The Cost of Starting a Consulting Firm 

The Cost of Starting a Consulting Firm 

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With over 700,000 locations currently doing business in the United States, consulting firms have become a mainstay in corporate America. What makes this such a popular choice amongst people currently deciding to open a business? Per the website Inc., working within a specific niche of the business world and the ability to focus on improving one specific aspect of a company make consulting firms an attractive option when deciding what direction to take in today’s market. When deciding to start any type of business, one of the major factors that will influence your decision is the start-up costs you are facing. So, what are the start-up costs to open a consulting firm?

The startup cost to open a new consulting firm can range from $10,000 to $50,000. Several factors can determine your startup costs, such as location and real estate, license and fees, tax expenses, insurance requirements, and the equipment and supplies your business may need. 

In this article, I will highlight the most important areas that influence the start-up costs of a consulting firm in today’s business market. We will also go into greater detail regarding which areas of the United States have a market that is conducive to opening a start-up firm in our current business climate, and also discuss some of the reasons why a consulting firm is a logical choice when deciding to go into business for yourself. Once you have been armed with the information you need, you can decide whether or not starting a consulting firm is a right decision for you. 

Why Should I Consider Starting a Consulting Firm? 

The Cost of Starting a Consulting Firm 

Today, you have more options than ever when deciding to go into business for yourself. What makes opening a consulting firm such an attractive option in a market that can take you in several directions? Perhaps the most enticing of the many reasons to start a consulting firm is the ability to specialize in one specific area of improving a business’s performance. Consulting firms provide you with the option to fall into a niche category, rather than concerning yourself with every aspect of a company. Whether your area of expertise lies in HR, payroll, taxes, or any other specialized area, there will be a business that is looking for the services you offer.

If you are looking for another reason why starting a consulting firm is a good fit for you, WeWork says that the flexibility of being able to choose when and where you work has made this an attractive option if you choose to go into business for yourself. Still, you may be wondering, “Which type of businesses are the most likely to hire a consulting firm?” After all, you need to be aware of which fields are currently in need of your services. The areas that are most likely to hire a consulting firm are business management, finance, human resources, technology, and marketing. 

How Successful Are Consulting Firms? 

Knowing the potential that consulting firms have to succeed will also factor into whether or not you decide to start one of your own. Consulting Success says that businesses are looking for results, and more and more businesses are hiring consulting firms to get them. Today’s corporate world is more competitive than ever, which is why businesses spend billions and billions of dollars per year hiring consulting firms to give them an advantage in many different fields. Most companies know that they are in good hands by hiring a consulting firm, which allows them to shift their focus to other areas of their business that may require attention.

Now that we know why businesses need your services as a consultant, let’s get down to brass tacks. Of course, I am referring to how much money you can expect your consulting firm to make in a year. According to Alcor Fund, 19.8 percent of consulting firms make over $100,000 per year. This will depend on whether you decide to run an independent consulting firm, or if you choose to be employed by a larger, international consulting firm. Other factors that impact the bottom line of your business including how much business you bring in for a company that hires you; your area of expertise; your level of experience l, and your ability to get results. 

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What Startup Costs Can You Expect To Incur? 

Location and Real Estate 

Though startup costs may vary, you can expect your consulting firm to Incur expenses for equipment, incorporation fees, insurance, taxes, and payroll, per Nerd Wallet. Other start-up costs may include rent or mortgage, should you decide to open a brick-and-mortar business versus running your consulting firm out of your home. As this has the potential to be your largest startup cost, the location of your consulting firm will possibly be the largest decision you make when starting your business. Keep in mind that some local zoning laws may prohibit you to do business in certain areas.

As the value of real estate is based largely on your location, where you decide to open your consulting firm can have a large impact on the starting cost you can expect your consulting firm to Incur. Should you try to establish your consulting firm in your current location, or should you venture out and try to conquer new territory? Knowing which states employ the most consulting firms should help with this decision. According to Zipia, the best states in which you can have a consulting firm in the United States include:

  1. New Jersey 
  2. Massachusetts 
  3. Rhode Island 
  4. Connecticut 
  5. Illinois 

Licenses and Permits 

Licenses and permits are also a commonly overlooked area of start-up costs for most businesses, including your consulting firm. In addition to an Employee Identification Number (EIN), your business may also be required to have a state license, per Nolo. Whether or not your consulting firm will be subjected to your State’s health and safety regulations will be determined by whether you are largely based in an office, or if the majority of your work is done in the field. You can get more information on this subject by contacting your state’s Occupational Safety & Health Administration (OSHA) and the Environmental Protection Agency (EPA). 

Tax Expenses 

The Cost of Starting a Consulting Firm 

Consulting firms generally fall into the category of independent contractors. Because you are more than likely a self-employed business, you should become familiar with the federal government’s self-employed business taxes. This will also affect what you will be permitted to write off when filing your taxes. For example, should you choose to run your consulting firm out of your home, you will be permitted to deduct your rent or mortgage as a viable business expense. More information regarding this matter can be found in IRS Publication 587, should you choose to further research this matter. 

Insurance Requirements 

Insurance expenses are another startup cost that you can expect for your consulting firm. Insurance costs will generally be determined by two factors, which include your state’s requirements and which level of coverage you are comfortable with having. You may want to consider having insurance that protects you and your employees against personal injury and bodily harm if your consulting firm conducts the majority of its business on-site, where the risk of getting hurt is substantially higher than in the office. 

Depending on your level of expertise, you may also be required to carry personal liability insurance. Finally, if your consulting firm is based in an outside location other than your home, and depending on the amount and the cost of your office equipment, you are going to need adequate property coverage. Liability insurance will generally be required to protect you and your business against any damage to your property or bodily harm to your employees or clients. It may also be worth considering carrying insurance that protects your consulting firm against any loss of data that may occur.

Equipment and Supply Costs 

Now that we have covered the legal costs that your consulting firm will accrue during its start-up phase, let’s take a look at some of the equipment and supplies you will have to purchase when starting your firm. According to Piedmont Avenue Consulting, five basic pieces of office equipment are necessary for any new business, which includes:

  • Office furniture 
  • Printers and photocopiers 
  • Stationery and supplies 
  • Computers and applicable programs 
  • Collaboration supplies 

One of the key factors that will determine what supplies your consulting firm will need is the location from which you choose to run your business. For example, if you choose to have a home-based consulting firm, you will need to buy significantly fewer office supplies than if you run your firm from an outside location. When it comes to office equipment and computers, the number of employees that work for your firm will have a direct effect on the equipment you need to buy. While a single laptop may be sufficient for an independent contractor working out of their home, an office that hires several employees will have to purchase an adequate number of computers.

Conclusion

In conclusion, you can expect to spend between $10,000 and $50,000 to start a consulting firm. Some of the factors that will influence how much you spend include the location where you choose to establish your form; the licenses and permits required by your state and by the federal government; the tax expenses generally associated with a consulting firm; the type of insurance and the amount of coverage you choose to carry: and the equipment you will supply your consulting firm with. Hopefully, the information I have provided you with has encouraged you to take the steps toward establishing yourself in the consulting world. 

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Frequently Asked Questions

What type of education should you have to become a business consultant?

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While your area of expertise will impact the level of Education you complete to start a consulting firm, a bachelor’s degree in business management, economics, marketing, engineering, or a similar degree is generally the minimum requirement to become a business consultant. However, some of the top business consulting firms will typically require you to have a master’s degree.

What is the average salary of a business consultant?

The average salary of a business consultant amounts to $76,425 annually, with the high-end being around $117,000 and the low-end being around $50,000. However, several factors can influence how much you make as a business consultant. Some of these include your experience, your skill level, your employer, and your location.

To learn more on how to plan your own consulting firm business click here!

Please note that the contents of this blog are for informational and entertainment purposes only and should not be construed as legal advice. Any action taken based on the information provided in this blog is solely at your own risk. Additionally, all images used in this blog are generated under the CC0 license of Creative Commons, which means they are free to use for any purpose without attribution.