How Consulting Companies Work
If your colleagues consider you to be an expert in your field, and you have long been the go-to person at your office, starting a consulting business may be a good idea. Consultants are paid to share their expertise with other individuals and businesses. Successful consultancies can be financially lucrative and provide opportunities for positioning yourself as a thought leader within your industry.
What Does a Consultant Do?
A consultant is an expert in her field who provides advice and guidance to companies and individuals. Unlike an employee, a consultant is hired as a third-party contractor, and typically works with a business or individual on a short-term or part-time basis to address specific issues.
Some consultants are self-employed, while others may form partnerships or employ other consultants. As of 2017, consultancies did 150 billion dollars in business worldwide. Often, however, consultancies operate as small or medium-size businesses. Sometimes, individuals do consulting work part-time while also working a full-time job.
There is a need for consultancy services in a wide range of industries. Here are some examples:
Management consultant: A management consultant works with companies to improve their efficacy and profitability. They review a company's business practices and conduct interviews with key managers and employees to develop a better understanding of its challenges, strengths and processes. From there, the consultant makes recommendations to company leadership regarding ways that the company can improve its operations.
IT consultant: IT consultancies provide information, advice and, in some cases, labor, to businesses. The involvement that an IT consultant will have with an organization varies, but may involve assisting non-IT professionals in choosing and installing hardware and software, assessing the performance of IT operations within the organization and, in some cases, provide labor in situations when a full-time staffer is not available.
Industrial-organizational psychology consultant: Industrial-organizational psychologists specialize in the study of how organizations, such as businesses, operate. Businesses and other organizations often hire industrial-organizational psychologists as consultants when it is clear that personalities and leadership styles may be contributing to low productivity and poor morale.
Online marketing consultant: Online marketing consultants are experts in the ways that businesses and organizations promote themselves online. Typically, an online marketing consultant has experience in search engine optimization, email marketing, content management and social media engagement. Sometimes, the online marketing consultant may train current staff in these areas, or the consultant may handle all, or most, online marketing duties for client.
Human resource consultant: Many smaller businesses do not have a full-time human resources department, or even a full-time HR director. Instead, they may contract with a human resource consultant who performs work on an as-needed basis. For example, an HR consultant may recruit and interview job applicants, advise executives and managers having difficulty with an employee, and handle both onboarding and offboarding for new and departing workers.
Ergonomics consultant: Repetitive stress injuries and conditions, such as carpal tunnel syndrome, cost companies a significant amount of money in reduced productivity and workers compensation claims. More importantly, these injuries can have a long-term, if not permanent effect on the well-being of employees. An ergonomics consultant is an expert in designing workplaces that encourage healthy body movement and reduce the risk of injury.
Why Would Someone Hire a Consulting Firm?
Individuals and businesses hire consultants and consulting firms for many reasons that range from lack of expertise in a specific area, leadership's desire to improve, to a crisis within the organization:
Specific knowledge: Occasionally, businesses and organizations find themselves confronted with a challenge or opportunity that requires the opinion and assistance of an expert. Consultants can provide this expertise on an as-needed basis.
Third-party intervention: When a business is in crisis, it can be difficult for owners, managers and senior employees to develop an accurate perspective. It can be even more difficult to get them to work together to take constructive action. An experienced consultant can provide crisis management services along with dispassionate feedback and mediation that can get a company back on track.
New business: New business owners may have good ideas, initiative and even experience in their industry, but they may not fully understand what it means to assume full responsibility for running an organization. A consultant who specializes in startups can help an entrepreneur adhere to best practices in setting up a business.
Underperforming business: Businesses that have a lot of potential sometimes don't perform as well as they should. A management analyst or business consultant can evaluate a business and make recommendations that can help improve the company's prospects.
Cost control: Small and medium-sized businesses may have a limited budget for staffing. By hiring a consultant for occasional work or to perform specific tasks, a company can save money while also benefiting from the consultant's labor and expertise.
Entering a new industry or market: Business owners may engage the services of a consultant when entering a new industry or market. The consultant can advise the business owner on best practices while also providing introductions and strategies that can help make the new venture or direction successful.
Starting a Consulting Company
Many people consider starting a consulting practice after working in an industry several years. Their reasons for going into consulting can include:
Entrepreneurship: Sometimes, an individual has an entrepreneurial streak and would like to work for himself. Because he already has knowledge and connections within his industry, a consultancy may be a safer option than trying to go into an unrelated business.
Hitting a career wall: Other consultants get their start when they realize that they have gotten as far as they can in their careers without having to take on a very different role. For example, an IT professional may face the choice of remaining in her role as an engineer or admin or moving into executive management, which means a significant change in job duties. She realizes that she does not want to go into management, and after crunching some numbers, concludes that she can make more money as a consultant than she can as an employee.
Need for flexibility: Not everybody wants to or can work a 9-to-5 job. Parents, caregivers, people with disabilities and many others need or prefer to work a flexible schedule that allows them to set their own hours and to take on more or less work to fit with their other responsibilities or limitations.
Specialized expertise or skills: Some consultants have specialized expertise or skills that are marketable, but that may not lead to a full-time job. For example, someone fluent in a language or dialect not commonly spoken in the business world may find that while his language skills won't help him get a full-time job, he can get hired for plenty of short and medium-term translation and editing projects.
Once you've decided to explore becoming a consultant, there are several things you can do to help ensure your future success:
Establish yourself in your industry: As a consultant, you will be selling yourself to clients. To do this, you will need to establish yourself as an expert in your field. Take into consideration the length of time you spent in your industry, as well as your educational and professional credentials. Would you hire yourself as a consultant? If you hesitate to answer that question, consider spending a few more years on the job or going back to school to get additional training.
Research existing consultancies: As you explore the possibility of starting a consulting business, do some research on consultancies within your own industry, as well as outside it. If you plan to begin your practice locally, spend some time learning whether industry consultants have been successful in your area. After you've done your research, consider whether small consultancies in your industry are successful. If they aren't, explore why:If one major consultancy seems to have a lock on the industry, it can be very difficult for you to get started on your own.
Start part-time: If your current job allows it, try taking on small consulting gigs. While you may feel a bit overworked, you'll get a chance to understand what consulting entails while also beginning to develop a client base.
Protect yourself against liability: As a consultant, your clients look to you for expertise and guidance. If you make a mistake, or your advice doesn't work out, you may be exposing yourself to potential legal and financial liability. Talk to an attorney about drawing up contract language that limits your liability and ask about setting up a legal structure for your business that shields your personal assets. You should also talk to a business insurance professional who can recommend polices that provide additional protection.
Get in touch with your network: Let friends and industry colleagues know that you are starting a consulting business. You may even find that former employers are eager to become clients.
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