How to start a consulting business

Published Thursday 15 May 2025

Table of contents

• What do consultants do?
• Types of consulting niches
• Consulting for smaller organizations vs. large companies
• Why start a consulting business?
• How to start a consulting business: A 10 step guide

Key Takeaways:

• Consultants use their expertise to solve problems and help businesses grow. Key skills include problem-solving, clear communication, and offering practical solutions.
• Choosing the right niche is crucial. Focus on your strengths and research market needs to find a profitable consulting area.
• The experience differs depending on the size of the business. Small businesses need hands-on support, while larger companies often require strategic planning.
• Starting a consulting business offers flexibility, financial rewards, and personal growth with low consulting startup costs and the opportunity to make a real impact.

What do consultants do?

Consultants use their expertise to help businesses solve problems, improve how they work, and reach their goals. They bring a fresh perspective and deep knowledge that’s hard to find inside the business.

Some people think anyone can be a consultant. But to succeed, you need more than experience. You need to be great at what you do, clear in how you communicate, and focused on helping others succeed.

If you're thinking about becoming a consultant, here are some key skills you'll need:

• the ability to give expert advice in your area of knowledge.
• a strategic mindset to create business growth plans.
• strong problem-solving skills to spot issues and offer solutions.
• confidence in researching, analyzing data, and sharing insights.
• clear thinking to recommend practical actions that help businesses grow

Types of consulting niches

Think about what consulting niche best matches your skills and experience. Here are some of the most in-demand:

• Management consulting: Help businesses improve performance by solving operational or team-related challenges.
• Marketing consulting: Use your strategy skills to build marketing plans, grow brands, or boost visibility online.
• Human resources consulting: Advise on hiring, contracts, and people issues, offering an independent and expert point of view.
• Financial consulting: Support businesses with smart financial planning, reporting, and data-led decisions.
• IT consulting: Improve systems, streamline tech processes, or support new software rollouts.
• Public relations consulting: Build buzz and brand awareness through smart communication and media tactics.
• Strategy consulting: Work with leaders to define big-picture goals and create clear, focused strategies.
• Business consulting: Offer broad support across planning, growth, and market positioning.

Consulting for smaller organizations vs. large companies

Along with choosing your niche, think about the size of business you want to work with to better understand how to become a consultant.

Small businesses often move fast. Decision-making is usually simple, with fewer people involved, so things can get approved quickly. But they may need more hands-on support—especially if they don’t have the time, tools, or expertise in-house. You might need to be creative with limited budgets and help turn strategy into action yourself.

Larger companies usually have more resources and more complex systems. Decisions can take longer, with more people involved. Your work here is likely to focus more on strategy, while internal teams handle the day-to-day delivery. These projects are often longer, more structured, and come with higher budgets.

No matter the size of the business, what you bring—your expertise, energy, and ability to adapt—can make a big impact.

Top reasons to start a consulting business

Running your own consulting business can be exciting, flexible, and rewarding. Here’s why it might be the right move for you:

• Low cost to get started: All you really need is a laptop, a phone, and a few essentials. You can work from home or on the go—no need for a big investment or office space. Most consultants don’t need outside funding to launch.
• Control over your income: Consulting is one of the highest-paid careers. You set your rates, choose your hours, and decide how much work you want to take on. That means more freedom—and the chance to build a business that fits your lifestyle.
• Constant learning and growth: Every client brings new challenges. You’ll sharpen your skills by solving problems, thinking creatively, and working with a variety of people and industries.
• Making a real impact: Helping a business succeed because of your advice feels great. Happy clients often turn into repeat business or referrals—so the impact you make helps your business grow too.

How to start a consulting business

Starting a consulting business can be a rewarding way to leverage your expertise, make a real impact, and enjoy the freedom of being your own boss. Here’s a simple guide to help you get started on the right foot.

1. Define your niche

To build a successful consulting business, it’s crucial to define a niche that matches your skills, experience, and industry knowledge.

Start by assessing your strengths and areas of expertise—where do you excel, and where can you provide the most value? Once you've identified your niche, it’s time to research industry trends, competition, and client needs to make sure your choice is profitable and in-demand. You can explore service-based business ideas to get inspiration, or dive into consulting business planning to create a clear strategy for your niche.

Think about how you can uniquely position your consulting business—whether it’s through specialized business consulting services, a unique approach, or a specific market segment you can serve best.

2. Identify your target market

Start by narrowing down your focus—consider factors like business size, industry, budget, and the specific pain points your services can address. Different types of businesses will have different needs, so it's important to understand who can benefit most from your expertise. Research the challenges, goals, and problems that businesses in your niche are facing, and tailor your business consulting services to solve those issues.

If you’re unsure where to start, explore small business ideas to see what types of businesses are out there, or dive into market research and competitive analysis to gather insights into your specific market.

3. Develop a consulting business plan

The first step is to create a business plan. This helps you clarify your ideas, guides you as you grow, and provides an important document for banks, investors, and accountants.

Your consulting business plan doesn't have to be a lengthy document. Just one page will do. You can use this free business plan template. Here's a list of what you may want to include:

• Executive summary
• Company overview
• Industry analysis
• Customer analysis – likely potential customers
• Competitive analysis – who your competitors are
• Marketing plan – your value proposition and how you plan to market this
• Operations plan
• Management team / Your team
• Financial plan – how you intend to finance getting started and the ongoing business

If you're undecided about what type of consultancy service to offer, start by auditing your skills and experience. How can you make the most of your strengths? What’s the main area of expertise that you can offer to organizations?

Consider the target market you want to work in. What might be the pain points of working in this area? Is it an area you want to excel in? Answer these questions before moving forward.

4. Decide your business structure

Choosing the right business structure is crucial because it will affect your personal liability, taxes, and how your consulting business will operate. Different structures—such as sole proprietorship, partnership, LLC, or corporation—have unique implications. For example, an LLC offers personal liability protection, while a sole proprietorship leaves you personally responsible for business debts.

When deciding on a structure, consider your future growth plans, risk tolerance, and the level of administrative complexity you’re comfortable with. If you plan to expand your business, a structure like an LLC may offer more flexibility.

5. Register your business: EIN & licensing essentials

Understand the legal requirements based on your business structure, location, and services. Taking care of these obligations upfront will save you time and stress later on.

Consultants typically need a few key licenses and permits to operate legally. These might include a general business license, a home occupation permit if you’re working from home, or a DBA (Doing Business As) if you plan to use a trade name. It’s important to research what’s required in your area so you can ensure your business is fully compliant.

You'll need an Employer Identification Number (EIN), for doing taxes, hiring employees, or opening a business bank account. Depending on your location, you may also need to handle sales tax requirements or file a BOI (Business Ownership Information). Don't forget to separate your business and personal finances—this is important for both legal protection and accounting purposes.

6. Understand business insurance requirements (H3)

Business insurance is essential for protecting your consulting business from potential risks. The types of insurance you need will depend on your services and whether you have employees. Here are the key types to consider:

• General liability insurance covers claims of bodily injury or property damage that might occur while you're working.
• Professional liability insurance (or errors and omissions insurance) protects you against claims of negligence or mistakes in your advice or services, which is especially important for consultants offering expert guidance.
• Business continuation insurance helps ensure your business can keep running in the event of disruptions, like natural disasters or unforeseen circumstances.
• Workers’ compensation insurance is necessary if you have employees, covering medical expenses and lost wages if they're injured at work.

To determine which policies you need, assess the specific risks of your consulting niche, the types of clients you interact with, and whether you have employees.

7. Set your prices (H3)

When it comes to setting prices for your consulting services, there are different pricing models to consider.

• Hourly pricing: This is a straightforward model where you charge clients based on the time spent on their project. It works well for smaller tasks or when the scope of work is unclear.
• Project-based pricing: Here, you set a fixed price for an entire project, regardless of the time it takes. This model is great for well-defined projects where you know the scope and deliverables in advance.
• Retainer pricing: With a retainer, clients pay a set amount on a regular basis (usually monthly) for ongoing services. This pricing model provides more predictable income and is ideal for long-term relationships.

The key to setting the right price is to focus on the value you deliver to your clients, not just the time you spend. Consider how your expertise solves their problems and the impact of your work. Pricing based on value can help maximize your profitability, allowing you to charge more for services that make a significant difference to your clients.

8. Establish a business bank account

Opening a business bank account helps keep your personal and business finances separate, making it easier to track expenses, manage cash flow, and file taxes. It also adds credibility and allows you to access business-specific features like loans and credit lines.

Choose a bank that offers low fees, online banking, and great customer service to best support your consulting business.

9. Finance your consulting startup

When financing your consulting business, consider these options:

• Personal savings: Using your own savings is a low-risk option but requires having enough funds set aside.
• Business loans: Ideal if you need a lump sum to cover startup costs, but you'll need a solid plan to repay.
• Grants: Government or private grants are non-repayable but competitive and often have specific eligibility requirements.
• Crowdfunding: Suitable for businesses with a compelling story, allowing you to raise small amounts from many people.
• Investor funding: Attracts investors who provide capital in exchange for equity, making it a good choice for high-growth potential businesses.

Regardless of how you choose to finance your startup, always keep a close eye on budgeting and cash flow management. Choose funding that aligns with your long-term business goals and ensures sustainable growth.

10. Market your small business

Marketing your consulting business effectively is essential to attract clients and build your reputation. Start by creating a professional website, as it’s a key tool for showcasing your services and building trust with potential clients. Your website should clearly highlight your expertise and provide easy ways for clients to contact you.

Consider strategies like blogging, case studies, or sending out newsletters. These tactics can help you establish credibility and demonstrate the value you bring to clients. Sharing your knowledge through blogs or case studies builds trust, while newsletters keep clients engaged and informed.

To connect with potential clients, leverage platforms like LinkedIn, attend industry events, and engage in direct outreach. Reaching out to prospects directly can help you build relationships and expand your network.

FAQs on starting a consulting business

What qualifications do I need to become a consultant?

The qualifications you need to be a consultant depend on your niche. Certifications like Project Management Professional (PMP) for project management, HubSpot Marketing for marketing, and Certified Public Accountant (CPA) for finance can boost your credibility. Additionally, ongoing training in your area of expertise helps you stay competitive and knowledgeable.

How much should I charge as a consultant?

Your consulting fees depend on factors like your expertise, industry, and the value you provide to clients. Generally, consultants charge hourly, project-based, or retainer fees. To determine your rate, consider the complexity of the work, your experience, and what competitors are charging. Make sure your pricing reflects the value you deliver rather than just the time spent, ensuring it aligns with your business goals.

Do I need a business license to start consulting?

Yes, you’ll usually need a business license to start consulting. The specific requirements depend on your location, the type of consulting services you offer, and whether you’re operating as a sole proprietor or an LLC. Check with your local government or regulatory bodies to determine which licenses or permits are necessary for your business.

How can I find my first consulting clients?

To find your first consulting clients, start by exploring job boards like Upwork or Indeed, where companies often post freelance consulting opportunities. You can also use cold email outreach—craft personalized emails offering your services and how you can solve specific problems for potential clients. Additionally, leverage social media platforms like LinkedIn to connect with prospects, share valuable content, and engage in industry-specific groups to increase your visibility and attract clients.

What tools do I need to manage my consulting business?

To manage your consulting business effectively, you’ll need a few key tools. Accounting and bookkeeping software like Xero can help you track finances and manage invoices. A project management tool like Trello or Asana helps you stay organized and track client projects. Communication tools like Zoom or Slack are essential for client meetings and team collaboration. Additionally, using a CRM like HubSpot can help you manage client relationships and streamline your sales process.

Use Xero to streamline your consulting business

Take control of your finances, simplify your accounting, and focus on what you do best—consulting. Sign up for Xero and see how easy managing your business can be.