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.
Related: Two Weeks to Startup
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.
Related: Five Creativity Exercises to Find Your Passion
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.
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Comments:
If you are just starting out sometimes you have to give away services or heavily discount them to get people to use you. Once they use your services and are pleased ask them for testimonial letters and referrals. Testimonials are great to add to your presentation materials and website. You can also form alliances with other companies that offer complementary services. This can help build experience and reputation.
Reputation is the key. But how can I build experience if I need reputation, and I need reputation to build experience?
The first point cant be overstated. You have to be an expert in your field first. Without that education then you cant build your portfolio and your reputation
The information economy is increasing the value placed upon one's knowledge. This knowledge becomes available as a product, and when delivered to solve customer needs it becomes a service. That is fascinating to me. One consideration, however, is that being a consultant in many respects is like owning your job. Your pay is still tied to your hourly or project inputs. Something consultants should consider (I have done some consulting in the past) is to package their knowledge in a way that can be distributed beyond their schedule. This was touched on Andrea Coutu's example. A thousand people can buy her eBook and once completed, her compensation is no longer tied to her ongoing personal time investment but is scaled by the number of downloads.
Jennifer first let me congratulate you for this work. I think you have hit a point that many home based entrepreneurs may miss which is establishing your name before striking out. How many times have you run into some home business guy who isn't good at what he does? That's a good point to note. Well done
There are tons of other business consultants so the building of reputation part is very important.
To be a business consultant is not an easy job.One has to have a creative mind and the space to accept newer ideas .That person can outshine others in business.
I guess every man has his own way of achieving his set goals and objectives including setting up and running any business including consulting business.
I believe personal branding is one of the only things you need to build a consulting business. You never have to advertise because you are forever booked solid on referrals alone.
Depending on the niche you might want to start consulting in you may not need to brand yourself. Nor will you need to work with another firm to get started. If you have the skills necessary, technical and business, you might just be able to jump right in. What is really required is a steady flow of prospective clients. How do you do that? Marketing.
I want to start my own business too. I lost my job. I need to keep going. I consider myself very smart. I have in mind to start my own business as entrepreneur. I have my own creations of new ideas. I have sketches. As sample new shoe laces for children 2,3,4,5. As well for teens. I have another idea which it's wonderful as kitchen. Another for unembrellas, how to fix your umbrella en less than 4 minutes while you are under a windy raining day. I have another idea as umbrellas for kids. The other is a new umbrella that resists any kind of bad weather. I have a problem, I need money for all these inventions, I cannot do anything without it. I am trying in my house to give life to the first three. Just to start it. As I do not have money to pay for a patent, my business professor advised me how to protect mi ideas just in case if someone tries to copy them. After that I am going to placed in YouTube. Hoping that a big business decide to help me or buy one of ideas of all of them. I need money.
Consulting businesses are set up by experts who want to assist consumers or fellow small-business owners with everything from helping families to working with local business owners to promote their ventures online. Consultants are opting to run their consulting firms from home to save money and make use of extra space in their homes.
Nice article! I agree on all the points presented here. Being a business consultant is not an easy task.
Jennifer, good article here and enjoyed reading everyone's comments. One area that many novice consultants have trouble with is pricing. I created a free online consulting fees calculator to help consultants get a baseline of how to price their services. Your readers may find it useful. The consulting fees calculator can be found here: http://www.consulting-business.com/consulting-fees-calculator.html
In my experience at least half the challenge in starting a consulting business is in maintaining momentum. One tip that I found useful and still use today when undertaking a project that is not my full time focus is simply to ensure that you Do at least one thing every day to move you towards your goal, even if it is just to make one phone call or send one letter. If you take this approach you will be amazed at how quickly you will complete tasks and these positive experiences will be like the wind at your heels – they will carry you forward closer and closer towards your goal.
There is nothing quite like having an anchor client with a long term project in place to use as the foundation for starting a new consulting business. It provides immediate stability, credentials, references and opportunity. Whether it is a client you have worked for in the past or a new opportunity, I would always recommend having a committed first project before striking out on your own. Then, as you see additional opportunities around you, take advantage of services like http://www.consultingbench.com to find additional talent to add to your consulting team.
I love that you wrote this on top: Establish your reputation before striking out on your own. Social proof is a commodity these days and just make sure that along the way of building your rep, you don't step on anyone else. In the end, branding will play a major role. Thanks for the awesome tips!
Interesting and practical. I have started 5 years ago after 4 years of building reputation. I felt I needed a good reputation push before starting the business. I did ally with a couple of reputable businesses in the beginning but the best was Cisco Entrepreneur Institute/Amideast. It gave me the best credibility push. And yes, best of all, I was able to differentiate my services and mainly my approach by being the listener instead of the talker...This made the best difference since most of the competitors were too egocentric to be the "I know it all, I will tell you what to do...". I was the "tell me about it and let's figure out the way together. That's besides the very system approach and process that I built in a very solid way over the years. Thanks for the article and I guess the best thing that I've missed before was to find Entrepreneur.com and figure our that I am not alone in this world...there are plenty of great people like you to share what we are going through!
Somebody can tell me two characteristics of a consulter :)
Thanks for the article. I think option would work for any type of business starting up. Also, calling yourself a consultant isn't being too bold, it's being truthful.
Excellent advice! However, you may not need to wait to build your reputation before you start your consulting business--you can build your reputation at the same time. There are a number of things you can do to establish yourself as an expert in your niche, such as blogging, publishing an ebook, etc. I give some examples on a recent blog post (http://www.startmyconsultingbusiness.com/tired-of-scrambling-for-business-surprising-and-proven-ways-to-get-new-clients-part-1/). As the article mentioned, differentiation is hugely important, and is a key reason why clients will choose you over your competition. If you can offer a twist to set yourself apart, especially with an eye toward making your uniqueness appeal to your target customers, you'll have an edge over your competition. For example, MailChimp competes with a number of other very similar e-mail marketing providers, but they've found a way through their branding to stand out from the crowd, and it's worked well for them. The last thing you want to do is compete on price alone, since that's a losing strategy. I've found that fear often stops aspiring consultants from starting their business, and on my blog, I talk about how to overcome those fears. I also talk about practical, concrete things you can do to start and run a successful business, along with tools, tips, tricks, and techniques for automating your business and running it on the cheap. Most importantly, just start someplace and do something on your business each day. The more you do, the that you'll find that things will start happening (i.e., the harder you work the luckier you become). Greg Miliates StartMyConsultingBusiness.com
The statement in your article about committing to the title of "consultant" makes a lot of sense.With so much "teminolgy" availiable focusing on what you are and what you can do is a long run successful proposition.
Great article…partnering or building strategic alliances with other companies is great way to build your reputation while saving time and money. Here’s another article about the benefits of alliances https://www.partnersindemand.com/Strategic_Alliances_Save_Money
Sound advice..!
I'm a small business consultant and one of the ways I've been able to win business from larger firms is that I respond to all clients immediately and I'm available whenever they need me. The larger firms make clients work around their schedules, I work around my clients schedules. Rob C. MileHighBusinessPlans.com
What a difference it makes to have a good standing relationship with your current or former employer. Not only will it give you credibility, but the business partnership and referrals are key to your consulting success.
This is a great presentation of useful start-up techniques Jennifer. Starting a consulting business (or any business for that matter) can be a challenging feet; especially for those who have other obligations. Finding a way to leverage your current position to create more value is always the key. Thanks for the great read.