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How to start a consultancy business

Some 300,000 consultants in the UK work as external advisers to people, businesses and organisations. Whether providing advisory or implementation services, some are called consultants, while others are called advisors.

Their independence and unbiased opinions are a large part of their appeal, with consultants often saving people, businesses and organisations a lot of time, effort and money. Most consultants work in one of six consulting areas ­– strategy, management, operations, HR, financial advisory or technology.

Why set up a consultancy business?

Most people set up a consultancy business after gaining knowledge, qualifications, experience and contacts while working for someone else. Some set up a consultancy business on their own, while others do it with colleagues.

Although there are no guarantees, setting up your own consultancy business can give you more income, greater flexibility and a healthier work-life balance. You get to be the boss and decide your own destiny. Others do it because they relish the challenge of creating, running and growing a successful consultancy.

As with most things, there are pros and cons. You may not earn more, not at first, at least. You may need to work longer hours to get established. And as well as providing your services, you’ll have to manage your business, which means having to take care of many tasks, including those you don’t like. But the pros can outweigh the cons and the rewards can be significant.

Starting a consultancy business? A word of caution…

If you’re an employee considering setting up your own consultancy business, check your employment contract terms. Some contain “restrictive covenants” or “post-termination restrictions”, which prevent employees from leaving and setting up in competition.

They normally last for three to six months (12 months for more senior roles). Sometimes voluntary redundancy agreements also contain restrictive terms about approaching customers. Ignore them and there can be expensive legal consequences.

Even if there are no such restrictions, if you tell your employer that you plan to leave and set up your own consultancy, you could soon be put on “garden leave”. Naturally, your employer will want to mitigate potential damage. If you’re in any doubt about your legal position, seek tailored professional advice.

What research should I do?

Start by answering some basic questions.

  • Will yours be a full-time or part-time consultancy business?
  • Should you go it alone or set up with someone else?
  • Which specific services will you offer?
  • Which customers will you target?
  • Will you be able to you attract enough of them?

Carrying out basic market research is advised. If you don’t already know, find out who your main competitors are, what they offer and how much they charge. Crucially, consider how you can set your consultancy apart.

Also speak to potential customers. Tell them you’re planning to launch your own consultancy and ask them what they like and dislike about their current service provider. Ask how much they currently pay and whether this offers good value. Find out how your offer could be more attractive to them. 

If you can get a commitment from them there and then – get it. Being able to launch with clients in place will be hugely advantageous. Getting direct feedback from potential customers can prevent expensive start-up mistakes. At very least, it can help you to launch a consultancy that’s more likely to appeal and succeed.

Young businessman multitasking using laptop.working concepts

Is my consultancy business idea viable?

You need to work out whether your idea for a new consultancy is viable. Things may be better or worse in reality, but you need to work with educated estimated figures to test whether your business idea could work.

Guided by your basic market research/knowledge, you should know what you can charge for your services, determined by how much target clients or customers are prepared to pay. Work out roughly how much revenue you’re likely to make in a month. Once you take away your likely start-up, operating costs and tax, would your take-home be enough?

Also consider where the money will come from to start your consultancy. You’ll have to use your own savings, but will you have enough to start and keep your business afloat until it generates profit? If not, you’ll need funding or finance. Minimising your start-up costs is essential, but you’ll still need spend some money.

Creating a brand for a consultancy business

People often mistakenly believe that “brand” means logo, typeface, colours, etc. These are elements of brand identity. Your brand is what comes to mind when customers think of your business. Your brand is your promise to your clients – it’s what you stand for.

Successful businesses have strong, appealing, distinct brands. Invest time and money in creating your brand. Budget permitting, paying for advice from a brand expert can prove shrewd. Having an impressive brand can really enable your new, small consultancy to compete against larger, more established competitors.

Experts can help you with your brand identity, and once fashioned, you’ll be able to create your website. Your website should create a superb first impression by showcasing your brand, telling potential customers key facts and why they should buy your services. Obviously, it’s cheaper to do your own website, and it’s possible to create a reasonably good website, but hiring a professional can ensure far better results.

It’s a key start-up task, but you’ll also need to come up with and register a name for your new consultancy. Be sure to check that your preferred business name isn’t take and that you can get the website domain name you want.

How to attract customers

There are countless ways to promote your new consultancy business, but here are some good methods to start with. 

  • Printing press
    Leaflets

    Sounds old-fashioned? For many consultancy businesses working with consumers, a good old-fashioned leaflet drop in a targeted area can generate many leads.

  • Talking over coffee
    Word of Mouth

    Just telling people that you’re starting your own consultancy and encouraging them to tell people they know, may generate leads. Maybe offer a cost-effective incentive to encourage your customers to recommend you to others?

  • Website builder
    Website

    Have an impressive website, with copy optimised for Google so that you rank highly in search engine results pages, can generate leads. For a better response, you could consider Google advertising options.

  • Apple iPhone 7 on blue wooden table with icons of social media facebook, instagram, twitter, snapchat application on screen. Tablet computer life style. Starting social media app.
    Social media

    Having an engaging, strong, regular social media presence is vital for many businesses. Low cost is a big advantage of social media marketing. While some channels may not be suitable for your consultancy, being active on LinkedIn works well for many consultancy businesses.

  • A young girl in glasses sits in the office at a computer desk and is talking on the phone. Before her on the table lie folders with documents.
    Other options

    Simply phoning potential customers can bring dividends. Other options include direct mail/email, online/offline advertising, blogging, providing comment or articles for publication, networking online and offline, attending or having a stand at conferences, joining business networks and membership organisations, etc.

Checklist: 12 things to sort before starting a consultancy business

We’ve ticked off some of the main things you’ll need to think about in the planning phase. Here are some of the other key areas you’ll need to consider when starting your consultancy business. 

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Registering a new business

With all of the other main tasks completed, you’re now in a position to officially register your business.

  • Your main options include sole trader (ie self-employed) and private limited company.
  • If you become a freelancer or contractor, you can simply become self-employed or incorporate a private limited company.
  • If you set up your consultancy with others, you could register as an ordinary partnership or limited liability partnership.
  • Read about the pros and cons of different types of business that you can register.
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