MD: Intending to start a consulting firm? Here’s how you can do so. Be sure to buy insurance for consultant before you offer your services.
Have you always wanted to start a consulting business in the United States? If yes, you’ve come to the right place. Here, we explore the step-by-step process of how to plan for and set up a consulting firm. We see what insurance for consultants is best for you and how to ensure your new consulting business thrives for years to come.
· Choose a business niche you want to consult for
A consultant can consult companies across industries. From architecture to art, gaming to geology and pharmacy to psychology – you can work in any niche based on your academic and professional expertise.
· Determine what services to offer and which markets to consult for
Even within a niche, you can choose a specific market to work in. For example, if you consult for pharmaceutical companies, you can choose to be a specialist in your industry’s APAC or EMEA business region only. Or you can become a generalist.
Your choice of business market will affect the type and number of clients who approach you for your services. It will also affect the nature of services they seek. For example, a country has a shortage of the right talent or technology. They may seek IT or HR consulting businesses more than other types. As a business owner, you need to know what your prospective clients expect from you and offer relevant services.
· Decide on the business structure.
When it comes to consulting businesses, there are different types of business structures you can choose from:
· Sole consulting – Here, you are the exclusive consultant, and you will work with your clients one-on-one on all projects.
· Consulting firm – This is a company with two or more consultants who work together. You share projects or allocate teams to handle a client each.
· Productized/Subscription/Membership-based consulting – While the above two business structures are service-driven, this is more product-driven. Instead of offering a customized consulting service, you create a course or software or program for clients to use. This can help them make business decisions. Typically, this involves identifying a common problem with your clients and developing solutions to address that challenge. Each month you update this knowledge base and answer any questions your clients may have.
· Hybrid consulting business – This consulting business structure combines both the productized and service-driven consulting firm structures. Here, firms provide a basic productized solution for an affordable price. But there’s also an option for clients to upgrade to a customized, one-on-one consulting service if they choose to.
The choice of the business structure depends primarily on what your consulting strengths are.
· Register your business, get the required business license and Employer Identification Number (EIN) for your consulting firm
Once you’ve selected your business structure, it’s time to register your business. In the US, consultants can register their consulting firm using the resources and instructions provided on the US Small Business Administration website.
Additionally, business owners who wish to start a consulting firm in the United States are required by law to have a business license to operate in that state. You are required to apply for a business license in each state that you wish to offer your services. Also, if you are a consultant to a specialized and technical field – for example, medicine, engineering, pharmacy, etc. – you will need to have the additional requisite licensing to prove that you are qualified to provide this technical advice.
Finally, business owners must apply for the Employer Identification Number (EIN) for tax purposes.
· Create a business plan and apply for investments
Once your business is set up, you’ll need money to start your consulting operations. A few good ways to get finances are –
· Bank loans
· Venture capital investments
· Greenfield investments
· Angel investments
· Friends & family
· Personal capital
Except for your capital, you will need to convince everyone else why they need to invest their hard-earned money into your consulting business. This is where a business plan helps.
Your business plan should contain essential information about your consulting business, such as:
o Industry, markets & geography it serves
o Company SWOT & PESTEL analysis
o Competition analysis
o How do you intend to overcome competition
o Finance & investment are necessary
o Breakdown of how this money will be used
o Financial projections for the next 1, 5 & 10 years
o Hierarchy of firm
o Number of employees
o Qualifications of team members
o Forecasts of BEP and profits/losses
o The forecasted number of customers
o Methods of seeking clients
o Tools, technology & resources you intend to use
o Expected growth plans
o Returns you plan to give your investors
o Exit strategy for investors
This information will help potential investors decide whether they should invest in you or not.
· Find a place to work out of
The choice of where to work out depends on how you intend to offer your service. If you plan to visit the client’s company and work from there, you can work right out of your home. This will save a lot of money on rent.
But, if you plan to invite clients to come to your office, renting an office space sounds good. There are many co-working places in the US, such as WeWork, Proximity Space and Regus, where you can rent office space for an affordable cost.
· Purchase the right tools & technology for your business operations
Once your office is in your possession, it’s time to equip your consulting firm with the tools & technology it needs to shine. These tools include:
o Consulting software
o Invoice management software
o Accounting & bookkeeping software
o Time management software
o Document sharing software
o Internal communication software
o Cybersecurity software
o Benchmarking software
o Competency analysis templates
o Balanced scorecard software
o HR management software for onboarding, training, attendance, timekeeping, etc.
o Productivity software
Purchasing these tools can help you run your business more efficiently.
Purchase business liability insurance to protect your company
The next step is to purchase professional liability insurance for consultants.
Consultants advise entrepreneurs, managers and company directors about various aspects of their business. This advice is often used as the foundation on which business owners and leaders take important firm-related decisions.
While you offer your advice in your client’s best interest, many uncontrollable forces can affect how well your advice works in the end. For example, the political atmosphere in the country, economic changes, natural disasters, etc. These may sometimes result in your client losing money or their plans getting delayed, or their branding getting impacted.
It is straightforward for your client to feel angered or cheated in such circumstances. They may even levy a lawsuit against you on grounds such as:
o Misrepresentation of information
o Low-quality information & advice
o Deliberate damage to business
o Failure to deliver expected service
Such claims can be particularly damaging to your company. You may be forced to pay thousands or even millions of dollars worth of damages to the client. This can even bankrupt a small consulting firm.
This is where professional liability insurance for consultants comes in. This is an insurance for consultants designed to protect you against any claims that your clients may make about a service they were unhappy with. The coverage from this insurance for consultants will help you cover your legal costs and possibly a portion of your damages as well. That way, you won’t be too affected by the financial burden of any possible cases.
In addition to getting professional liability insurance for consultants, consider also purchasing general liability insurance. This insurance indemnifies you against any financial losses if your clients were injured or their property damaged during their visit to your consulting firm. This policy can protect you from accusations of libel or poor advertising.
Finally, if you intend to use specific business tools – either in your firm or at the client location – having a Business Owner’s Policy helps. It’s insurance for consultants that protects your company assets against damage and theft.
· Hire an attorney experienced in representing business consulting firms
While the insurance for consultants will help you protect your finances, you still need a qualified lawyer to represent your interests in the court of law. You will need to work with an attorney who is licensed to practice in your state. This lawyer will help you with everything from business registration issues to taxation to service performance.
· Set your prices
The final stage of preparing to take your consulting business to the market is setting the prices. You can study the fees charged by your closest competitors and use that to help you decide on a price. Or you could offer more specialized or a higher number of services and charge a premium for it.
· Promote your consulting business to your professional circle and friends
Once you have completed the above steps, you are ready to start your consulting firm and offer your services.
The best way to get clients the first time is to contact your professional circle – previous employers, professional acquaintances, friends and family members.
To encourage more clients to choose you as their consultant, you can offer discounts or other non-financial benefits. Such as an add-on service to patrons who purchase your services in the next 1-2 months. The offers you provide can change depending on whether they are consistent/long-term or clients or not.
· Create a website and social media profile
Everyone is online these days, and your consulting firm won’t survive without a website or social media profile. The great news is, you can find freelance website designers and social media consultants who can help you set up an online presence. You can then purchase and run ad campaigns on social media and create landing pages to attract different groups of clients.
Did you know? Some types of general insurance for consultants also provide coverage for your cyber assets in the event of a hack. You can find out more about this insurance here.
· Advertise across various channels
Apart from social media, it would be best to consider advertising on job portals, employment boards, professional publications and in the newspaper. This will help you reach more companies that require your consulting services.
· Collect client reviews to use on your site/accounts
When you start getting clients, be sure to collect their feedback. Ask their permission to use this feedback as a website review. These reviews will be the most compelling sales pitch for prospective clients.
· Hire experts as you grow
If you start as a sole consultant, in the beginning, you may need to hire qualified people later. LinkedIn, Indeed and other job portals can be a great place to hire the right staff. You can also participate in job fairs to target students looking for jobs.