How to start a consulting business: An 8-step guide

Whether you’re an expert in a particular topic or want to help businesses grow with professional services, you likely considered becoming a consultant.  

Developing a consulting business can be extremely rewarding. However, as with any business, getting it up and running can be a challenge. From legal needs to licenses and business plans to taxes, there are several critical things you'll need to address before you can open your doors with confidence. 

In this guide, we’ll go over how to start a consulting business to help you on your way to opening a successful business so you can make your dreams a reality. 

1. Choose your niche
2. Analyze the market
3. Create a business plan
4. Register your business
5. Determine your prices
6. Invest in tools and staff
7. Market your consulting services
8. Review and improve

Step 1: Choose your niche

The first step in how to start a consulting business is choosing a niche. You might already know what your niche is, but if you’re still looking for the perfect fit, there are many different types of consulting. 

Some types of consulting include: 

• Accounting: Assists with analyzing financial statements, determining how profitable a business is, and doing financial forecasting. 
• Management: Helps businesses and organizations by providing solutions to maximize performance and improve processes. 
• Operations: Assists with solving operational challenges, such as managing supply chains and redesigning strategies to help businesses save money. 
• IT: Advises businesses to implement new technologies and identifies problems, such as cybersecurity threads.
• Sales: Helps businesses promote and sell their products and services and develop sales strategies and pitches. 
• Marketing: Provides marketing services and strategies, such as developing a brand identity or optimizing content. 

With these types of consulting in mind, start thinking about which consulting niche would be the best fit for you. Consider what strengths and passions and whether you have an expertise that would benefit clients. 

It’s also worth considering if you have any specialties, such as certifications or degrees, or past experiences that would apply to the field. Then find out if you’ll need extra training to get started.

Step 2: Analyze the market

The next step is to analyze the current market to find gaps where your consulting service is most needed. Start by understanding your market’s biggest pain points and how you can provide solutions. 

Find your target market challenges and needs by researching online or asking your network, looking at what competitors are doing, and understanding if your services will be valuable. 

Once you understand your market’s pain points, you can specify what services you can provide. For example, if you want to get into accounting consulting, you may find that some small businesses don’t have a budget to hire a full-time accountant or need assistance with their accounting software.

Step 3: Create a business plan

Next, it’s time to start on your business plan. A business plan is simple—it outlines various components of your company, including how you’ll measure success, what services you’ll offer, and what your target market is. With a thorough business plan, you'll have a clear understanding of how you’ll run your business, and you’ll potentially be able to attract investors.

There are a few essential components that you should include in your business plan, according to the US Small Business Administration. These components are as follows:

• Executive summary: The introduction to your business consulting services, which includes your mission statement, a brief description of services, and your growth plans. Include your business location, number of employees, and potential clients. 
• Company description: Gets more in-depth into the details of your consultancy business. Describe your company, the services you’ll offer, the customers you’ll serve, and the competitive advantages of your business. 
• Market analysis: Here, you’ll add your market analysis, including your target market and your competitor’s strengths and weaknesses. Describe what your business will do better and why it will succeed. 
• Organization and management: Covers who’s in charge and each employee's role. You should also cover your business’s legal structure, whether an LLC, partnership, sole proprietorship, or corporation. 
• Services: This section explains the nitty-gritty of the services your business will offer. Describe in detail how your services will work, the prices based on a cost analysis, and how you’ll expand your services. 
• Marketing and sales: Go over your marketing and sales campaigns and how you plan to attract and retain customers, garner referrals, and ensure repeat business. 
• Funding request: This section is where you'll tell investors how much funding you’ll need. You can also describe how you plan to use any financing you secure from investors. 
• Financial projections: This section includes forecast income statements, cash flow statements, and balance sheets to help tell your financial history. 

You can also start creating your brand, including your website and logo, during this step. Learning how to write a business plan takes a lot of time and thoughtful planning—it can feel like a full-time job. However, with an in-depth business plan, you’ll have a clear picture of how to start a consulting business and where to take it.

Step 4: Register your business

All businesses have to register, file, and pay state and local taxes. To avoid any issues with your state and municipal governments, register your business well before opening your doors. This way, you can ensure you’re complying with all local and state laws.

In order to operate, businesses need specific licenses, permits, and insurance. Here are some necessary licenses, permits, and insurance all businesses should have:

• Business license: Allows you to legally operate your business, which you can obtain through your state or local government. 
• Employer Identification Number (EIN): Informs the government that you’re an employer and allows you to hire and pay employees. You can apply for an EIN with the IRS. 
• Building health permit: States that the building your consultancy business is located in (if you have one) is up to code and local regulations. 
• Sign permit: If you want to place a sign on your building, this permit ensures it passes county and city rules. 
• General liability insurance: Protects your business from property damage and personal injury claims. It also covers advertising injury claims and medical expenses. 
• Commercial property insurance: Protects your physical assets, like technology and furniture, from damage. 
• Additional licenses for specific business types: Depending on your type of consulting service, you may also need other permits or certifications to operate. 

Additionally, you must first obtain an Employer Identification Number (EIN) and complete your state application to register for state and local taxes. 

Because the professional services industry contains a wide array of business types, each type may have its own set of required licenses and permits. For example, lawyers will need a license to practice, while accountants may need to hold a CPA license. To determine all the requirements, consult your state or local government.

Step 5: Determine your prices

The following step in setting up a consulting business is defining your prices and payment systems. To determine your prices, consider the costs of running your business, review pricing strategies, and perform pricing research to find the optimal price range for your consulting services.

Once you know how much you should charge for your services, determine how you’ll price them. You can, for example: 

• Choose if you’ll take clients long-term with a retainer or short-term with one-off projects. 
• Create packages bundling your consulting services. 
• Identify your hourly rate or project rates. 

After determining your prices and how you’ll charge for your services, consider detailing that on your website or have a document handy to review your prices when talking to potential clients.

You’ll also want to select a payment system that works for your consulting business. To choose a payment system, consider payment methods, processing fees, invoicing, and integration with other systems, such as bookkeeping software.

Step 6: Invest in tools and staff

Now it’s time to get into the smaller details of your consulting business, which means evaluating which tools you’ll need and staff you may need to hire. First, consider what you’ll need assistance with, such as project management, accounting, and marketing. Depending on your needs, it’s worth growing your team and hiring a specialist in the area. 

Next, determine what you and your team will need in terms of tools. Consider, for example: 

• Video conferencing software
• Invoicing software
• Accounting software 
• Payroll system
• Project management tools

Ensure you have everything to keep your business running smoothly and your team equipped with the right tools and resources.

Step 7: Market your consulting services

Marketing is essential to establishing and growing your business. This is especially true for new companies just starting out. There are numerous marketing strategies you can implement to gain and retain customers. 

Some marketing strategies to gain a competitive advantage include:

• Social media marketing
• Email marketing
• Digital marketing
• Content marketing
• Search engine optimization (SEO)
• Inbound and outbound marketing

You should also consider reaching out to local groups, meeting with your industry connections, and attending networking events. Remember to practice your elevator pitch and write business proposals to attract clients. 

As you think about different marketing tactics, it’s important to keep your target audience in mind and analyze your efforts to determine their success. If you can't handle all of these marketing aspects on your own, consider hiring a part-time employee or freelancer. This will help you gain your footing.

Step 8: Review and improve

Once your consulting business is up and running, continually reviewing and improving your processes and strategies is key to generating the best results. Evaluate your business monthly by looking at your performance to understand how to decrease costs and generate more revenue. 

Consider also how you can scale your consulting business by staying current with your industry and competitors. With consistent work and improvement, you’ll be able to attract new clients, get referrals, and keep your business flourishing.

Start your business with confidence

Learning how to start a consulting business is easier than putting your plan into practice. But once you set your foot in the door and have a detailed business plan, you’ll soon be able to scale your business and generate revenue from your consulting services. 

Staying connected with all parts of your business, including finances, marketing, and accounting, is crucial when evaluating your results. Streamline every inch of your business using QuickBooks to keep invoices, accounting, and payment systems all in one place.