Becoming a consultant brings many benefits; there’s flexibility in determining where and when you work, the jobs you take on, and the rates you charge for your time. There are minimal overheads to starting a consulting business, and it’s easy to scale up and down to accommodate your lifestyle and financials.
Despite these advantages, there are important factors to consider in order to give your consultancy the best chances of success. Here are some questions to ask yourself before starting a consulting business, including how to define your niche, set your rates, and grow your client base.
1. What’s my specialty?
Typically, the best consultants are established experts in their field—people with demonstrated experience across a lengthy career or notable successes in a certain area. Before starting a consulting business, it’s imperative to evaluate the way your experience appears to potential clients, asking yourself questions like, What are my strongest selling points? How does my experience differentiate me from my competition?
The aim should be to carve out a niche within your consultancy market, showing how your history—both personal and professional—translates into a unique perspective that’s of value to clients.
For Zaki Hussain—CEO and founder of WeWork member company Clutchgrowth, which curates and runs marketing campaigns for clients—big-picture thinking and an all-encompassing approach to marketing is how he differentiates his company from competitors.
“From the get-go, we set out to build Clutchgrowth to be relationship-first,” Hussain says. “We partner with our clients for the long-term. Rather than just delivering ads, landing pages, or campaigns, we consult with clients on how to best generate revenue, including how to hire exceptional talent, budget and scale their teams, and strategize for sustainable growth.”
2. Do I need special training?
While you might be an expert in your field, consulting requires additional skills that can be honed with extra training. As a consultant, you might be called upon to speak publicly, train groups of people, identify problems in struggling teams, analyze and present data, and offer feedback effectively.
“I had a lot of hesitation about launching a business [at first],” Hussain says of his marketing company. “Not only did it take marketing experience, it also needed sales, accounting, and other skills that were outside my realm of expertise.”
While daunting at first, your ability to perform these tasks will likely become a determining factor in your success as a consultant (regardless of your specialty), and courses in public speaking, reporting, and management can go a long way in improving client relations and outcomes.
There are also business considerations in running your own consultancy: for example, writing a business plan, handling financials, and structuring and scaling operations. It’s helpful to upskill in these areas and properly understand the legal and tax requirements that come with working for yourself.
3. What industries hire consultants?
The industries that most commonly hire consultants include finance, technology, human resources, marketing, and business management. (Find more detailed information about industries that commonly use consultants.)
Regardless of your line of work, however, consulting is a viable way to find employment if you can identify the ways other companies or professionals might benefit from your assistance and expertise.
4. How should I charge for consulting work?
As a consultant, your price point will be a major factor in your ability to attract and retain clients. If your rates are too high, potential clients might be turned off; if they’re too low, potential clients might become suspicious and question your legitimacy.
It’s always a good idea to audit your competitors to gain an understanding of the services they offer and the rates they charge. Ideally, keep your prices within a similar range to your competitors’, and find a way to differentiate yourself from their offerings.
Typically, there are three ways consultants charge for their services, including:
This is a flat rate that’s established as a reflection of your expertise, and clients pay only for the time you spend on their accounts. It’s essential to track your hours using this approach, and clients will likely have questions if the task takes you much longer than initially promised.
With this rate, clients are charged according to the work that’s completed on a project-by-project basis. While this transparency is often attractive to clients, it doesn’t afford you much flexibility when contingencies arise and projects take longer than anticipated.
This pay schedule is ideal when you’re providing an ongoing service to a client, for example, managing their website or handling their bookkeeping. It means you are paid at a recurring rate for an extended period of time, similar to a regular employee but without employee contributions to tax, benefits, or retirement funds.
Extra tip: Introductory offers or add-ons with certain packages are popular strategies for client attraction, while rewarding longevity is key in keeping your client book robust going forward.
5. How do I structure my services?
The same way you must establish fair and consistent price points for your services, you should structure your services in a way that’s clear to clients and easy for you to adhere to—no matter how tied up in a project you become.
“Scope creep” can see you executing on strategy when you only promised the planning, or tracking a project’s performance when you were only paid for its delivery. Be as specific as possible in explaining the scope of your services, and the costs involved in bolstering this work with supporting add-ons.
Extra tip: It’s important to know when to say no to a job that isn’t right. As a consultant, your reputation and record of success are integral to the health of your business. It’s a good idea to evaluate the potential risks of every client project and, if you’re out of your depth or if a client has unrealistic expectations, it’s sometimes best to turn down the project.
6. What registrations and licenses do I need?
Depending on your vision and the extent you wish to grow your practice, you can either run your consultancy under your personal name or a fictional, business name. If you’re running operations under your own name, it’s likely you’ll start out as a sole proprietor. This business structure requires no registration with state or federal governments, and is the easiest way to establish a business. The drawback? All income and losses must be filed on your personal tax return.
An alternative is establishing a Limited Liability Company (LLC), in which your company is taxed as a separate entity and your personal assets are not at risk. For more information on the different licenses and registrations required to start your own business, see our nine-step guide to launching a startup.
7. How do I get referrals and find new clients?
In building a consulting business, word of mouth is one of the most powerful ways to attract and retain clients. If one customer shares their positive experiences with others, it’s a surefire way to grow your customer base. The opposite, however, is also true—if someone has a negative experience, they’re likely to inform others in their network and your reputation will be tarnished.
An effective way to encourage people to share positive experiences is to provide incentives to do so. For example, if an existing client successfully refers a new client to you, you might reward them with compensation, free services, or a gift pack.
Networking is also important, and attending industry events—potentially hosting your own event—is an effective way to forge new connections and pitch new clients. Participating in online communities, speaking at relevant conferences, and sharing advice on social media can go far in establishing your expertise. Plus, conducting outreach on social platforms like LinkedIn, or capturing the emails of people visiting your website, can help fill your sales funnel with qualified leads.
Extra tip: Designing a buyer’s journey will help you better understand the needs and mindset of potential clients. Identifying your target audiences, their various pain points, and their unique customer journeys will ensure that you approach these prospects with empathy—and solutions that are relevant to their problems.
8. What about contracts?
A contract is a legally binding agreement between you as a consultant and your clients. It should specify the work you’ve agreed to complete, as well as the amount your client has agreed to pay. Though contract requirements will vary between states, as contract law is bound by state law, all contracts should:
- Have a specific title
- Identify the parties involved, using the full names of individuals and the contact information and tax identification numbers of companies
- Detail the purpose of the contract and what each party must provide to fulfill the contract
- Define the type and scope of services involved
- Include the amount owed for these services, and when and how this amount will be payable
- Establish the length of the agreement, including start date and end date
- Include a provision on the termination of the contract by either party
- Ensure the contract is agreed upon by both parties and signed by both parties
Grow your network naturally with a community of innovators
No matter your industry or previous experience, starting a consulting business will bring unexpected challenges as you begin working with clients and scaling your services. Arming yourself with knowledge will help you handle these contingencies as they arise, and surrounding yourself with a network of supportive professionals is key to driving success and keeping yourself grounded.
Coworking solutions like WeWork are an ideal milieu for starting a consulting business. With a global network of members, WeWork opens a door to a wealth of potential clients. Plus, frequent community events are an easy way to meet fresh collaborators. More than this, however, WeWork surrounds you with a mix of entrepreneurs, creatives, growing teams, and established companies—professionals who can provide guidance and direction when you need it most.
In starting a consulting business, you are opening yourself up to new opportunities and you will enjoy ultimate flexibility in when, where, and how you choose to work. There are countless benefits that come with being a self-employed consultant; the key is setting yourself up for success from the get-go.
For more tips on starting and growing a business, check out all of our articles on Ideas by We.
Caitlin Bishop is a writer for WeWork’s Ideas by We, based in New York City. Previously, she was a journalist and editor at Mamamia in Sydney, Australia, and a contributing reporter at Gotham Gazette.