Businesses have certain requirements they must meet when employing workers, and many need help adhering to legal regulations and overcoming practical challenges. When they need help, businesses that don’t have in-house HR departments turn to human resources consulting firms. A human resource consulting firm business may help other businesses with employee handbooks, personnel forms, benefits programs or any other employment-related issue.
For business owners with experience in the field, starting a human resources consulting firm business can be a promising venture. IBISWorld reports that the HR consulting industry has an annual revenue of $22 billion within the United State, and it has demonstrated a slow but steady growth of 0.6 percent over the past five years.
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Learn how to start your own Human Resources Consulting Firm and whether it is the right fit for you.
Start a human resources consulting firm by following these 10 steps:
- Plan your Human Resources Consulting Firm
- Form your Human Resources Consulting Firm into a Legal Entity
- Register your Human Resources Consulting Firm for Taxes
- Open a Business Bank Account & Credit Card
- Set up Accounting for your Human Resources Consulting Firm
- Get the Necessary Permits & Licenses for your Human Resources Consulting Firm
- Get Human Resources Consulting Firm Insurance
- Define your Human Resources Consulting Firm Brand
- Create your Human Resources Consulting Firm Website
- Set up your Business Phone System
There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your human resources consulting firm. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Exploring your options? Check out other small business ideas.
STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a human resources consulting firm?
The costs to open a human resource consulting firm business are fairly low, totaling between $2,00 and $10,000. These funds are needed to purchase a computer, office software, a laser printer, a fax machine, and an internet connection. An office may be necessary at times, but business owners can rent a shared coworking space or meet in a cafe when first starting out.
Before opening a consulting firm, however, business owners should either have another source of income that’s stable or a significant amount of personal saving. It can take six months to develop a client base and another six months before consulting begins to provide a paycheck.
Because earning any income from consulting can take so long, many business owners start human resources consulting firms part-time while working at another job. Working in the evenings and on weekends gives business owners an opportunity to grow their client base without giving up their primary income. Once the client base is providing a steady income, they may choose to leave their job and consult full-time.
What are the ongoing expenses for a human resources consulting firm?
The ongoing expenses for a human resources consulting firm business are minimal. They include office supplies, office equipment depreciation, utility costs, and travel expenses if a business owner meets with clients in person.
Who is the target market?
The primary target market for a human resources consulting firm business is small and medium businesses that either don’t have in-house HR departments, or want to downsize and outsource their HR department’s work. Some firms also consult for nonprofit organizations.
How does a human resources consulting firm make money?
A human resource consulting firm business makes money by selling consulting services to other companies. Most firms charge an hourly fee, and some may be on a retainer for certain clients.
How much can you charge customers?
The average cost for a human resources consultant ranges from $99.52 to $184.74 per billable hour. Specialists will tend to be toward the higher end of this range, while generalists will likely be closer to the lower end because of the increased competition they face.
How much profit can a human resources consulting firm make?
Human resources consultants can earn a substantial income. In a full day with 8 billable hours, a consultant might bring home between $800 and $1,472. Of course, not every day will have 8 billable hours in it.
How can you make your business more profitable?
Human resources consultants who write articles for magazines and newspapers might earn a little side income while pursuing these marketing efforts. Additionally, business owners can write ebooks or traditional books on their areas of expertise.
What will you name your business?
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Human Resources Consulting Firm Name Generator
When registering a business name, we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability.
It's very important to secure your domain name before someone else does.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your human resources consulting firm is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
- LLC Taxes
- Sole Proprietorship vs LLC
- LLC vs Corporation
- LLC vs S Corp
- How to Start an S Corp
- S Corp vs C Corp
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
Besides being a requirement when applying for business loans, opening a business bank account:
- Separates your personal assets from your company's assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.
Open net 30 accounts
Net 30 accounts are used to establish and build business credit as well as increase business cash flow. With a net 30 account, businesses buy goods and repay the full balance within a 30-day term.
NetMany net 30 credit vendors report to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our best net 30 vendors, guide and start building business credit.
Get a business credit card
Getting a business credit card helps you:
- Separate personal and business expenses by putting your business' expenses all in one place.
- Build your company's credit history, which can be useful to raise money later on.
Recommended: Apply for an easy approval business credit card from Divvy and build your business credit quickly.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
Make LLC accounting easy with our LLC Expenses Cheat Sheet.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a human resources consulting firm business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Certificate of Occupancy
A human resources consulting firm business is generally run out of an office. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a ___ business.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your XXX business will be in compliance and able to obtain a CO.
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
If you already have a logo, you can also add it to a QR code with our Free QR Code Generator. Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.
How to promote & market a human resources consulting firm
Networking at local business events and with area business organizations can help business owners develop relationships with potential clients. These efforts can be complemented with direct mailings and cold calling.
How to keep customers coming back
Business owners can set themselves apart from the competition and further establish themselves as specialized experts by writing newspaper and magazine articles, and by presenting to area business organizations.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2022 to find the best phone service for your small business.
Recommended Business Phone Service: Phone.com
Phone.com is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.
Start a Human Resources Consulting Firm in your State
- District of Columbia
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
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- Rhode Island
- South Carolina
- South Dakota
- West Virginia
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Is this Business Right For You?
Obviously, business owners who want to position themselves as human resources consultants must be knowledgeable in the field. It’s not enough to be an expert in HR, though.
Consultants must also be capable salespeople, for bringing on new clients forces business owners to sell themselves. They have to be able to show how their services will help other companies, earn the trust of those companies’ decision makers and ultimately, secure a consulting contract.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at a human resources consulting firm?
Human resources consultants spend time interacting with clients and working alone. Business owners can expect to be in regular contact with clients, connecting via email, fax, phone, and in-person meeting. When not talking to clients, business owners often work alone researching issues and assembling materials.
What are some skills and experiences that will help you build a successful human resources consulting firm?
As mentioned, business owners must be knowledgeable in current human resources issues and how they’re solved.
Prospective business owners who would like to bolster their knowledge in a specific area may want to take an online HR course. ECornell, Study.com and other organizations offer courses on particular subjects. Some other institutions, such as the University of Phoenix, have certificate programs. For the highest level of education in the field, business owners can complete a bachelor’s degree or master of business administration at an accredited university.
Classroom education alone, however, may not sufficiently qualify prospective business owners for work as an HR consultant. Most people who successfully start HR consulting firm businesses have experience working in HR, and many have worked in the industry for decades.
What is the growth potential for a human resources consulting firm?
A human resource consulting firm business can be a small business run by one person, or it can grow to be a large international company. Burr Consulting, LLC in New York is an example of a small firm that has one consultant. Mercer is a much larger consulting firm, with operations in more than 130 countries.
Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a human resources consulting firm?
There are many human resources consultants who provide general consulting services, which can make attracting clients difficult. To differentiate themselves, business owners should specialize in one or two areas of HR consulting that are in demand.
Colin McAndrew, an HR consultant in the United Kingdom, did just this by offering overseas consulting services. He had worked in several countries before opening his own consulting firm, and he has leveraged this experience to attract U.K.-based companies that have operations in multiple countries.
How and when to build a team
Many human resources consultants never hire an employee, while some choose to hire only support staff to help manage their office. A few eventually bring on additional consultants as their client base grows.