You’ve worked for 15 years managing a dedicated team as part of a large, global firm based in Canada. Midway through your career, you decide something’s missing. You feel as if you’ve learned all you possibly can from your current position, but you don’t want to become an executive with even more job duties and added stress. This is when you branch out by starting a consulting business.
Discover everything you need to know about how to become a consultant, from finding out how much to charge clients to how to stand out from similar businesses.
What Does a Consultant Do?
The most basic role of a consultant is to improve a client’s situation. Regardless of the problem, as a consultant, you help the client solve the problem to better their situation.
A consultant taps into his or her expertise to give a specific type of advice to clients. For example, you leverage your 15 years of experience as a manager to advise a startup on how to run a specific aspect of its business, such as online marketing, to create a cohesive push that expands the firm’s presence among its target audience. The startup has only a few employees in order to focus on its core business model, but it requires an expert to run its marketing campaign for six months.
A startup has some investment capital to play around with, but it probably doesn’t want to hire a new marketing employee at $30,000 a year. Instead, the startup hires a marketing consultant for $10,000 over six months. The cost savings to the startup is quite considerable.
This same scenario works well with an HR consultant. Perhaps the startup needs to hire five more people for a leadership team. The startup can utilize your 15 years of experience as an HR manager for a three-month stint. You charge the startup $20,000 for your services, which is still less money than the startup would spend by hiring a full-time employee at $75,000 a year. The startup saves money by hiring a consultant.
What Do You Need to Start a Consulting Business?
In terms of equipment, the only items you need to start a consulting business is a cellphone and a computer. Both of those tools help you reach new clients through cold calling, email, advertising and a website.
Beyond the physical tools, you should provide potential clients with a compelling service that offers value. This means your consulting services should show precisely how clients benefit from your expertise. If a customer invests $10,000 for six months, you can demonstrate how that company earns a return on its investment during contract negotiations.
Make sure the services you offer are unique in comparison to other consultants in your field. Perform marketing research to see what others offer. One simple way for you to do this is by making some phone calls or through direct feedback from others in the field.
Knowing your target audience is key to attracting new clients. Are you marketing your services to large corporations, medium-sized businesses or startups? Do you favor companies that have well-established customers or ones seeking to expand their customer base? Consider your connections and the network that you’ve built over the years to see what kind of clientele you connect with. Determine what each prospective client is missing in their repertoire that you can provide. This serves as your starting point for attracting clients to your consulting business. Your target audience has a point of weakness that you can strengthen, thanks to your industry knowledge and experience.
Next, you need a repeatable way to get new clients to hire you. Consider using a combination of calls and emails, either through your network of contacts or through cold calls, to find your initial customer base. You should also take a look at your marketing budget and diversify your pushes. Think about online advertising and social media targeting your niche audience. The goal of these ads is to draw your target market to your website. Once they arrive to your website, you can monitor traffic and possibly obtain an email address or contact information when someone fills out a form to get more details about your services. Then, you can expand your reach with emails and possibly phone calls as you give respondents more information through one-on-one communication.
Here’s one scenario traced from initial marketing to landing the contract:
- Buy $250 in Facebook ads.
- These ads land 200 visitors to your website.
- 50 of the site visitors sign up to receive a 2,000-word white paper on how to take their marketing to the next level.
- Of those 50, eight want to talk to you over the phone.
- Out of those eight, one of them signs a three-month deal for $1,000 worth of your services.
Your initial investment of $250 quadrupled your revenue with one person signing up at $1,000. Yes, you had to spend time creating your website, white paper and email lists, but you landed a client. You have to start somewhere. When you repeat this process dozens or hundreds of times, you keep this funnel going and increase your revenue.
How Much Should You Charge as a Consultant?
A consultant’s annual salary averages between $61,000 and $73,000, according to Glassdoor. Meanwhile, there are more than 5,300 open consulting jobs on Indeed across a wide range of services, from nursing and education to photography and business development. There is plenty of market potential if you plan on starting a consulting business. Charging for your consulting services becomes a fine balancing act. You don’t want to undersell your expertise, but you also want to get clients quickly. If you charge too much, you may not land any clients at all.
Do your research to find a well-balanced rate for your consulting services. Go to the websites of other consultants in your field and assess their expertise and experience. You may find that an engineering consultant with 30 years of experience at a government agency may charge $200 per hour for their services, while an engineer with just 10 years of experience charges $100 per hour.
Consider two types of rates for your services. One is an hourly charge for small projects. The second way to charge for your services is to establish a fee for an entire project. If you find a client needs you to complete an entire project over the course of nine months, create an overall fee for the entire project regardless of how much time you spend on it. The contract for your consulting services should include benchmarks and project goals from month to month until completion. Rather than expect payment for the entire project upfront, consider a monthly billing cycle for the project. If your services cost $18,000 over nine months, this comes out to $2,000 per month.
QuickBooks Online can help you track revenue with cash flow reports, invoices and online payments, and monitor your expenses so you can improve your bottom line. Over time, you’ll see more profits once you organize and improve this process.
Do You Need a Licence Before Starting a Consulting Business?
Before you sign your first contract, determine what types of licences your consulting business needs to operate on the federal, provincial and municipal levels. Contact each agency to find out what you need to make your business a legal entity in terms of its operation. In addition to business licences, some professions require licensing depending on the level of expertise required. For example, nurses need certain medical certifications to run a consulting business. Engineers and financial consultants may need professional certifications from accrediting organizations to prove they have the necessary skills to perform their work. Contact your professional organization to find out if you need to maintain your licence as a consultant.
Take a look at the licensing process in Canada:
- Fill out the necessary forms and pay any fees to federal, provincial and municipal government agencies. You can contact these agencies for more information on how to do this.
- Register your business properly and pay any applicable fees. Considering hiring a business lawyer to help manage the correct paperwork and filings.
- Apply for a business number through the Canada Revenue Agency.This registers your business for sales tax, payroll deduction and corporate income tax account programs.
- Make sure your professional licences are in order. You don’t want your nursing or professional engineering licence to expire. Otherwise, you could face fines or legal trouble.
If you are self employed, you are likely the sole proprietor. As a sole proprietor, you’re the only one who is responsible for all of the debts and obligations for your business, but you also get to keep all of your profits. A sole proprietorship is easy and inexpensive to register, and you don’t need much working capital to get the company up and running. On the other hand, because you are solely responsible, if you can’t pay your bills, claims may be made against your personal assets. Also, it may be hard for you to raise capital for your business on your own.
A corporation can be done at either the federal or the provincial territory level. As a corporation, your business has shareholders who share in the liability of the company. This means you are not solely responsible for the debts, but you’ll also have to share the control of the company. It’s more expensive to set up a corporation, and it’s best to get the assistance of an attorney.
Another issue to note is how the government classifies personal services businesses for tax purposes. Personal services businesses are classified as such if you have one client that dictates your entire business. That means you could end up paying higher income tax rates versus those of a small business. Plus, your business is limited by the amount of deductions it can take if the government classifies you as a personal services business. The way to avoid this designation is to have multiple clients. Having many clients, and the freedom to have multiple income streams, are the main reasons for starting a consulting business.
What Does the Typical Consulting Process Look Like?
- Start with sales and marketing. The only way to get new clients is to market to them.
- Sign a contract. A contract represents the legally binding aspects of your relationship with a client. The contract stipulates what type of work you do, when you must reach certain benchmarks and when the contract is complete. It also specifies when you should receive payment and for how much. A contract shows which fees are due upfront. Some companies may decide to hold you on a retainer, which may mean you cannot work with their competitors.
- Get to work. Once you have a contract in hand, it’s time to get to work. Set up a plan for communicating with the client on a regular basis to show your progress. Determine how often face-to-face meetings should happen throughout the duration of the contract. Create a paper or electronic trail that proves you have been working on the project.
- Fulfill the terms of the contract. Once you fulfill the terms of the contract to the client’s satisfaction, you deserve full payment for your services.
Now that you have satisfied customers, you can grow your business by using referrals. Ask a client, or even offer a slight discount on your services, to use a referral quote to help market your business on your website. Always get permission from the client first.
Now, you’ve got the basics to get your consulting business off the ground.
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