someone. It’s hard for a potential client to put trust in your services, but if you have a few people to vouch for you, it’ll be a different story.
Advertising your consulting business will depend on the limit you put on your advertising budget. While building up an advertisement strategy, you should keep the following in mind :
- Based on the location and demographic, you can set up local advertisements through newspapers, radio, TV, etc.
- Examining local ads set up by other consultants and crafting your ads based on the findings can be helpful too.
- Using Facebook and Google ads, you can create targeted campaigns to reach audiences who might be interested in your services. It’ll help to get the word out about your consulting business quickly.
Networking is an essential part of landing your first clients as an independent consultant. You can attend various industry events and potentially host your own event to forge new connections and pitch new clients.
Speaking at relevant conferences, sharing your opinions on social media, and participating in online communities will help establish your standing in the industry. Along the way, you might meet new people who could be your potential clients.
5. Join associations
Associations sponsor numerous events throughout the year where you get to learn about ‘best practices’ or new ideas. You get the opportunity to get familiar with the breaking news in your industry, and you also get to brainstorm with others who are willing to share and learn new information.
So, whether you are looking to learn about the latest developments in your field, gain access to current events in your industry, or just have some fun while meeting new people, joining a professional association is a step in the right direction.
You can check out the various consulting associations through this link.
6. Create a website
Having an online presence can have a massive impact on the success of your business. A website helps to build credibility, promotes brand identity, gives a platform for your potential clients to get a better picture of the services you offer, brings in organic traffic, and helps you generate leads. In addition, you should try to publicize your website on different community forums.
7. Set up social media accounts
Social media offers inexpensive and easy exposure to your business. Maintaining Twitter, LinkedIn, Facebook, and Instagram accounts will help you build a presence in the community and make it easier for potential clients to know what your services are about.
Apart from the points mentioned above, it’s good to have healthy relationships with other consultants as it can provide a source of additional staff and new clients as you might work for each other.
Step 10. Stay organized and grow your business
Once the business gets on track, it’s essential to stay organized and ensure that the work is being done in a streamlined manner to deliver results and earn repeat clients and referrals.
Hiring a manager can help keep the business on track, but in this era of technology, you can try to do the same with the help of online tools and software that can prove to be more efficient than hiring someone. You can have many benefits like :
1. Online appointment scheduling
It’ll not only save you time and resources but also enable the clients to access your services more efficiently. The clients will have the flexibility to book an appointment at any time of the day with ease.
Moreover, an online tool would avoid human errors such as double booking, wrong booking times, etc.
2. Reliable customer database
Having a customer database will enable you to access essential client details with ease. With all the information at your fingertips, you’ll be able to understand your client’s needs better.
3. Secure and hassle-free payment gateway
A reliable online payment gateway will streamline your checkout process so the clients could pay for your services effortlessly. You could charge a full/partial fee for your sessions to ensure no casual bookings or late payments.
There are many tools and software that can provide such solutions, but it’s hard to find one that caters to all of your needs. At Appointy, we have the perfect solution that checks all the boxes.
Appointy’s scheduling software for consultants helps you manage appointments, accept online prepayments, set up virtual meetings through Zoom integration, enables you to analyze your business through various reports, and integrates your appointments with Google calendar and Ical all under one software.
Regardless of your previous experience, when you start a consulting business, you will face unexpected challenges as you work on new projects and gain clients. Still, at the same time, you’ll be opening yourself up to new opportunities.
If you plan correctly, stay organized, and keep your spirits high, your journey of being a consulting business owner will turn out to be an exciting one.
Hopefully, this blog has given you a basic understanding of how you should go about opening your consulting business.
We at Appointy, help business owners grow and run their businesses with our online scheduling software. This blog was a part of our ‘Manage your Business’ category, where we provide expert tips, resources, or simply talk about the challenges that small and medium businesses face every day.
If you have any thoughts on this blog, or would like to chat about your business struggles and achievements, let us know in the comments below.
We love a good talk!