How to Start a Human Resources Consulting Firm

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Our guide on starting a human resources consulting firm covers all the essential information to help you decide if this business is a good match for you. Learn about the day-to-day activities of a human resources consulting firm owner, the typical target market, growth potential, startup costs, legal considerations, and more!

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Start a human resources consulting firm by following these 9 steps:

You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step 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.

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 initial costs?
  • Who is your target market?
  • How long it will take you to break even?
  • What will you name your business?

Luckily we have done a lot of this research for you. Skip on ahead to the Business Overview for more detailed answers to all your questions.

Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.

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STEP 2: Form a legal entity

Establishing a legal business entity such as an LLC prevents you from being personally liable if your human resources consulting firm is sued. Consider using a registered agent service to help protect your privacy and stay compliant.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

STEP 4: Open a business bank account

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.

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.

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.

STEP 7: Get Business Insurance

Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.

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.

STEP 9: Establish your Web Presence

A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.

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Select your state below for an in-depth guide on completing each of these steps in your home state.

Business Overview

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.

Who is this business right for?

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.

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 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.

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.

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, 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 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.

Where can I 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.

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.

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Growing Your Business

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.

Recommended: Get started with local advertising for your business with a $300 credit from Yelp.

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.

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.

Legal Considerations

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:

Maintain Personal Asset Protection

Don’t think that just forming an LLC, or any other type of business, will save your personal assets in case of a lawsuit or other matter by itself.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.

Two of the simplest steps that will protect your business, and yourself, are to:

Open a business bank account

  • This separates your personal assets from your company's assets, which is necessary for personal asset protection.
  • It also makes accounting and tax filing easier.

Get a business credit card

  • This helps you separate personal and business expenses by putting your business' expenses all in one place.
  • It also builds your company's credit history, which can be useful to raise money and investment later on.
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To learn more about maintaining your LLC's corporate veil, read our guide and protect your personal assets.

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.

Earning Potential

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.

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.

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.

Next Steps

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