A management consulting business provides expertise, guidance, and objective insight for businesses. As of 2020, management consulting was a $250 billion industry. There are many niches in management consulting, including strategy, human resources, operations, and more. Management consulting companies are usually comprised of experts in business-related fields who specialize in helping businesses improve in various areas related to leadership and management.
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Learn how to start your own Management Consulting Company and whether it is the right fit for you.
Start a management consulting company by following these 10 steps:
- Plan your Management Consulting Company
- Form your Management Consulting Company into a Legal Entity
- Register your Management Consulting Company for Taxes
- Open a Business Bank Account & Credit Card
- Set up Accounting for your Management Consulting Company
- Get the Necessary Permits & Licenses for your Management Consulting Company
- Get Management Consulting Company Insurance
- Define your Management Consulting Company Brand
- Create your Management Consulting Company 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 management consulting company. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
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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 management consulting company?
One of the nice things about starting a management consulting business is that your startup costs are not very high. As long as you are doing the work yourself and not hiring someone else to help, you will only need your phone, computer, and expertise. Marketing your services might require some initial investment, but even those costs can be kept down if you take advantage of free marketing opportunities like social media and blogging.
What are the ongoing expenses for a management consulting company?
The ongoing costs for a management consulting business vary depending on the structure of the business. If you are doing everything on your own, your costs may be limited to maintaining your technology (computer, smartphone), utility bills for your home office, and travel costs when you meet with clients. If you have employees, they will make up a large portion of your ongoing expenses. But while employees can be costly, they may save you money over hiring freelancers to take care of specific tasks like data analysis.
Who is the target market?
Your target market is businesses that need help with their management. You may prefer to be more general and serve all types of businesses, or you may want to narrow down to a specific niche industry. Remember, just because a business appears successful doesn’t mean they don’t need help. Don’t be afraid to target all types of businesses that you think you could help.
How does a management consulting company make money?
Management consulting businesses tend to use four different pricing models:
- Return of investment (ROI)-based
- Monthly retainer
You might use one pricing model with one client and a different model with another client. There are positives and negatives to each model. Some clients have strong opinions about one model over another as well. For example, a client might balk at paying you an hourly rate while being happy to pay by project or based on ROI.
It is usually easier to determine which pricing model will work best after knowing what kinds of problems you will be solving.
How much can you charge customers?
There are multiple ways to choose how much you charge clients. You need to charge enough to make your business appear professional and valuable, but not so much that you drive away business. One pricing method consultants use is to take the salary from their last job and multiply it by three. So, if you made $50 an hour at your last job, you would charge $150 an hour for consulting. The significant increase from your previous salary is necessary because you have to pay more taxes as a freelancer. You also have to pay for your health insurance coverage and your marketing costs.
How much profit can a management consulting company make?
Management consulting businesses can generate significant profit if they are successful. Major consulting companies may charge $500,000 to $1,000,000 a month. Of course, these are the top players in the industry. At the low end, the rate for a single business consultant is $150 an hour. If we go off of the entry-level pricing model mentioned above, where you triple your last salary, you can expect to make a little more than you did at your last job after expenses. As you gain experience and build a team, your profit potential goes up considerably.
How can you make your business more profitable?
You can make your consulting business more profitable by building a team and a reputation. As your team grows and you can offer more comprehensive solutions for your clients, you can charge considerably more. And if you build a great reputation, clients will trust you to solve their problems and expect you to charge accordingly.
What will you name your business?
Choosing the right name is very important. Read our detailed guide on how to name your business. 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.
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 management consulting company 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 Management Consulting Company. 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.
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 management consulting company
There are multiple channels you can use to promote your management consulting business, including social media, blogging through your website, direct mail advertising, trade journals, cold calling, and word of mouth. All of these can be effective if done right. The key is to be persistent and take note of what works. For example, you can track how many people follow links to your blogs. There may be some topics that generate more interest than others. You can conduct A/B testing in direct mail marketing by sending out two different versions and having respondents tell you which version reached them. By being more systematic in your marketing approach, you can identify what works best and do more of it.
Word of mouth is particularly effective in consulting. If you help a client successfully, be sure to ask for referrals and testimonials.
How to keep customers coming back
Businesses hire consultants because they need help. If you provide that help and leave clients satisfied, they are more likely to come back. That is why it’s very important to do the best for every client you work for. Consulting companies have a big potential upside if they develop a good reputation – which is what you want for your company.
Good communication is also important for keeping customers happy. They need to know what you see, what you want to do to fix it, and why it’s important to fix it. They also need regular updates about your progress to know that they are getting what they paid for.
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 Management Consulting Company in your State
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Is this Business Right For You?
If you like helping managers get better results from their teams, you would probably be a good fit for management consulting. There are so many different management types that you can pick one that you are most passionate about and help others in that area. If you are passionate about teaching, team building, communication, and results, you may excel in the management consulting industry.
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 management consulting company?
An average day at a management consulting business is a busy one. Work can include examining issues your client is having with their business to find potential solutions, analyzing data to identify issues and/or solutions, conducting surveys of management and/or employees, preparing presentations for clients, presenting your findings, negotiating with clients, and much more. Depending on the complexity of client needs and the scope of your business, you may have employees handling these tasks and therefore need to manage those employees. And if you are not currently helping a client, you will spend your day marketing your business to get more clients.
What are some skills and experiences that will help you build a successful management consulting company?
Probably the most important qualification for becoming a management consultant is experience and expertise. Businesses come to consultants because they need insight and knowledge that they don’t have. You should be able to confidently market yourself as an expert in your field if you want businesses to pay you for your expertise. Organization is another major skill that can be helpful. If your business is successful, you will need to juggle numerous tasks to serve your clients best.
What is the growth potential for a management consulting company?
The growth potential for a management consulting business is significant. As you gain experience and build a reputation for quality, you can attract bigger businesses with more resources to pay you and your team. It may take time, but if you are persistent and deliver results for your clients consistently, you should be able to grow steadily, hire more employees, and offer more services.
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 management consulting company?
Marketing your business may be challenging at first. It can be helpful to find what is working for others and copy it for your own business by researching how similar consulting businesses reach their clients. For example, other consulting businesses in your niche may advertise in trade journals specific to the industry. You should do the same. Others may blog regularly about management optimization strategies. You can blog, too, or at least hire someone to do it for you.
Another option you may try is reaching out to your connections in the industry. If you’ve been working in the industry for years, you probably know some people in various companies that you can tell about your new consulting business. They may be able to help you find some of your first clients.
How and when to build a team
While it often makes sense to start your consulting business on your own, if you get more than a few clients, you will need help to keep up with the work. There are several reasons to hire employees. One reason is to handle more menial tasks so you can focus on problem-solving. Your expertise is far more useful for your business if you are helping clients instead of stuffing envelopes. Another reason is to add expertise and skillsets to your business. For example, you may be able to serve your clients better if you have a data analyst handling the data while you focus on communicating with clients.