Starting a consulting business is one way of drawing on your expertise and creatively making use of problem-solving skills. It’s a popular – and potentially lucrative -- avenue for aspiring business owners. The consulting industry in the U.S. generates nearly $100 billion in revenues each year, according to a Harvard Business School analysis conducted in 2007. And it's an industry where one can earn upwards of $400 per hour depending on the work and location, according to the Association of Management Consulting Firms, a New York-based organization.
"People come into consulting from all different routes," says Andrea Coutu, a Vancouver-based marketing consultant and founder of the blog Consultant Journal.
If you're ready to hang your own consulting shingle, consider these three strategies to get started.
1. Establish your reputation before striking out on your own.
Ann Quinn spent more than a decade helping midsize, and some small, companies raise money in and around Baltimore. In 2009 Quinn was working at an investment bank and had few prospects for the big transactions the company was after.
But she did begin to work with small companies and nonprofits that didn't have good advisors to help grow their businesses. It was work she wanted to do, but it wasn't lucrative for her firm.
So in early 2010, Quinn worked out a deal with her boss where she would strike out on her own and take on clients her company wasn't interested in. She agreed to send other business to her old firm for tax and audit services when it made sense, while the firm would refer small companies and nonprofits in need of strategy to her.
The expertise she gained from years in the industry and the region helped her build a reputation and client base that would serve as the foundation of Quinn Strategy Group, which she founded in March 2010. The business is on pace to bring in $160,000 or more in revenue this year.
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2. Partner with another firm while building your business.
For some aspiring consultants, name recognition is more of an issue than expertise. In that case, look for an established company where your ideas will be complementary and pitch an arms-length partnership. It will allow you to build your name, refine your services and reach clients you wouldn't otherwise have access to on your own.
"Partnering with others is a good way to get started," advises Maria Coyne, who heads small-business banking programs at Key Bank in Cleveland.
That's exactly what Jill Reamer did six years ago. The former attorney and mergers and acquisitions specialist decided to start her own company to work with small-business owners looking to sell their companies or make an acquisition. She formed a strategic partnership with a two-person consulting firm that did similar -- but noncompeting work. The deal allowed Reamer to use the name of the established, respected firm while building her own business, Peak Strategy Advisors.
"It's a tricky balance of having the control and autonomy that drove you to create your own firm versus the collaboration and give-and-take you have when you are in a partnership," Reamer says.
She was able to avoid potential problems by signing on as a consultant, not an employee or partner. She kept her own office and paid her own overhead costs. That made it easy to part ways and move on amicably later.
3. Differentiate your services.
After the terror attacks of September 11, 2001, Brad Stern's multinational employer shuttered the Cleveland office where he worked. He and his team were told they could move to Chicago -- or leave the firm. So Stern and five other consultants left and started their own human-resources consulting firm, Shaker Consulting Group.
Stern, who is president of the firm, says he and his partners quickly realized they needed to differentiate from their well-established former employer in order to compete. So, they turned the hiring and talent management process into a video game, a sort of virtual job tryout. While it didn't reinvent human resources at its core, it offered a new twist to the field. Stern recalls how some companies preferred the umbrella of a bigger firm at first, but his team's new and different strategy helped win clients, and eventually catch the attention of big companies.
"It's easy to roll into a me-too attitude of 'I can do that, too, but cheaper,'" Stern says. "You have to commit to being unique."
And it is important to call yourself a consultant early on, adds Coutu, whose success starting her own consulting business led to the blog, four ebooks and her offering an online a course about becoming a consultant. Previously, she had been working in marketing at a hi-tech firm in Canada just before the 1990s dot-com boom, and started consulting on the side.
As soon as her side business grew enough to pay the bills, she went out on her own full-time and called herself a consultant from the start. Her colleagues at her former employer left her with a Rolodex of about 100 contacts -- many of whom ended up at new firms when the company downsized. They funneled work and referrals her way.
"If you want to be able to get full value for what you are offering, you can't see yourself as a contractor or a freelancer," she says.