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Avoid These 3 Pitfalls When Opening a Consulting Business If done correctly, a consulting business can be lucrative for an entrepreneur. To get people on the right path, here are three mistakes to avoid.

By Dana Brownlee Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

If you've ever met someone who told you they were a "business consultant," and you scratched your head wondering what in the heck does that really mean, you are not alone. The term "consultant" is so vague it often borders on euphemistic: Are they essentially unemployed or trotting the globe advising Fortune 100 CEOs on their next strategic move? Who knows?

Because the term is so ambiguous and often misunderstood, starting a consulting business can be quite tricky. I find that new consultants have difficulty articulating their business proposition and that's certainly a recipe for disaster. At the end of the day, our job as entrepreneurs is not just helping customers understand what we're providing but more importantly helping them see why they should buy it. If they don't easily understand your services and feel a strong urge to purchase them, you'll have a steep uphill sales climb at best.

So, should you abandon that consulting business idea? Not so quick. Consulting, if done correctly, can be a lucrative business for entrepreneurs – it just needs to be done correctly.

Related: Need Clients? The 5 Best Ways to Market Your Consulting Business

Here are three major pitfalls to avoid as you plan your consulting endeavor.

Not developing your subtitle. I've noticed that virtually every non-fiction book title has the same format these days: short, catchy title followed by a longer, more descriptive subtitle. (For example, Tony Robbins' "Notes From a Friend: A Quick and Simple Guide to Taking Control of Your Life".)

Consulting businesses can often benefit from the same strategy. Telling someone that you're a marketing consultant may sound good, but it really provides very little information and only leaves them confused. What's more effective is starting with your catchy title and then following up with a sentence or two that provides a vivid description of tangible services that can serve a real need. For example, "marketing consultant focused on helping small businesses promote their products and services, so they can focus on running their business." Yes, the second version is longer and you shouldn't blurt it out anytime anyone asks your name, but you should be prepared to share it when you're asked to describe your business.

The simple truth is the title "consultant" is virtually meaningless and should rarely be used without any additional explanation. Develop your subtitle and use it.

Related: Protect Yourself: How to Structure Your Consulting Contracts

Providing ONLY services without any tangible products. The upside of service businesses is that they require little capital expenditure and barriers to entry are low. After all, if you're essentially selling your advice, it's fairly easy to develop a website, hang your shingle, and find yourself in business. The downside for service businesses though is that they're often quite labor intensive. Consulting businesses relying exclusively on services can find themselves frustrated because they are:

  • Exhausted by having to physically work (or bring in other labor to work) to generate revenue
  • Revenue limited by their own bandwidth and the amount of services they can provide
  • Having difficulty defining and distinguishing their offerings
  • Having trouble selling their services, because they're not easily understood

A great option for many consulting businesses is to develop tangible products that can not only complement and expand service offerings, but also help them better serve their clients and generate passive revenue. Typical product offerings could include webinars, e-books or other publications, training seminars or other instructional materials and templates or guides.

Related: Too Much? Too Little? How to Set Fees for Your New Consulting Business

Instead of focusing exclusively on consulting, think early on about what complementary products you might be able to offer.

Allowing scope creep. As a hungry, new entrepreneur, you may fall victim to scope creep. If you can smell the opportunity to win some new business, it's tempting to push your scope of services to pursue the business. But don't do that.

A key element of scoping your services is deciding what is OUT of scope for you. This out of scope list truly sets the boundaries of your consulting services and helps you better define your business. Write an in scope/out of scope list that clearly identifies what you do and what you don't do and stick to it

Developing a consulting business can sound simple, but it's really anything but. Performing the consulting work may actually be the easy part. Appropriately defining and scoping your business may prove to be trickier than you think. Don't make the classic mistake of underestimating the importance of establishing this strong foundation.

Related: Starting a Consulting Firm? 10 Reasons Your Clients Need You.

Dana Brownlee

President of Professionalism Matters

Having run a small business over the past decade, Dana Brownlee is an advocate for helping other small businesses succeed.  She is president of Atlanta-based training company Professionalism Matters and is an acclaimed keynote speaker, corporate trainer and team development consultant. 

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