How to Start a Consulting Business

Market research is an essential first step when starting any kind of business. When starting a consulting business, consider researching your potential client base and competitors. This process should leave you better prepared to make a success of your own consulting business.

You can manage your market research in several ways, including by researching the websites of established consultants in your field and talking to industry customers and competitors.

The two most important questions are:

1. Is there demand for my services?
2. Who should be my target market?

Use this research to decide what type of consulting business you want to create, and consider the demands of your clients. Ultimately, your clients will expect you to come to the table with knowledge that solves their problems or helps them add value to their organisation. Think about what sector you intend to focus on and where you’d be able to add the most value as a consultant.

Apart from management consultants, other common types of consultants include the following:

• Strategy consultants review and advise businesses on their long-term strategies.
• Operations consultants help businesses with supply chains, procurement, and their day-to-day operations. 
• Financial consultants work with companies to get corporate budgets and balance sheets into shape. 
• IT consultants help with anything related to information systems and technology, from setting up new software to managing an organisation’s long-term IT strategy. 
• Sales consultants work with companies to help them sell more products or services.
• Marketing consultants help organisations to develop their brand and increase their visibility.

This list is far from exhaustive, and in reality, there are countless different types of consultants. In fact, almost any specialist and marketable skill set you can think of can form the basis of a consultancy service.

Consultants may also offer industry-specific services – like aviation consultants, who work with airlines, or editorial consultants, who work in the book trade. If you have a natural affinity for dogs, for example, there’s nothing stopping you from calling yourself a canine consultant and charging clients to train their pets. 

It should be fairly obvious from your professional experience what sector and what type of consulting would suit you best. Once you have decided on a focus for your consulting business, an important next step is to start putting together a list of industry contacts: people you know or have worked with over your years in the industry. When you set up your consulting business, these will probably be some of the first people you approach as potential clients. 

Creating a business plan and budget will help give you a better idea of exactly how much money you need to start your consulting business. A business plan will normally also be required if you apply for a start-up loan or business loan.

For a more detailed guide, read our article on how to write a business plan.

As for your budget, it may not take a large up-front investment to get a consulting business off the ground. If you choose to run your consulting business from home, you’ll likely have fewer overheads than if you were to buy or lease business premises. 

And since consultancy work can be entirely independent, you won’t necessarily need to hire any staff. Again, this contributes to keeping overheads low.

When writing a budget for your consulting business, consider:

• Premises: The cost of business premises will depend on the size of the office you want to rent and where in the UK your consulting business is based. Working from home may eliminate many of these costs. 
• Website costs: Setting up a website will help you advertise your consulting business and connect you with potential clients. Whilst you can create a simple website yourself using a free or low-cost platform you may decide to enlist some outside help to give you a more professional look. Freelance designers may charge around £750 to create a small website advertising your consulting business – although prices are likely to vary depending on the needs of your website and the skills and experience of your chosen designer – and could be much higher.
• Administrative costs: Consider any other overheads or start-up costs associated with running your consulting business. You’ll almost certainly need an internet connection to find and communicate with clients, and you may also have to pay to register your consulting business. It costs £12 to register as a limited company with Gov.uk. 
• Travel costs: If you are required to travel to visit clients, these costs could soon add up. Even though you’ll likely get the money back if you charge expenses, you’ll still need to foot the upfront cost so be sure to account for travelling expenses.
• Accountancy services: When starting your own consulting business, you might decide that it’s worth paying for accounting software to help you file your tax returns and keep track of your finances. You can read our guide to the best UK accounting software for small businesses. 
• Insurance: Although not compulsory, it may be a good idea to purchase professional indemnity insurance and public liability insurance when starting your own consulting business. Quotes for both kinds of insurance may start from less than £5 per month, but your final price will vary depending on the size and nature of your business and your desired level of cover, amongst other things. 
• Marketing costs: You may also decide to set aside some money in your consulting business budget for marketing costs. This may involve taking out adverts in trade magazines or on the websites of industry publications – the price of which will depend on the publication and the size of your advert.

For more details, explore our five-step guide to creating a small business budget.

One of the first official steps you will take when starting up is choosing a business structure and then registering your consulting business. You should take your time and research which business structure will best suit your needs:

One option is to run your consulting business as a sole trader. This is the simplest and easiest route to starting your own business, requiring only that you register with HM Revenue & Customs (HMRC) for Self Assessment. 

However, you should take your time and research which business structure will best suit your needs. Many self-employed consultants either operate as sole traders or set up and run their own limited companies, although you also have the option of running your business as a partnership.

For more information, check out our guide to registering for your business.  

» MORE: Should I register as a sole trader or limited company?

Now is also the time to consider taking out insurance for your consulting business.

Professional indemnity insurance protects you if you make a mistake that costs your client money – and which might result in you being sued by your client for damages. Professional indemnity insurance is not a legal requirement, but if you are in the business of advising other companies, it may be a good idea to get it. 

Public liability insurance may also be necessary if you plan on attending meetings at clients’ or your business premises. Public liability insurance is designed to protect you from damages resulting from injuring someone or damaging someone else’s property. Again, it is not a legal requirement to have public liability insurance – but it can be a good idea for any business that comes into contact with clients or members of the public.

Once you have created a budget and registered your consulting business, you are ready to seek the funding you’ll need to get your business off the ground. If you don’t employ any staff and decide to work from home, you may not need much capital to get your consulting business up and running.

If you don’t employ any staff and decide to work from home, you may not need much capital to get your consulting business up and running. In this case, you may be able to fund your consulting business with your savings. 

Otherwise, you may need to consider or even combine the various funding options explored in our guide to funding your new business, from government business funding to start-up loans.

Whatever option you go for, you may also choose to open a business bank account to keep track of this funding – and the profits you’ll hopefully make while running your consulting business. While you may be able to keep on using your personal bank account if you are a sole trader (and your bank permits you to), the moment you incorporate as a limited company or partnership, you must keep your personal and business finances separate. 

Even as a sole trader, you may find that opening a business bank account makes it easier to keep on top of earnings and outgoings. 

Finding work as an independent consultant may be difficult when you are starting out. You might want to start by reaching out to people you’ve worked with in the past.

Likewise, if you have other contacts within your industry, now may also be a good time to get in touch and see if they have any need for your services. If you do a good job, then you may find that word-of-mouth referrals result in one job leading to another. 

Meanwhile, there are various other steps you can take to give yourself the best chance of finding consulting clients:

• Join a professional body: Membership of a professional organisation may be a signal of your experience and skills in that industry, which, in turn, may make it easier to find consulting clients. For management consultants, joining the Institute of Consulting may demonstrate credibility and expertise. For consultants in other industries, research relevant professional organisations and consider signing up, if you aren’t already a member. 
• Set up your own website: A website advertising your professional expertise and your consulting services will make it easier for prospective clients to find you. Consider paying a designer to create a professional website if you don’t have experience in web design. 
• Take out adverts: If there is a specific industry publication whose readers would benefit from your services, then taking out adverts in this publication may be a good way to raise the profile of your consulting business. 
• Get networking: The more people you know, the more likely you are to find new consulting clients. Step up your networking efforts by attending events in and around your industry and making more connections with people in your sector. You never know when a handshake at an industry event might lead to lucrative work at some point down the line.