How to Start a Small Consulting Business

By Christina Hamlett

  • Overview

    When a company starts to run into trouble or - on the flip side - is planning to expand its operations by diversifying, it may need the objective advice of an outsider. Rather than hiring someone permanently to resolve a temporary problem, a company will often seek out consultants with the right kind of expertise to advise them. Such arrangements not only benefit the business with a fresh viewpoint but also provide savvy entrepreneurs with the flexibility and extra income to define their own job.
    • Step 1

      Identify your areas of expertise that best lend themselves to the medium of consulting. Generally, these are going to be activities such as writing, research, copyediting and grant writing that can be performed in a home office or tasks such as auditing, bookkeeping, IT, payroll management and motivational workshops that have to be performed onsite, because either the work materials are confidential, or it would be impractical to have staff members leave the premises for training. Other services, such as advertising, image consulting, tax preparation, and publishing can involve going to the client's home or business, working at home, or meeting at a neutral location.
    • Step 2

      Identify your target market. In addition to using your networking skills to let family, friends and associates know about your new venture, you'll need to pay strict attention to what's going on in the business community. If a company, for instance, has just downsized, it may welcome the services of someone who not only doesn't have to be paid a full-time salary plus benefits, but who also won't require a desk or office from which to perform the needed tasks. Pay attention as well to all those casual remarks you hear in which a shop or business owner laments that she'd really like to try something new, but that no one on her staff has the knowledge or experience to get the ball rolling.

    • Step 3

      Assess whether you have the personality, energy and self-discipline to be a freelance consultant. You'll need to be aggressive, for instance, when it comes to drumming up prospective clients. The ability to network - including getting yourself known at your local chamber of commerce - is essential in generating word of mouth publicity about your expertise. It's also important that you can effectively function in the unstructured environment of setting your own hours, managing your workload, juggling multiple projects, and responding to crises in a calm and professional manner.
    • Step 4

      Decide whether you're going to be doing your consulting activities out of a home office or performing tasks at the client's home or place of business. If you're going to be working out of your own home, you'll further need to decide whether you'll be working solo (i.e., proofreading documents) or inviting clients to come and see you for consultations. If it's the latter, you'll need to review your homeowner's insurance to make sure you have enough coverage. It also goes without saying that some home environments just don't lend themselves professionally to visitors (i.e., a perpetually messy house, a noisy neighborhood, a tribe of children under age 5, multiple pets that have not been to obedience school).
    • Step 5

      Get a business license and a federal ID number. The website of the Small Business Administration (see URL at the end of this article) can walk you through the steps of obtaining the licenses and permits required by your state in order to be a business owner. You'll also need to decide on an official name for your business and register it with the Secretary of State's Office. If you're going to be calling it something other than your own name (i.e., Tom Jones Consulting), you'll be required to conduct a search to make sure the name you want hasn't already been taken. Again, the SBA website will advise you how to obtain the necessary forms.
    • Step 6

      Design business cards, brochures and a professional website once you have locked down your official name and acquired your business license, permits and federal ID number. If you're going to be working out of a home office, it's usually best not to list your home address on any of these items. Instead, list your phone number, fax, and email. Your website should identify the list of services you offer, a brief bio that highlights your education, expertise and special credentials, and - as your company starts to grow - endorsements from satisfied clients.
    • Step 7

      Determine what your fee structure is going to be. It should be readily understandable from your website whether you charge on an hourly basis, a project basis, and/or available on a retainer basis. If you're not sure what to charge, do some homework and research what other consultants in similar lines of work are charging.
    • Step 8

      Establish yourself as an expert in your field by writing freelance articles, maintaining a blog, and teaching workshops and seminars in the community. These are all relatively low cost ways of promoting yourself. If you do have some money set aside to constitute an advertising budget, it can be well spent doing ads in weekly community newspapers and becoming a steady presence in print. Your advertising budget can also be put to good use purchasing mailing lists of companies and individuals who would be interested in your consulting expertise and sending them introductory letters along with your business card. As an incentive, offer new clients a "get acquainted" discount.
    • Skill: Moderately Challenging
    • Tip: Just like any business, you're occasionally going to encounter thoroughly annoying clients who just can't be pleased with anything you do for them. The worst thing you can do, though, is to start bad-mouthing them to others. Even if you're joking about them in confidence to your best friend while you're out having lunch, you just never know who might be eavesdropping on your conversation. Whether or not they personally know the object of your ridicule and/or wrath, it reflects badly on your reputation that you'd be discussing your clients at all with third parties.
    • Tip: Maintain excellent records as well as back-up files. While some of your consulting projects may be a one-time deal, it won't inspire confidence with your repeat customers if you ever have to ask,"What exactly did we do last time?"
    • Tip: Always follow up with your clients by phone or in person after a job has been completed. They'll remember the courtesy.
    • Warning:
    • If you launch your consulting business while you are still employed by someone else, make sure that you are not violating any rules that would constitute a conflict of interest. An example of this would be if you were working for a makeup salon but decided to start siphoning off the salon's clients for your own image consulting business.

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