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As an expert in your field, you likely get asked for advice on a frequent basis. Starting a consulting business can be a great way to capitalize on your expertise — both for your own financial benefit and for the benefit of others. 

Business consulting represents an almost $330 billion industry in the United States. So, there’s plenty of room for success in the marketplace as a consultant. Yet whether you plan to start out as a small one-person consulting shop or open your consulting business with support staff already in place, you need a plan to ensure everything runs as smoothly as possible.  

Here are four steps to consider before you start a consulting business. 

1. Choose Your Niche

There is certainly a lot of demand for reputable and effective business consulting services. At the same time, the marketplace is also crowded. So it’s important to figure out the unique experience and guidance you have to offer. In other words, what will help your consulting business stand out from the crowd so that businesses will hire you? 

Let’s consider a few scenarios. You might have years of experience running a successful online retail store. Or perhaps you have a penchant for digital marketing and growing social media followings and brand engagement online. Either of these skill sets could be a great place to start since plenty of businesses are willing to pay for expert advice in these areas. Yet if you narrow your niche down more, you might have a better chance of attracting customers (and attracting customers that you’re uniquely suited to advise). 

For example, you might have a background that includes not just marketing services, but promoting fundraiser campaigns for nonprofit organizations. Remember, the more specific you can get when you decide how to advertise your consulting services, the better. 

2. Create a Business Plan

woman working on business plan
iStock

There are many details to consider when you start a new business. And even though starting a small consulting business might be an easier task compared with some other business startups, it’s still essential to outline your plan. 

With a traditional business plan, you often write it with potential investors or lenders in mind. However, you might not have plans to borrow much money if you’re starting a one-person consulting firm, at least not in the beginning. In this scenario, a business plan can still help you focus on goals that you want to achieve and plan ahead for potential challenges that could arise. 

Below are some of the details you might want to include in the business plan for your new consulting business. 

  • Market Research: Who else is providing similar services in your niche? Looking at the competition can help you find ways to stand apart from the crowd and attract customers who could benefit from your services. 
  • Services: The knowledge and skills you’ve acquired throughout your career are your biggest assets as a consultant. Yet it’s important to find a compelling and understandable way to sell your services to future clients in order to get paid. Your business plan should define the services you will offer and the rates you will charge as well. 
  • Financial Plan: As a consultant you might not have employees or an office space to manage, especially in the beginning of your journey. Nonetheless, it’s wise to make a list of any recurring expenses you’re likely to encounter and create a budget for your business. 
  • Savings: Whether you’re a consultant or some other type of entrepreneur, going into business for yourself can be a gamble. Revenue and income may fluctuate as you establish a name for yourself and build up a client base. Therefore, it’s wise to have savings you can rely on when these situations arise. If you can save in advance and store your funds in a high-yield savings account, even better. 
  • Long-Term Goals: You might want to work as a consultant for the rest of your career. Or perhaps you want to grow your consulting business into an agency and hire other consultants to work under you in the future. You might even have plans to build a large consulting firm and sell it to an outside buyer down the road. Whatever your long-term goals are, take the time to map them out. It’s important to keep these goals in mind when you make future business decisions.

3. Make It Official 

Once you have your initial business plan, you may be ready to make your consulting business official. It’s important to set your business up the right way from a legal and tax perspective. You’ll likely want to talk to an attorney and a tax advisor for advice about your specific situation. In the meantime, here are some steps that most business owners need to take. 

  • Register your business. You’ll need to choose a name for your business and the type of business structure you prefer (e.g., limited liability corporation, corporation, sole proprietorship, etc.). Armed with these decisions, you can register your business with your Secretary of State’s office. 
  • Get licensed. Depending on the industry in which you operate, you might need certain licenses to start a consulting business. Your state or city may require you to have business licenses as well. 
  • Get a federal tax ID. After you register your business with your state, you can reach out to the IRS to apply for an Employer Identification Number (EIN). You will need an EIN to file business tax returns, open a business bank account and more. 

4. Keep Business and Personal Finances Separate

When you run a consulting business, it’s easy for your professional and personal lives to overlap. You’re likely to attend business conferences that are a mixture of business and pleasure. Networking events may fall under the same category. And depending on the size of your staff and the level of access you provide to clients, it might not be uncommon for you to answer calls and emails at varying hours throughout the day. 

However, it’s important to develop boundaries between your personal and professional worlds. And your finances is one area where there needs to be a clear line between your business and your personal money. 

One of the first things you should do when you start a consulting business is to open a separate business checking account. A business savings account could be a good idea as well, especially if you plan to save money for future growth or to help offset any fluctuations in revenue. You might even be able to qualify for a small business bank bonus in the process of setting your business up the right way.  

Finally, consider opening a small business credit card for your consulting company too. According to the Small Business Administration, 46% of small business owners use personal credit cards. Yet it’s best to keep business purchases on business credit cards and vice versa where personal purchases are concerned. Plus, opening a business credit card could help you establish business credit for your company — a valuable asset to have in the future in case you need to apply for financing.

Moving Forward

Starting a consulting business can be a great way to put your unique skill set to use. Not only do you have the potential to help other businesses achieve better results, you may be able to earn a living doing something that you love on a day-to-day basis. 

Just be sure to set your consulting business up the right way. It takes some hard work in the beginning. But once the initial steps are complete, you should be in a good position to focus on growing your consulting business and achieving your own personal business goals.

ML

Michelle Lambright Black

Michelle Black is founder of CreditWriter.com and HerCreditMatters.com. Michelle is a leading credit card journalist with over a decade and a half of experience in the financial industry. She’s an expert on credit reporting, credit scoring, identity theft, budgeting, small business, and debt eradication. Michelle is also a certified credit expert witness and personal finance writer.