Published by MBA Skool Team, Published on January 20, 2016
The article covers steps on how to start a consulting firm. In recent times the need to start something on our own far surpasses the previous dream of settling down and getting a job. Entrepreneurial and innovative ideas are on the rise and we see more people willing to work in start-ups than in established companies. With the rise of service sectors, consulting firms are on the rise. Professionals prefer to start their own consulting forms rather than working for someone else.
Steps to be considered before opening a consulting firm are detailed below:
1. Initial checklist: The following is a checklist that people should consider before starting a consultancy firm:
a) The certifications and licenses that may be needed
b) The necessary qualifications and legal obligations
c) The contacts and client base that are already present
d) The core competencies of the business
e) The diverse services that may be offered
f) The Unique Selling Point of the consultancy firm versus other firms
g) A business plan
h) The structure of the business (a company, partnership, proprietorship, etc)
i) The marketing strategy involved
2. Financing Decisions: Consulting firms are not capital intensive. A large amount of capital is not needed to open a consulting firm. Here the investment is more on human capital. Since a consulting firm subsists on knowledge, hiring suitable candidates is a very important decision. But, before that, the core services offered should be decided. In the initial stages rather than offering a diverse range of services, these firms should focus on a few important services. They should build up on these and then diversify.
3. Knowledge Requirements: In consulting firms, knowledge is of paramount importance. A consultant should also be confident in his knowledge and assertive. People come to the consultant for advice. It does not inspire confidence when the consultant is fumbling with the answers and is unsure about the facts. Each consultant should have a niche and be up to date about all changes in that field. It is also not advisable that the consultants stagnate in their knowledge. They must continue to grow and develop their expertise. As David A Fields says, “Be generous with your knowledge. Clients return to the richest wells first when they’re thirsty for help.”
4. Client Base: The next deciding factor is the client base. This will not be easy. The firm needs to acquire and maintain the client base. Initially it will be difficult to obtain new clients. The entrepreneur needs to build up on his people pleasing skills. It is also imperative that he be able to convince people and maintain relationships with his clients. The major advertising in consulting firms is word of mouth. It is essential to keep your existing clients happy so that they spread the word and help you obtain more clients. Your interactive skills should be extremely good because you would constantly need to market your services. Apart from this the consultants should have relationships which could be converted into a client base, or at the very least, referrals.
5. Revenue Model: Apart from these consultants should also have a revenue model in place. Charging less initially and then raising their prices does not work in this case because the clients will feel ripped off. A consultant should have knowledge about the ongoing market rates for similar services and then charge in the same bracket if not more. Since people generally associate high costs with better quality, it is in the best interests of a consultant to charge more than his peers. He however needs to justify this with better quality services. Along with the revenue, a control should be exercised on the costs incurred. Overhead expenses, employee salaries, rent etc are the major costs which have to be controlled.
6. Professional Behaviour: Consultants should also be prepared for slow business initially since this kind of business takes time to take off and be successful. They should be prepared financially and emotionally for a few months of almost no business and should be able to sustain themselves through it. Consultants should portray themselves as professional. Since services are intangible, the way they can do this is through tangible factors such as location, premise, business cards, professional clothes and outward appearance, etc.
7. Communication and Networking: It is vital that the consultants communicate effectively and at regular intervals with their clients. Keeping the client up to date, communicating explanations and being honest with the clients are all a mark of an efficient consultant. A consultant also has to constantly network to build their customer base which would help them grow.
8. Employee Requirements: As the business grows, the consultant may need to hire employees. However, in this case employees with appropriate qualifications have to be hired. Employees who can also help network and build the client base would be particularly useful. Also employees who are efficient will be preferable. Employees should be well-trained and mentored so that they can deal with the clients and perform their jobs satisfactorily.
9. Efficient and Ethical: Consultants should also be ethical to inspire trust in them. They have to be honest which will help them build a good reputation. They should also be efficient as the billings will usually be on a per hour basis and the clients would not like to pay for the inefficiencies of the consultant.
10. Essential attributes of a consultant: Since consulting is a human intensive activity, some important attributes of a consultant are:
a) Patience- to understand the problems of the client
b) Listening Skills- to hear the issues and also find out what is exactly needed
c) Knowledgeable- should be knowledgeable in his areas of expertise
d) Qualified- should possess the necessary qualifications
e) Investigative Skills- should have the ability to ferret out details
f) Action and Goal oriented- should not be lackadaisical and lethargic
g) Dynamic- the consultant should be dynamic.
h) Professional approach,
i) Interpersonal Skills to build relations
j) Business Acumen- since consultants strive to earn profits as well, they should also earn profits.
Consultancy is not a business for everyone. As Indra Nooyi says, “Every year in consulting is like three years in the corporate world because you have multiple clients, multiple issues- you grow so much.” For each firm that succeeds, there are at least seven that do not. However, if the due diligence is done correctly then success is imminent.
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