Things to consider before starting a consultancy business
Posted on 13th May 2020 by Marketing Executive - Katherine Ducie
The UK’s consulting industry is made up of over 63,000 professionals, specialising in a broad range of areas, from PR and marketing to finance and accounting.
Working in a profession where your experience and advice is what you build your business on can be extremely fulfilling. It presents a chance to work with different clients from all industry sectors, by providing them with valuable services that they cannot undertake themselves.
As well as providing a fulfilling career, consultancy can be a profitable and equally, a challenging route to take. With no two days the same, a career as a consultant can provide you with the independence and flexibility you’ve always craved.
But how do you take the leap and start a career as a consultant?
Knowing how to get started, or even getting to the stage where you have enough self-confidence to go for it can be difficult.
If you’re thinking of starting your own consulting business but don’t know how to or you’re trying to figure out whether it’s a step you’re ready to take, this article will help you find the answers.
To give you the best and most practical advice, we’ve spoken with experienced consultancy business owners, Jessica and Natalie. They share with us their first-hand experience of starting and maintaining a successful consultancy business.
In our article we cover topics including:
- How many years of experience should you have before becoming a consultant?
- What skills are needed to be successful as a consultant
- The challenges faced at the beginning of a consulting career
- What is key to sustaining and growing a consulting business?
- How to set the right prices
- How to register a business
PR consultant – Jessica Morgan
Based just outside of Bath, Jessica set up her own PR consultancy business Carnsight Communications over four years ago. Discussing when she first went into consultancy, Jessica says: “I’d thought about it for a while, but it felt like a big step. Moving from London to the Bath area was the real catalyst. I started small with one project and it grew from there.”
Marketing consultant – Natalie Sharp
Based in Tunbridge Wells, Natalie set up her marketing consultancy business, Sharp Thinking Marketing, two years ago. Natalie has consulted at brands including Vodafone, where she created an award-winning social media strategy. Explaining her path into consultancy, Natalie says: “Across my career, I had worked with a huge range of clients across different sectors and client-side I had worked for start-ups, small businesses as well as corporates, so I felt I could utilise the depth and breadth of my experience in a consultancy capacity.”
Knowing when the time is right to become a consultant
Explaining how she knew it was the right time to take the plunge and become a consultant, Jessica says: “It’s always a leap of faith but peers and people in my network had encouraged me and said they knew I could do it, which definitely helped. Self-confidence was the single biggest thing I needed.”
For Natalie, the flexibility consultancy offered was perfect for juggling work around motherhood.
She says: “I felt confident that I could advise clients with their business planning. It was always something I knew I wanted to do. I took a career break after having my children and felt it was the perfect time for me. It would also allow me flexibility, so I could work from home and fit the work in around the children.”
How many years of experience should you have before becoming a consultant?
There’s no definitive number, when it comes to the years of experience you need to become a consultant, but you need to have honed enough experience to impress a prospective client and for them to believe that you can tackle a problem much more effectively than they’re able to themselves.
Prior to becoming a consultant, Jessica had built up 15 years of experience working with a range of high-profile global brands and as a Director at a PR agency.
She explains: “I had 15 years behind me which felt like a good amount. Having said that, every profession is different and if you feel you’ve grown enough in your role you may feel ready after just a few years. We’re all still learning.”
Natalie on the other hand spent 10 years working in advertising at the biggest London agencies, creating lead generation campaigns and managing product launches. She then worked in house as a marketeer, developing marketing strategies.
Natalie shares her advice: “I would say you need at least 10 years of experience to really add value to different clients that operate in different sectors and have very different challenges. I use my knowledge and experience across all the 8 different roles I’ve had during my career history. Every role I’ve had I’ve been able to learn from and grow.”
What five skills are needed to be successful as a consultant?
Jessica’s top five skills:
- Confidence – build or fake it initially if necessary!
- Enjoying your craft
- Never stopping learning
- Finding your support network
- Knowing when to delegate
Natalie’s top five skills:
- Good listener
- Strong multi-tasker
- Good at questioning
- Natural problem solver
The challenges faced at the beginning of a consulting career
Sharing what she found difficult when first becoming a consultant, Jessica says: “Initially I missed having colleagues around me – so I started getting more involved in networks and started having more face-to-face meetings with clients and contacts.”
“Also, the fact that you’re the main contact for everything has its challenges – you suddenly have to understand IT systems, be a web developer and fix a broken printer yourself. That was eye-opening!”
For Natalie, the juggling and being responsible for all parts of a business were the most challenging aspects.
She says: “It is not just about delivering the work – you are running a business. You need to think about everything that comes with it including your sales, marketing and finance.
It is also a fine balancing act, gauging how much time a project will take and then ensuring you have lined up the next project without waiting for months. And of course, ensuring you have got your pricing right, so you can make a sufficient profit.
I tend to use freelancers when I’m busy, who help pick up additional projects for me, but this heavily eats into your profits. Quite often, projects take a lot longer than you had estimated so when you are paying freelancers on an hourly rate you have to be really careful and agree upfront how much time they can spend on a project.”
Best advice for anyone thinking of starting a consulting business
Before getting your consulting business off the ground, Jessica recommends carrying out some research.
She says: “Understand your market and your potential customers and competitors. Get a feel for what kind of fees you should be charging and what percentage of time you need to be working to make it worthwhile.
Also, be realistic about all the costs at the start – what software will you need, IT equipment, workspace costs etc.”
For anyone thinking of starting a consultancy business, Natalie says:
“Develop close relationships with others in your industry and build up your industry network. It can be a lonely job, so it can really help to have others to confide in that can help you along the way.
Remember, you have every right to change your business at any point. And it will naturally evolve, so nothing is set in stone.”
How to set the right prices
When it came to working out what prices to charge clients, Jessica says: “I asked around when I first started and then set prices at a rate I was comfortable with. I’ve since raised them!
According to research, women often price themselves too low so it’s best to push yourself a little. And don’t feel you have to constantly overachieve – you’re worth the money.”
Natalie’s advice on setting prices is to conduct some research. She explains: “I did a competitor audit and looked at how other consultancy businesses had approached pricing. I also looked at industry sources and compared on a national and local level.
A year in, I launched a range of packages. I still keep evolving my products and services even now to stay relevant and of course ensure my prices are competitive.”
What is key to sustaining and growing a consulting business?
Once you’ve got your business off the ground and built up a steady number of clients, you then work on maintaining those clients and finding ways to be discovered by new clients. Jessica says: “Working on the business not just in the business is key to sustaining and growing a consultancy business. We’re now a small team and I make sure I leave time for things like working on the website, social media, PR (obviously!), giving business talks, networking etc.
It’s all too easy to spend too long on the doing and not long enough on the planning and generating interest.”
Natalie says the key to sustaining and growing her consultancy business has been SEO.
She says: “Over half of my business has come from SEO so I invest a lot of effort into improving my Google search rankings. This means that time needs to be invested every week.
Writing blogs is also an important part of your SEO, but blog writing is also a chance to show off your expertise and drive traffic to your website.
Growing your social media following is another key aspect. It takes years to do this and you need to dedicate a lot of time and patience.”
Does it help to have a business mentor?
Having a mentor to runs things by and seek guidance from can be extremely useful, especially when you’re first starting out in business.
A mentor can be someone you know. Maybe you could reach out to a friend who has their own business, an old colleague or a LinkedIn connection and arrange a catch up. Those who know you will be happy to help motivate and support you on your journey.
If you don’t know anyone personally who can offer sound business advice, becoming a part of a network can be a great way to find a mentor. This could be a network specific to your industry or could be a business mentoring network like Mentors Me.
Discussing mentors, Jessica says: “I don’t have one mentor, but I certainly have a few key people around me that I trust and I can meet with for a coffee and chat to, giving advice and taking it. I’ve also met advisers at various stages, and they have been invaluable, too.”
Natalie says: “Having a mentor can definitely help. It can be a lonely job and of course, you have no manager, so it is highly beneficial to have someone you can confide in and help guide you.
How do you register a business?
Once you have decided you’re ready to become a consultant, you’ll need to register your business at GOV.UK.
You can either register as a sole trader or as a limited company. While it’s simpler to set up as a sole trader, it means you are personally responsible for your business finances. This has its advantages and disadvantages. If your business is thriving and making a profit, that is yours personally but if your business has a financial loss or debts, you’re personally responsible for those too.
If you choose to open a limited company, your personal finances and business finances are separate. That means that any financial losses or debt your business incurs won’t fall on you personally. Having a limited company does however come with more reporting responsibilities, such as filing your accounts annually with Companies House.
Why do consultants need insurance?
As a self-employed consultant, you are exposed to a number of risks that, without protection, could cost you your business. No matter how hardworking, professional or careful you are, mistakes can transpire unintentionally. These risks can be out of your control and occur when you’re least expecting it.
One danger you could encounter may involve a client being unsatisfied with the work you have produced and claiming to have suffered a financial loss as a result of that work.
Another risk could involve you losing or breaking a device that is vital to the completion of your work such as a computer, laptop or phone. If your laptop breaks, that could be all of the hard work saved to that device, and potentially your income from a client, gone.
Complications like these are unpredictable and can be costly or in the worst case, leave your business bankrupt.
Consultant’s business insurance, including professional indemnity cover, can protect you from these risks and give you peace of mind. Click here to find out more about insurance for Management and Business Consultants or click here to find out more about insurance for Finance Consultants.
If you’d like to find out more about business insurance for consultants, contact our award-winning team on 0333 321 1403.
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