Everything You Need to Know About Consultants and Consulting Businesses
The global management consulting services market was valued at $819.79 billion in 2020 — and is expected to reach $1201.06 billion in 2025, according to a report from ResearchandMarkets.com.
Management consulting is just one type of consulting that is growing in market value. Businesses and entrepreneurs are increasingly turning to consultants for help in improving their financial, operational, and strategic performance, among other areas.
In this post, we’ll cover what a business consultant is, the different types of consulting they can specialize in, and how to become one. We’ll also walk through how to start a consulting business to help you enter this lucrative market.
What is a business consultant?
A business consultant is an expert that specializes in a niche industry or field and offers their advice, strategies, and time to businesses for a fee. A consultant may work independently or with a firm.
Consultants are sought out to help businesses address their most immediate problems to become more competitive or profitable. Their services vary but often include creating and managing projects from scratch. Throughout this period, tasks may include:
- Collecting data by reviewing documents, interviewing employees, and observing processes
- Diagnosing the root cause of a major organizational issue
- Creating a project plan and timeline
- Delivering the finalized process to the client
- Communicating with the client’s management team and employees
- Helping the client implement the new process
- Preparing the client to solve similar issues in the future
- Following up with the client to see how the new process is working
Take a look at this image to better visualize the scope of a consultant’s responsibilities:
In addition to their deep expertise in a particular industry or subject, like market positioning, the key benefit of a business consultant is that they can devote themselves entirely to solving one issue. A company’s leadership team, on the other hand, has to split their attention among all aspects of running the company.
Consultants may spend a few hours a week working with multiple clients at once, or they may work full-time for one company for a temporary period of time (usually around 6 months). Their schedule depends on their business and their client.
Now that we have a better understanding of what a business consultant is, let’s take a look at the different types of consulting they can specialize in.
Types of Consulting
- Management Consulting
- Strategy Consulting
- Pricing Strategy Consulting
- Operations Consulting
- Financial Consulting
- Information Technology Consulting
- Sales Consulting
- Marketing Consulting
- Human Resources Consulting
- Security Consulting
- Data and Analytics Consulting
- Legal Consulting
- Accounting Consulting
- Sustainability Consulting
Management consulting is among the most common and profitable types of consulting. The market size of the management consulting industry in 2022 is $263.5 billion, according to data from IBISWorld.
A management consultant’s responsibilities depend on their specialty and the organization where they work as well as the client. Typically, they work with the client’s leadership team to solve critical business problems. To do so, they assess certain processes and provide recommendations for how to improve or implement new ones.
A type of management consulting, strategy consulting also takes place at the highest level of the company.
Whereas a management consultant is tasked with identifying and solving problems that the company faces as a whole, a strategy consultant offers strategic recommendations for resolving specific management topics, like reducing costs, increasing operational efficiency, or identifying new opportunities and markets for a company.
This type of consultant is often brought to help a company mobilize for change or navigate uncertainty, like during or after a merger and acquisition.
Pricing Strategy Consulting
Pricing strategy consulting is a subset of strategy consulting dedicated to helping companies set the right price for their products and services.
This type of consultant works with companies to set or readjust their pricing strategy to gain a competitive advantage and boost sales in a period of stagnation. In order to figure out what the “right” price is, they’ll use a combination of competitive and consumer trends analysis and ensure the pricing strategy aligns with the company’s marketing strategy.
Operations consulting — or operations management — is focused on improving a company’s internal operations and performance.
An operations consultant may analyze and provide strategic recommendations for improving a company’s processes, people, technology, or location. For example, an operations consultant may redesign employee roles in order to boost productivity or implement new processes for demand planning and forecasting to optimize the supply chain.
Financial consulting is another type of consulting that refers to a broad range of services. This type of consultant may provide financial advice to corporations, or help financial services firms improve their performance. Typically, the former is more common.
The goal of most financial consultants is to help a business improve their financial strategy and create more efficient procedures to ultimately increase revenue and shareholder value. They may design a compensation strategy for executives, for example, or help close a real estate deal.
Information Technology Consulting
Information technology (IT) consulting is focused on improving the performance, scalability, and competitiveness of a company through the enablement and use of technology.
An IT consultant provides strategic advice and guidelines for managing existing IT assets and resources and sourcing and integrating new ones. They may help the organization understand and analyze its IT requirements, recommend IT solutions and services based on those requirements, and manage the implementation process.
Sales consulting helps align salespeople, teams, processes, and technology to transform a sales organization and ultimately increase revenue.
A sales consultant will analyze the current state of the sales department and make suggestions to optimize or create new processes and strategies. They may work directly with salespeople or with sales managers, who will then implement the consultant’s recommendations.
Marketing consulting is similar to sales consulting but is focused on maximizing the organization’s marketing efforts to better reach, engage, and convert prospects.
A marketing consultant will start by evaluating current marketing efforts, then make suggestions for improving them. They may help create and implement digital marketing campaigns, train marketers, recommend technologies or methods for increasing traffic and conversions, and track the success of marketing activities using analytics tools.
Human Resources Consulting
Human Resources (HR) consulting is dedicated to helping organizations recruit, retain, and manage talent.
An HR consultant may help a company address compliance issues, solve employee relations problems, develop compensation strategies, recommend human resources technology, implement diversity, inclusion, and belonging initiatives, and more.
Security consulting provides a range of services, including risk analysis, security planning, threat assessments, and other aspects of a security program.
A security consultant may help analyze threats, risks, and vulnerabilities in order to assess, provide, or update security solutions and systems. Some consultants may even design a custom security system for a client from scratch.
Data and Analytics Consulting
Data and analytics consulting helps companies get the most value from their data.
This type of consultant may create or optimize the company’s analytics strategy and data architectures, recommend a data governance strategy, or create a data lake. They may also help improve and streamline demand forecasting across every facet of the organization.
Legal consulting is designed to support a company’s legal compliance, profitability, and risk mitigation.
A legal consultant’s ultimate goal is to help a company make legal decisions and ensure their business practices follow the law. To achieve this goal, they may draft contracts, review briefs, and conduct negotiations on the company’s behalf.
Accounting consulting constitutes a variety of services aimed at helping a company improve its financial position and enhance its internal processes and procedures and accounting protocols. These services may be provided to pre-IPO, private equity-backed, and public companies.
An accounting consultant is typically responsible for optimizing a company’s accounting practices to make them more efficient, accurate, and consistent. They may also help with the accounting, tax, and reporting aspects of specific projects.
Sustainability consulting is an increasingly popular type of consulting that aims to help companies in all industry sectors manage their social and environmental impacts.
A sustainability consultant partners with businesses to develop and incorporate more responsible approaches in their operations so they can better achieve their sustainability goals. They may, for example, recommend a company switch to more sustainable materials or create a strategy to reduce carbon emissions in their supply chain.
How to Become a Consultant
- Get a bachelor’s degree.
- Identify an area of expertise.
- Decide where to work.
- Choose a target market.
- Get certified in your industry.
1. Get a bachelor’s degree.
Most consulting entry-level positions require a bachelor’s degree. The most common majors among consultants include:
- Business/Business Administration
- Political Science
- Computer Science
Many consultants major in business and minor in another field related to the industry they want to work in. For example, if you’re interested in working in the public sector, you might get a minor in political science.
2. Identify an area of expertise.
A consultant is not an expert in everything — they are an expert in a niche industry or field. So to become a consultant, pick an area of expertise. Ideally, this will intersect with your passion and your skills.
Some examples are:
- Corporate strategy
- Product development
- Commercialization strategy
- Human resources
- Competitive analysis
- Due diligence
- Operations management
3. Decide where to work.
You have a few options as a consultant: you may decide to first work in the industry you’re interested in to gain practical knowledge before you start consulting. You may decide to work at a consulting firm, or as an independent consultant. Or you may decide to start your own consulting business.
Whatever you decide, it does not have to be final. Many individuals who began at a Fortune 500 company or consulting firm become independent consultants or start their own business, for example.
4. Choose a target market.
Within your niche, consider which markets would want your consulting services.
Choosing a target market can help you decide where to work. For example, say you want to work with medium-sized tech businesses. Then you can narrow down the list of consulting firms you’re evaluating to only those that work with companies of the size and industry you’re interested in.
5. Get certified in your industry.
Getting certified is only necessary in certain industries, but it can help increase your chances of getting hired at a top consulting firm or by clients, no matter your industry. While they don’t guarantee you a job, certifications are proof of your skills and experience and can help you establish credibility, gain a competitive advantage over other consultants, and set higher rates.
Some of the most common examples of certifications are:
- Project Management Professional (PMP)
- Communication Management Professional (CMP)
- Certified Management Accountant (CMA)
- Certified Manager (CM) certification
- Certified Management Consultant (CMC)
- Talent Optimization Consultant certification
- Master Project Manager (MPM)
- Certified Business Analysis Professional (CBAP)
- Change Management Certified Professional
How to Start a Consulting Business
- Do market research.
- Set your pricing strategy.
- Pick a consulting model.
- Build a website.
- Market your business.
- Create a client proposal template.
- Hire some staff.
1. Do market research.
One of the greatest challenges of running a consulting business is finding clients. Market research will help determine which types of companies or departments within companies will most likely benefit from — and pay for — your unique consulting services and skills.
When researching your target clients, try to be as specific as possible. If you know exactly who you’re targeting, then you can more easily make your business stand out to them.
For example, if you’re an HR consultant, research start-ups looking to increase their workforce or growing companies trying to incentivize and retain their senior-level employees. Then drill down even more. Maybe you’re best equipped to provide consulting services to tech start-ups in a specific location.
You should also look at your competitors’ messaging and services and see how you can fill in any gaps.
2. Set your pricing strategy.
When performing market research, you may note your competitors’ pricing as well. This is one input that you can use to set your pricing strategy, but there are many factors to consider.
Below are five common pricing strategies you may choose from:
The simplest pricing strategy is to charge clients by the hour. So, if you charge $150 per hour and work 10 hours, then the client will pay $1500. This is a good strategy to start with as you get a better sense of how long a project will take. But as you grow your business, it’s limiting in terms of the number of hours you work and the hourly rate that clients are willing to pay. At that point, you may be better off switching to one of the strategies below.
Another pricing option for beginner and intermediate consultants is to charge by project. While more complex to calculate than hourly billing, it removes any uncertainty so your client knows exactly what they will pay upfront. To calculate how much a project will cost, create a list of deliverables and estimate how long each will take to create. Then multiply that sum by your hourly rate. You might even consider multiplying that total by 1.5 to accommodate additional tasks, like making revisions.
According to a study by Consulting Success, this is the most common pricing strategy among consultants, with 37% using a project rate to set their fees.
Another simple pricing strategy is to charge clients a monthly retainer, which is a flat fee they pay each month for access to your services. It requires some trust to be established between you and your client, as well as clear guidelines. For example, who can contact you and during what hours and are any deliverables expected? This pricing strategy can provide you more peace of mind since you’ll know exactly how much revenue to expect per month.
A less traditional pricing strategy is to charge value-based fees, which is a concept pioneered by the consultant Alan Weiss. With this strategy, you do not set a price. Instead, you and the prospective client discuss and agree upon the value that your services would have on the business, if successful. These fees may vary drastically depending on the client and the size of the company.
According to the study by Consulting Success, this is the second most common pricing strategy among consultants, with 26% using a value-based rate to set their fees. However, that same study showed that approximately 42% of consultants have never priced their services based on value because they don’t know how.
Another unconventional pricing strategy is performance-based fees — also known as “pay for results,” which is a concept popularized by leadership coach Marshall Goldsmith. With this strategy, you only get paid if your client improves thanks to your services. If your client doesn’t improve, you don’t get paid. It can be a lucrative strategy for more experienced consultants and the right clients.
The study by Consulting Success indicated that only 26% of consultants had done a performance deal, but over 60% are open to the idea.
3. Build a website.
It’s essential that prospects can find your consulting business online. You should include a contact form, links to your social media accounts, testimonials, and case studies of clients you’ve previously worked with.
That way, they can learn more about your brand, check out your previous clients and projects, and get in touch to discuss a project. This is important for establishing credibility and trust.
4. Market your business.
With your target market and pricing strategy nailed down, you can develop a marketing plan to attract prospective clients.
Having a website is a must. Beyond that, there are a range of marketing tactics you can use, depending on your skills, location, and technology stack. You might:
- Speak at events
- Host webinars
- Post on social media
- Create a referral program
5. Create a client proposal template.
Writing client proposals is another critical aspect of running a consulting business. This typically occurs right before the client agrees to work with you and is how you clearly communicate your value to prospective clients.
To standardize this process, consider creating a template that you can later specify with the details of the client and project. You’ll want to include sections for a description of the project, project scope, objectives, timeline, budget, and deliverables, among others. While you’ll need to tailor this template to each client, it can simplify and speed up the process.
6. Hire some staff.
When starting a consulting business, you may be doing everything. But over time, consider which responsibilities you can handle yourself and which might be better outsourced.
For example, you may manage the relationships with clients and the actual projects, but hire someone to take on the bookkeeping or administrative aspects of the business. This individual may only work part-time to help you with invoices and scheduling meetings.
Or, as you take on more clients, you may need to hire another consultant to help with the workload. It’s important to add additional consultants incrementally and ensure your sales revenue is increasing.
You may also need to bring on a marketer who can help create videos, social media campaigns, and other collateral to expand the reach of your business as you scale.
Getting Started with Consulting
Whether you’re looking to hire a consultant or become one, it’s important to understand what a consultant does and the many ways they can partner with a company to accelerate its performance.
A consultant can help identify new markets for a company to enter, improve its security program, develop compensation strategies, and more, depending on their niche and client. As businesses’ needs get more complex in response to globalization, consolidation, changing laws and regulations, and other factors, demand for strategic services and operational management is expected to continue to surge. This will likely lead to increased market value, attracting more consultants and consulting businesses to open or expand.