BrazilFive things to consider before starting a consulting business
Starting an own business is about taking a huge step forward in both career and professional life. Taking such a step is not easy and definitely takes a lot of courage. Since it is such an important leap, aspiring entrepreneurs need to be certain they have got everything under control and are 100% ready for their new venture. The same goes for consultants seeking to start their own consulting business.
Consultancy is all about serving clients and what consultants have to offer them. This is why, before deciding to start a consulting business, founders need to be well prepared. Marie Fincher, the editorial director at Trust My Paper, shares five things aspiring consulting entrepreneurs need to think about before starting a consultancy business.
1. Check the Market
As you are aware, consultancy is such a broad term. You can’t simply choose to be “a consultant”. In fact, a consultant is not a protected profession, meaning that any professional can call himself/herself a consultant. Key is therefore to choose a specific segment of the consulting industry and making it your specialty. Typical areas consultants can work in include: strategy; finance, risk & compliance; IT, digital and technology; human resources, operations management & supply chain; organisation & management; and mergers & acquisitions.
These are some of the most prominent types of consulting, widely spread and in high demand. But, how can you choose which way to go? If you’re not choosing based on personal preference, you should explore the market by checking the statistics and using data analysis, if possible. See which services are most needed and what kind of consultants are currently in demand. For instance, at the time of writing, consultants with expertise in cybersecurity and data science are in high-demand on the back of booming demand in the segments.
Consultancy buyers don’t want a consultant “for everything”. They want an expert in the niche and someone who specialises to be the best in exactly what they need. In other words, you need to define your path and be certain which way you want to go.
2. Rethinking Consulting Skills
You made the first step, which is selecting a specific consultancy niche. Now it’s time to consider your skills and expertise. The question is: can you do it? Your task is to do the homework and gather information about the specific skill set you need in order to rightfully do the consultancy job you’ve chosen.
We are not talking about the official consultancy education, degrees, and certificates. We are talking about the applicable practical knowledge. Ask yourself, can you: asses the client’s problems? Design an action plan? Help a client build capacity? Tailor a change management plan? Lead a programme transition including navigating change? Deliver on results including the business case?
Analyse your niche, learn what you need to know, work on your skills based on what the market requires and grow to be better every day.
3. Structuring pricing
For many beginners, structuring the pricing of their services can be a puzzle. You’re only just getting started and you fear to stand shoulder to shoulder with your competition. Pricing is key in consulting, with the fee charged for consultants currently under high scrutiny from clients. A growing number of tools are creating more transparency in consultant fees, meanwhile the rise of independent consultants – in line with the gig-economy – means that fees are under pressure.
When structuring your pricing, remember:
- you need to be cost-effective for companies who hire you; that is, less expensive than them hiring a long-term specialist;
- don’t underprice; value your knowledge;
- be specific; create a pricing guide to help you decide on the exact pricing for each specific project and client.
4. Keep track of the metrics
It’s important to start keeping track of the success of your consulting business the moment it starts. It will help you gain insight on your efficiency, productiveness and client satisfaction. Consequently, it will help you learn, develop, improve and grow to be even better. Therefore, before starting a consulting business, make sure to learn all about the metrics for your niche. For example:
- Leads generated: the number of clients leads generated by marketing and business development
- Utilisation rate: the number of hours working for a client, also known as chargeability or billable hours
- Customer satisfaction: how satisfied clients are with the engagement delivered by a consultant
- Repeat business rate: the number of repeat clients in a consultants’ portfolio, a measure of client satisfaction
- Gross margin: a key performance indicator to highlight the profitability of consulting operations
When preparing to start a consulting business, you need to be aware of the value of data analysis and metrics. Start keeping track from day one as it can down the line provide extremely relevant information.
5. Reach out
Before going all in, try connecting with potential clients and even future colleagues and making as many new contacts as possible. Build your LinkedIn profile and look for others from the same industry. Further, research what clients have to say about the consulting industry and what types of services are being hired by them. This will help you stay informed and up-to-date on the latest consultancy-related information and happenings. It will also allow you to have someone to ask for an advice, an opinion or simply to talk about your progress.
Conclusion
Think about all the things you’ve done to prepare yourself for starting a consulting business. Furthermore, think about everything that’s waiting for you just around the first corner. If you know what you’re dealing with, make sure to prepare in advance and start off ready and confident. Once you consider all the possible issues, difficulties and obstacles you could face and become certain you can face them, you’re ready to start your consulting business. Do it passionately and be the best you can be. That is the key to success.
