Starting a consulting business can be an attractive alternative to nine-to-five work. Consulting can be flexible, lucrative, and a great use of your proven expertise.
In this article, learn more about what a business consultant is, why one might be needed, and get tips for starting a consulting business.
What is a consultant?
A consultant, or independent contractor, is an outsourced expert hired by an organization to provide guidance on a specific project using their skills and knowledge. Working with a consultant can be attractive for companies that need flexibility in hiring or are looking to keep headcount and overhead costs low.
Consultants are brought on by businesses for a variety of reasons, including:
To provide outside expertise. Often consultants are hired for a specific technical need or to support a one-off project. An example would be a specialist who trains employees on a new computer system.
As extra help during busy times, such as a human resources expert hired during a period of exceptional staff growth.
To improve systems and processes. A company might hire a consultant to streamline department workflows or to train the staff on new skills.
What do you need to start a consulting business?
As remote work has become more accepted, a consulting business can often be started in one’s home and, depending on the industry, with not much more than a computer and internet connection. Here are a few additional things you’ll need in order to get started on the right foot with your business consulting services:
A clear idea of your business model and value proposition. Whether you seek to advise clients on preparing to open a restaurant or on which online technologies will fit their needs, you need to be able to articulate your niche, what clients will gain, and what they will save by using your services.
Proven expertise and authority. Think about how many years of experience you have in the field and the skills you’re planning to offer. Do you have a list of people who are willing to give you testimonials or references? If your field requires it, are you properly licensed and/or certified? If not, are you willing to take the necessary steps to receive the necessary accreditation?
An understanding of your consultant fees, profit margins and client agreements. One of the most challenging things about being a consultant is determining your price. As you think through how much you should charge, make sure you consider the amount of time you will spend with a client (including how much time it takes to onboard a client), your years of expertise, any outside resources you might need (like software or staff), and how much profit you consider appropriate. It can be helpful to research the price point of other consultants in your field to determine if you’re under or over charging. Whether you charge a flat fee or an hourly rate, always define the specific parameters of the job and the fee structure in your client contracts.
Sales and marketing resources. While existing contacts and word-of-mouth might be enough to get your consultancy started, eventually you will need to promote and sell yourself and your services. Your marketing plan might include creating a website, doing local advertising, putting out a regular email newsletter, posting on social media accounts, joining networking groups, etc.
Organizational structure and record keeping. Consulting involves a myriad of tasks and obligations like proposal writing, taking meetings, creating invoices, and paying taxes. Different business structures (sole proprietor, LLC, S-Corp, etc) have different tax reporting parameters. Get expert legal and/or financial advice when setting up your consultancy and keep accurate and thorough records of all transactions.
What coverage and protection do you need as a consultant?
One worthwhile small business expense is insurance, which affords you financial protection in the event you make an error or if there’s an unforeseen catastrophe that impacts your consultancy.
As with most businesses, the type and amount of insurance that you need depends on many factors, such as the nature of your industry, where you meet with clients, if you have costly equipment, and whether you’re responsible for client data.
Here are some common coverages to consider and discuss with your insurance professional:
Business Owner’s Policy (BOP) – The BOP is designed for small businesses, such as a consultancy, and combines two key coverages – general liability and commercial property – into a single package.
Professional liability – Also known as errors and omissions insurance, this coverage is essential for any business that provides services or advice, which includes contractors. It covers you for legal costs and damages if your business is sued for claims of negligence, neglect, or mistakes. Many of the companies you do business with may, in fact, require professional liability insurance as part of the contract.
Cyber – Chances are, your consultancy will be doing business online and may involve storing private data – and with our increasing reliance on technology, cyber risk is on the upswing. A cyber policy can help protect your business and your customers.
Your insurance agent or broker can help you assess the risks specific to your business and the insurance coverage you need.
This document is advisory in nature and is offered as a resource to be used together with your professional insurance advisors in maintaining a loss prevention program. It is an overview only, and is not intended as a substitute for consultation with your insurance broker, or for legal, engineering or other professional advice.
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www.chubb.com. Insurance provided by ACE American Insurance Company and its U.S. based Chubb underwriting company affiliates. All products may not be available in all states. This communication contains product summaries only. Coverage is subject to the language of the policies as actually issued. Surplus lines insurance sold only through licensed surplus lines producers. Chubb, 202 Hall's Mill Road, Whitehouse Station, NJ 08889-1600.
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