Whether you are trying to start a consulting business to earn extra income in retirement or become self-employed, there is a formula for building up a consulting business that generates a steady flow of work and income. There is certainly a large market for consultants since management consulting alone was a $55 billion dollar industry in 2015. Here is a beginner’s guide to starting a consulting business.
Before you identify yourself as a consultant, identify the subjects and industries on which you are an expert. If you have a degree in the area, you have a theoretical understanding of the subject. Industry certifications like project management professional for project managers and the professional engineering license for engineers act as an external verification of your expertise.
You might also consider pursuing a bachelor or master in communications if you want to add to your expertise. You can pursue an online masters in communication management while pursuing another degree in your main field of expertise.
In most cases, consultants spend as much or more time looking for clients than they do serving clients. You have to spend time cultivating a client base, tracking leads and building relationships. The time spent doing this isn’t billable, but you have to factor these costs into the hourly or daily rate you charge as a consultant.
You also have to compare your potential consulting fee against what others charge and the market for your services as a consultant; you have to be able to bill enough hours per month to a variety of customers to pay your bills.
Be wary of offers to become a permanent on-site consultant. This blurs the line between contractor and employee and could be used to force you to pay employment taxes and avoid the obligations employers have to employees.
Consultants often need licenses to be considered consultants. For example, many states require you to be licensed to become an investment advisor, fundraising consultant, or financial consultant. Many states require consultants to have a general business license even if working out of their homes. Professional engineers should have professional liability insurance in case they are blamed for a design failure and sued, and in many states, the PE certification is necessary to be a consulting engineer. In some cases, you don’t have to earn certifications or become licensed, but certification and insurance will demonstrate your professionalism to potential clients.
A company can file legal action against you if you take their customer lists and attempt to directly compete with the company. Many employers prohibit you from offering consulting services to their customers or clients for some time after ending your employment with the firm. In other cases, the law may limit the types of consulting you can do based on your licensing.
Know these rules and restrictions before you start your consulting business so your advice doesn’t cross a line that could cost you your fledgling business.