Starting out on a new career venture can be exciting and making the decision to work for yourself is a big step. If you’re thinking about starting a consultancy business, there are some things you need to consider. These steps will help you make sure you’ve thought about the challenges you could face when setting up your own consultancy.
A consultant is an expert in their field who is employed by businesses to advise and share their specialist knowledge. A management consultant is usually brought in by a company to identify and solve problems or to look for a way the company can operate more efficiently.
There are many different reasons a management consultant can be hired including, but not limited to:
- Working with the senior management team to look at and improve how a business operates.
- Reviewing accounting and tax processes to ensure everything is as it should be.
- Learning about how the business runs and finding opportunities for growth.
- Developing and implementing improvements to current business practices.
A successful management consultant can be invaluable to a company, helping businesses to face challenges they aren’t set up to deal with on their own. However, while becoming a management consultant can be an excellent career choice isn’t always an easy route to take. That said, if you’re willing to put in the time and effort, it could be both professionally and financially very rewarding. Follow the steps below to find out how to start a consulting business.
5 steps to starting a consulting business:
How to start your consulting business
Work out a business plan
Register your business
Make sure your consulting business is insured
How to land your first consulting client
1) How to start your consulting business
Starting a consulting business isn’t the right choice for everyone. You need to have solid industry experience behind you and the skills to effectively communicate your knowledge. You’ll also need to be organised and able to work autonomously to keep on top of your client workload.
However, if you already have a wealth of experience in your chosen field then your experience will be just as valuable as these. For example, if you want to become a management consultant then experience setting up your own successful business will give your clients the reassurance that you can offer them valuable advice.
2) Work out a business plan
Your business plan is an important step when setting up a consultancy and isn’t one you can leave out. Your business plan will help you visualise what you hope to achieve from your business and how you will go about doing this. Things to think about include but are not limited to: how you will fund your business, how you will gain clients, what will set you apart from the competition, and what your fees will be.
Your business plan will be your instruction manual for running your consulting business, so it’s imperative that you put in the time and effort to make sure it’s sound and workable. This is the stage of starting your own consulting business that you need to consider carefully and plan thoroughly.
If you’re wondering where to begin, this guide to the one page business plan will help point you in the right direction.
3) Register your business
Next, you’ll need to work out what is the best way to operate as a management consultant. This is most likely to be a choice between becoming a sole trader or a limited company, which will influence how you manage your company’s finances and how much tax you will owe.
Registering as a sole trader
Registering as a sole trader means you will be solely responsible for the liabilities that come with your business. Should you make a loss then you personally will be liable, but should your business be profitable then so are you. There are advantages to setting up as a sole trader. 
If you think being a sole trader is the best option for you, you will also need to consider the disadvantages. You will be personally responsible for any financial losses and debts that may accrue, which means any assets you own can be put at risk. 
It is easier to become a sole trader, but you will still need to fulfil your legal obligations with HMRC. You’ll need to register as self-employed and make sure you submit tax returns and pay any taxes owed on time. You also need to ensure you are up to date with your National Insurance contributions.
If you decide to register as a limited company, liability for any financial losses or debts falls on the company, instead of falling on you as an individual as is the case with sole traders. Keeping your accounts in order isn’t as easy for a limited company, so you will need to hire an accountant to deal with these. It can be easier to raise money as a limited company and to sell your business.
There are also some possible disadvantages to consider if you are thinking of registering as a limited company. You will need to annually file your accounts with Companies House, this is a legal requirement and there are financial penalties if you fail to do this. 
4) Make sure your consultancy business is insured
No matter how professional you are, there’s always the possibility that something might go wrong. And if it does, you’ll need to make sure your business is protected with the right business insurance. Having the correct cover from the outset means your business is in the best place possible to recover in the event something does go wrong.
At Hiscox, we offer specially tailored business insurance for management consultants. The policy you choose is tailored to your business to make sure you have the best level of cover for you. Professional indemnity insurance will cover you in the unfortunate event you make a mistake that ends up losing your client money. Perhaps you made a mistake with your figures and this resulted in you giving some bad advice.
It can also be pertinent to consider Public liability insurance. This will cover you if you regularly attend meetings at your clients’ business premises, or have clients visiting you at yours, and will cover you for any damages or losses that could occur during this time. It will also cover you if a member of the public or a client brings a claim against you for an injury they occur or property that is damaged as a result of your work.
If you’re a sole trader, you’ll be able to take advantage of Hiscox tailored insurance policies. Designed for sole traders and the self-employed, our cover will ensure that you have the best possible protection from the liabilities associated with this professional position.
5) How to land your first consulting client
Once you have your business set up, you need to think about your first clients. Usually, you will find your first clients from your existing professional network. Think about people you have worked with in the past and still maintain a working professional relationship with. It can be as simple as an email letting them know you’re offering your services on a consulting basis. Then ask to meet them for coffee or lunch and discuss how you will be able to help and support them.
It might transpire that they don’t have an opportunity for you right now, but they know someone who does. Word of mouth is important when setting up your management consultancy business, it’s how you’ll grow your business and, hopefully, go from strength to strength.