How to start a consulting business

Find out what you need to do to start and manage your own consulting business.

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Being a consultant is a way you can make a career out of sharing your business expertise with others. It can also be a lucrative side hustle. This guide covers types of consultants, getting expert advice on writing a business plan, choosing your niche, and understanding your target audience.

What do consultants do?

Companies hire consultants for their specific expertise and to bring an outside perspective to problems.

A common misconception is that anyone can become a consultant. Someone who wants to be a consultant needs to be both great in their field and an excellent communicator. You need to be strategic, solution-focused, and want to help other businesses to succeed.

To help you decide if consultancy is right for you, check this list of the top skills that successful consultants need. Consultants need to be skilled in:

  • providing specialized expert advice
  • devising strategies for other businesses
  • helping businesses diagnose problems and create solutions
  • assisting with data collection, expert research, and giving feedback
  • providing recommendations to help companies to grow and reach their goals

Types of consulting niches

Think about what consulting niche best matches your skills and experience. Some of the most popular ones are:

  • Management consulting: This can involve helping companies with anything from operational decisions to team restructures. Management consultants help to solve organizational problems to improve business performance.
  • Marketing consulting: This might be your niche if your expertise is in marketing strategy and understanding industry trends. It can involve creating a marketing plan to grow a new business or building brand awareness through social media.
  • Human resources consulting: Sometimes an organization needs an independent consultant for support with employment contracts or managing disciplinary action. An HR consultant can bring fresh, unbiased perspectives and additional expertise.
  • Financial consulting: Financial consultants are results-driven experts with the know-how to help businesses with their financial strategies, reporting structures, and data analysis.
  • IT consulting: IT solutions operate at the center of many businesses, and work efficiently to support staff members. Depending on their background, an IT consultant can help with anything from reworking existing IT systems and networks to supporting the implementation of new software.
  • Public relations consulting: Experts in communication and brand visibility may be well-suited to PR consulting. It's about finding the right tactics to improve a brand's presence, from creating compelling press releases to running buzzworthy social media events.
  • Strategy consulting: This involves working with high-level managers and executives to create clear strategies that meet business objectives. It's similar to management consultancy, but focuses more on meeting specific goals, rather than improving overall business performance.
  • Business consulting: A business consultant needs to have broad business and market knowledge to offer guidance and support. That support can involve writing a business plan to drive change and helping a company to implement that plan.

Consulting for smaller organizations vs. large companies

As well as choosing a niche, consider the size of the company you want to consult for.

Smaller organizations may require consulting work to be more hands-on as they lack the resources and expertise to strategize and implement improvements. They may need you to be more creative with budget, time, and resources when finding solutions in their specific area. You may require project management skills to help implement your recommendations.

Larger companies tend to be richer in resources and knowledge. Consulting for a larger business may require higher-level strategic thinking, as teams are available in-house to implement your recommendations. It's likely to involve more collaboration, working with different teams to get the job done.

Why start a consulting company?

So you're an expert in your field, looking to become a consultant to help other businesses. But why start your own consulting company? It allows you to work when and where you want, but running your own business can come with challenges.

It’s a big step moving from being in a full-time job to being self-employed as a consultant. So you might want to start consulting as a side project while still working full-time. This can be a useful way to learn the consulting landscape, understand if it's right for you, and start building your client base. However, it may not be sustainable long-term, as you balance your time and responsibilities throughout the working week. In addition, you must be sure that your side hustle client work doesn’t interfere with your day job, and that there are no conflicts of interest.

Here are some of the pros and cons of starting your own consulting practice:


  • It’s fairly low cost to start
  • It can be financially rewarding
  • You have control of where and when you work
  • You are your own boss
  • Job satisfaction as the work can be rewarding
  • You have flexibility


  • Running your own business can be stressful
  • Work can be irregular
  • As you are self-employed, there are no employee benefits or safety net
  • There are a lot of administrative responsibilities, such as handling taxes
  • You can’t have clients that are competitors of your current employer

Step-by-step guide to starting a successful consulting business

Follow our simple step-by-step guide to starting your own consulting business and making it successful.

1. Develop a 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 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?

As well as thinking about what you can offer, 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.

2. Decide your business structure

You'll need to decide how to structure your business as it can impact the taxes you pay, and your business legal status.

These are some of the common business structures for a consulting business:

  • Sole proprietor: Often preferred by single owners for its simplicity in ownership and management. You may work under your own name or file for a DBA (doing business as) if you want to name your company something else. The income taxes for a sole proprietor are generally simple too.
  • S-Corp: An S corporation is a corporate entity and any shareholders who work in the business are employees. While this type of entity files its own tax return, income is reported and taxed on the shareholders’ personal tax returns.
  • Limited liability company (LLC): An LLC is a flexible legal structure that provides some asset protection for its owners. There are multiple taxation options: it can be taxed as any of the entity types listed above, or as a partnership, depending on the number of owners and any tax elections made.

Read more in this Xero guide to types of business structure.

3. Get an EIN

The next step is registering for an employer identification number (EIN) at the IRS. It can be helpful when opening a bank account and filing for taxes. Sole proprietorships have the option of using their social security number instead.

4. Apply for a business license

If you've decided to set your business up as an LLC or an S-Corp, you'll need to register in the state you choose to operate, and in additional states if you will be working in more than one state. Find out how to register with your state. You may also need to register a doing-business-as (DBA) name if using a brand or trade name.

As permits and licenses vary from state to state, it's best to visit the individual websites to follow the steps you need to take. Find out more about what may be required when registering a business.

Special considerations/certifications may be needed, depending on the state you're operating in:

  • You may require a general business license in some states.
  • Some cities require a zoning permit.
  • Some consultancy work requires proof of certification or qualification, such as for financial services.

It's best to check with local authorities for what permits, licenses, and certifications are required.

5. Define your target market

Once you've chosen your consulting niche, you need to find your target market. The type of clients you work with depends on your area of expertise. Consider who the potential clients are likely to be and what kinds of businesses they come from.

For example, your market may be:

  • Startups
  • Small businesses
  • Corporations
  • Local, state, or federal government
  • B2B businesses
  • A specific business sector such finance, education, or health

6. Set your prices

How will you set up your pricing structure for prospective clients? You could, for example, charge via hourly rate or project rate. Read about some simple pricing options to work out what might be right for you and your business. It's important to understand the value of what you're offering and how your business can make the most money.

When setting your pricing structure, you'll need to consider the following:

  • Your overhead costs, such as office space
  • Competitor rates
  • The industry you’re working in
  • Any travel that’s involved

7. Establish a business bank account

It's a good idea to set up a business bank account for your company. It helps to separate your business spending from your personal expenditures.

It can also be useful if you need to apply for business loans or credit cards for company spending, especially if you want to scale your business. Plus, you can track the income from your company more easily if it's all in one place. If your bank connects to online accounting software like Xero, you can get automatic feeds of bank transactions into your accounts.

8. Build your brand

You'll need to define and build your brand to attract prospective clients to your business.

Start by focusing on your niche and target market, as this helps to tailor your brand to the right clients. You'll need to choose a business name and a logo to go with it.

The next step is to build a website to explain what you do, and showcase your offering. This is where you'll refer new clients for more information about your business, and where companies will contact you for potential work.

If you want to become a thought leader in your industry and set yourself apart from other consultants, think about what else you can do to help build your reputation. You could publish blog articles that share your knowledge and expert opinions. You could speak at events and conferences.

9. Understand business insurance requirements

Having business insurance is essential for the smooth and safe running of your company. Once you understand what you need for your business, make sure you regularly review your insurances, as risks and responsibilities change and evolve.

Start by understanding the different options that are available to you. Some key types of insurance include:

  • General liability insurance: This provides support against public injury and damage claims.
  • Professional liability insurance: This provides economic support if any mistakes are made that put your business at risk.
  • Business continuation insurance: This can help replace lost income if your business has to close or slow for any reason.
  • Worker’s compensation insurance: This is required if you have employees, providing financial support in cases of injury or death.

10. Startup financing

The next step is thinking about how to fund your new business venture. The types of funding available for starting a small business include:

  • personal savings
  • business loan, for example, through SBA
  • borrowing from family and friends
  • credit card financing
  • crowdfunding
  • a business partnership or strategic alliance

Some businesses may not require a large amount of funding upfront, but choosing the right funding is important for the longevity of your business. If you need a business loan, read this handy guide to understand what kind you need and how to apply.

11. Market your small business

Once you've set up your business, chosen a company name, and created a website, you need to think about marketing your brand. How will your first clients discover your consulting services? Can anyone provide you with testimonials or a referral to help build trust in your business? You need to communicate your business in the right way to the right clients.

Common ways to market a brand include:

  • Word of mouth and testimonials from previous clients
  • Referrals
  • Social media
  • Create a LinkedIn profile for your business
  • Ensure that your website is optimized for search engines (SEO)
  • Advertise in industry publications
  • Create business cards to hand out at networking events
  • Get a proposal template designed that looks professional


Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.

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