George Harrison
A consultant is an expert in their field who advises organisations or individuals to help them improve their performance and solve problems. This may involve working with a business to make them more profitable, for example – or working with a public organisation to improve their IT systems.
Essentially, consultants sell their experience, expertise, and ideas to clients.
If you’re considering starting a consulting business, you probably have years of experience working in a specific industry. This experience will help you steer your clients towards success and will likely form the backbone of your consulting business.
Consultancy businesses can be extremely varied, with consultants working in different sectors – anything from cybersecurity to manufacturing – and for radically different clients. But regardless of your field, to make it as a consultant, you generally need to have the kind of specialised knowledge that people will be willing to pay for.
If that sounds like you, then starting your own consulting business might be a great way to leverage the skills and experience you already have, while giving you the flexibility of working for yourself. The idea of getting your own consulting business up and running may seem daunting, but our simple, five-step guide will make everything clearer.
How do I start a management consulting business?
Management consulting – a specific branch of consulting – is often what’s referred to when people talk about consultancy. However, management consulting is by no means the only field in which consultants operate.
A management consultant is generally hired to help make companies or public bodies more efficient and successful. Large organisations typically hire external management consultants to appraise the efficiency and viability of the organisation or to solve specific problems.
Management consultants will often offer recommendations about what their client can do to improve their operations. Often, management consultants have a university degree, and they are more likely to work for large consulting firms rather than start their own businesses or work as independent freelancers. However, some may decide to go out on their own after some years of experience.
Why start a consulting business?
Not all consultants are management consultants. So if you want to start your own consulting business, you don’t need to specialise in management consulting.
In fact, you can be a freelance or independent consultant in any industry that comes to mind. For example, if you have had a successful career in marketing, you might choose to become a marketing consultant. Or if you have previously worked in IT, you might become a technology consultant.
When starting your own consulting business, you will probably choose to operate in whatever sector you have the most experience in. This flexibility is a key advantage of starting your own consulting business.
Other advantages to starting your own consulting business include:
- Be your own boss: If you start your own consulting business, you’ll become your own boss. That means you can decide what consulting projects to take on and how much you’ll charge for your insight and expertise.
- Work from home: This is likely to depend on the type of consulting services you offer, but you may be able to run your consulting business from home. This not only allows you to fit your consulting around your daily life, but it may also result in fewer overheads and lower start-up costs.
- Set your own rates: As a freelance or independent consultant, you’ll be able to decide what price to put on your expertise. The hourly rates charged by self-employed consultants are generally higher than the rates charged for salaried employees at a consulting company.
- Possibilities for travel: Consulting clients may be based anywhere in the UK or wider world, with consultants often expected to travel to their clients’ premises. The ability to travel combined with being based at home could be a distinct perk for some.
Start a consulting business in 5 steps
1. Research and choose your market
Market research is an essential first step when starting any kind of business. When starting a consulting business, consider researching your potential client base and competitors. This process should leave you better prepared to make a success of your own consulting business.
You can manage your market research in several ways, including by researching the websites of established consultants in your field and talking to industry customers and competitors.
The two most important questions are:
- Is there demand for my services?
- Who should be my target market?
Use this research to decide what type of consulting business you want to create, and consider the demands of your clients. Ultimately, your clients will expect you to come to the table with knowledge that solves their problems or helps them add value to their organisation. Think about what sector you intend to focus on and where you’d be able to add the most value as a consultant.
Apart from management consultants, other common types of consultants include the following:
- Strategy consultants review and advise businesses on their long-term strategies.
- Operations consultants help businesses with supply chains, procurement, and their day-to-day operations.
- Financial consultants work with companies to get corporate budgets and balance sheets into shape.
- IT consultants help with anything related to information systems and technology, from setting up new software to managing an organisation’s long-term IT strategy.
- Sales consultants work with companies to help them sell more products or services.
- Marketing consultants help organisations to develop their brand and increase their visibility.
This list is far from exhaustive, and in reality, there are countless different types of consultants. In fact, almost any specialist and marketable skill set you can think of can form the basis of a consultancy service.
Consultants may also offer industry-specific services – like aviation consultants, who work with airlines, or editorial consultants, who work in the book trade. If you have a natural affinity for dogs, for example, there’s nothing stopping you from calling yourself a canine consultant and charging clients to train their pets.
It should be fairly obvious from your professional experience what sector and what type of consulting would suit you best. Once you have decided on a focus for your consulting business, an important next step is to start putting together a list of industry contacts: people you know or have worked with over your years in the industry. When you set up your consulting business, these will probably be some of the first people you approach as potential clients.
2. Create a budget for your consulting business
Creating a business plan and budget will help give you a better idea of exactly how much money you need to start your consulting business. A business plan will normally also be required if you apply for a start-up loan or business loan.
For a more detailed guide, read our article on how to write a business plan.
As for your budget, it may not take a large up-front investment to get a consulting business off the ground. If you choose to run your consulting business from home, you’ll likely have fewer overheads than if you were to buy or lease business premises.
And since consultancy work can be entirely independent, you won’t necessarily need to hire any staff. Again, this contributes to keeping overheads low.
When writing a budget for your consulting business, consider:
- Premises: The cost of business premises will depend on the size of the office you want to rent and where in the UK your consulting business is based. Working from home may eliminate many of these costs.
- Website costs: Setting up a website will help you advertise your consulting business and connect you with potential clients. Whilst you can create a simple website yourself using a free or low-cost platform you may decide to enlist some outside help to give you a more professional look. Freelance designers may charge around £750 to create a small website advertising your consulting business – although prices are likely to vary depending on the needs of your website and the skills and experience of your chosen designer – and could be much higher.
- Administrative costs: Consider any other overheads or start-up costs associated with running your consulting business. You’ll almost certainly need an internet connection to find and communicate with clients, and you may also have to pay to register your consulting business. It costs £12 to register as a limited company with Gov.uk.
- Travel costs: If you are required to travel to visit clients, these costs could soon add up. Even though you’ll likely get the money back if you charge expenses, you’ll still need to foot the upfront cost so be sure to account for travelling expenses.
- Accountancy services: When starting your own consulting business, you might decide that it’s worth paying for accounting software to help you file your tax returns and keep track of your finances. You can read our guide to the best UK accounting software for small businesses here.
- Insurance: Although not compulsory, it may be a good idea to purchase professional indemnity insurance and public liability insurance when starting your own consulting business. Quotes for both kinds of insurance may start from less than £5 per month, but your final price will vary depending on the size and nature of your business and your desired level of cover, amongst other things.
- Marketing costs: You may also decide to set aside some money in your consulting business budget for marketing costs. This may involve taking out adverts in trade magazines or on the websites of industry publications – the price of which will depend on the publication and the size of your advert.
For more details, explore our five-step guide to creating a small business budget.
3. Register your consulting business
One of the first official steps you will take when starting up is choosing a business structure and then registering your consulting business. You should take your time and research which business structure will best suit your needs:
- Sole trader: A sole trader is the exclusive owner of a business, keeping all post-tax profits. But being a sole trader means there is no separation between you and your business – making you personally responsible for any losses your business makes. Sole traders need to register for self-assessment to pay their taxes to HMRC.
- Partnership: A business partnership is when two or more people share the responsibilities, risks, profits and losses of a business. The three main types of partnerships are general business partnerships, limited partnerships and limited liability partnerships. If you are the ‘nominated partner’ – the one responsible for filing the partnership tax return – then you must also register with HMRC. Bear in mind that all partners still need to submit their tax returns as individuals as well.
- Limited company: If you choose to incorporate as a limited company, you will be legally and financially distinct from your consulting business. A limited company will have shares and shareholders and can keep any post-tax profits. Register as a limited company at Gov.uk.
» MORE: Should I register as a sole trader or limited company?
Now is also the time to consider taking out insurance for your consulting business.
Professional indemnity insurance protects you in the event that you make a mistake which costs your client money – and which might result in you being sued by your client for damages. Professional indemnity insurance is not a legal requirement, but if you are in the business of giving advice to other companies, it may be a good idea to get it.
Public liability insurance may also be necessary if you plan on attending meetings at clients’ or your own business premises. Public liability insurance is designed to protect you from damages resulting from injuring someone or damaging someone else’s property. Again, it is not a legal requirement to have public liability insurance – but it can be a good idea for any business that comes into contact with clients or members of the public.
4. Fund your consulting business
Once you have created a budget and registered your consulting business, you are ready to seek the funding you’ll need to get your business off the ground. If you don’t employ any staff and decide to work from home, you may not need much capital to get your consulting business up and running. Otherwise, you may need to combine the various funding options below:
- Personal savings: Using personal savings will allow you to retain full ownership of your consulting business, but be careful not to endanger your own financial health in the process.
- Friends and family: Borrowing money from friends and family can be tricky, so it may be best to draw up a written agreement in advance of accepting any loans. This should help to avoid any disagreements in the future.
- Small business grants: There are a range of non-repayable and partially repayable start up business grants across the UK, as well as those based in Scotland, Wales and Northern Ireland.
- Government business loans: Different government business loans may be available to your organisation depending on where you are in the UK.
- Business loans: A traditional small business loan might be difficult to secure when starting up a new business since lenders typically like to see a strong track record, but it is not impossible.
- Angel investors: Angel investors tend to be wealthy individuals looking to invest in new businesses in exchange for equity or convertible debt.
- Crowdfunding: This involves securing funding from more than one source in exchange for things like equity or early access to products. Crowdfunding often takes place through an online campaign.
You may also choose to open a business bank account to keep track of this funding – and the profits you’ll hopefully make while running your consulting business. While you may be able to keep on using your personal account if you are a sole trader (and your bank permits you to), the moment you incorporate as a limited company or partnership, you must keep your personal and business finances separate.
Even as a sole trader, you may find that opening a business bank account makes it easier to keep on top of earnings and outgoings.
5. Find your first consulting clients
Finding work as an independent consultant may be difficult when you are starting out. You might want to start by considering reaching out to people you’ve worked with in the past.
Likewise, if you have other contacts within your industry, now may also be a good time to get in touch and see if they have any need for your services. If you do a good job, then you may find that word-of-mouth referrals result in one job leading to another.
Meanwhile, there are various other steps you can take to give yourself the best chance of finding consulting clients:
- Join a professional body: Membership of a professional organisation may be a signal of your experience and skills in that industry, which, in turn, may make it easier to find consulting clients. For management consultants, joining the Institute of Consulting may demonstrate credibility and expertise. For consultants in other industries, research relevant professional organisations and consider signing up, if you aren’t already a member.
- Set up your own website: A website advertising your professional expertise and your consulting services will make it easier for prospective clients to find you. Consider paying a designer to create a professional website if you don’t have experience in web design.
- Take out adverts: If there is a specific industry publication whose readers would benefit from your services, then taking out adverts in this publication may be a good way to raise the profile of your consulting business.
- Get networking: The more people you know, the more likely you are to find new consulting clients. Step up your networking efforts by attending events in and around your industry and making more connections with people in your sector. You never know when a handshake at an industry event might lead to lucrative work at some point down the line.
How much do consulting businesses charge?
How much you charge for your consulting services is likely to depend on your own level of experience, the sector you’re working in, and the nature of the job you are doing. As such, there is no one figure for how much consulting businesses charge.
However, salaries within the consulting industry are generally high. In the UK, the average salary for a full-time employee at a consultancy firm is £78,818. And the services of freelance consultants generally cost more per hour than the services of salaried consultants.
With your own consulting business, you’ll also need to decide how exactly you want to charge your clients. Consultants may charge fees on an hourly or monthly basis, or they may charge a flat fee to cover an entire project – no matter how long it takes.
It is also possible that companies will hire you on a retainer basis – meaning you will be paid in advance to deal with any issues that might arise over an agreed period of time. Regardless of how often and when exactly you are paid, your fees as a consultant should take into account the amount of time you spend preparing for a job as well as the amount of time you spend working on it.
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