Why Building a Consulting Business Is Harder Than It Initially Seems

If you've experienced difficulty building up a consulting business, you aren't alone. The number of consultants in the United States has grown every year since 2012, reaching more than 637,000 in 2016. So, it's unlikely that every one of these people will achieve succcess.

The turnover rate for consultants is also high compared to industry averages, yet it remains a popular choice for new entrepreneurs due to its perceived simplicity. To be a consultant, you don't need to invest in heavy machinery; you don't need to buy a franchise; and you may not even need to build a brand or get an office -- you just put our your shingle and charge money to give people advice.

But once you do get started as a consultant, you'll likely discover things aren't quite as simple as they initially seemed. So, what are some reasons for that? Why is consulting so much harder than you'd imagined?

Consulting complications
These are some of the biggest complicating factors in consulting:

1. The need for results
If you want to get and keep clients, you'll need to prove that you're worth what they're paying you. As consulting maverick Sam Ovens told The Epoch Times: "Helping clients get customers is absolutely the most important thing."

In short, you may be able to give your clients good advice, but if they can't see that advice translating into bottom-line revenue, they aren't going to keep you around. What's worse: if you aren't able to prove results with your first few clients, no new clients will want to hire you. Your consulting business needs to come out of the gates strong, with a results-oriented process that proves your worth.

2. Underestimation
Another problem in setting yourself up as a consultant is the perceived simplicity of the consulting model. It's true that consulting businesses don't require much startup capital (depending on your niche), and that anyone with experience in a given industry can technically qualify as a consultant, but that doesn't translate to early success in the consulting world.

You'll need to create a formal business plan, as with any other business, and to think carefully about the services you'll provide, your marketing and sales strategy and how you're going to scale.

3. Competition
Remember those 637,000 consultants already mentioned? They are your competition. Businesses looking for consultants have access to an enormous talent pool, with specialists and generalists to be found all over the country. What's more, they cover all price ranges and almost every conceivable need.

So, if you don't have a way to differentiate yourself, you're going to be lost amid the white noise.

4. Risk tolerance
There are tried-and-true ways to start a consulting business, and they're relatively easy to follow. The conventional path has proven fruitful for thousands of consulting entrepreneurs in the past, and will be for countless entrepreneurs in the future.

But building a business that follows the traditional model isn't necessarily the best approach. Instead, it's often better to take a risk and pursue a new angle, or think about consulting in a new way; it's riskier, so fewer entrepreneurs choose this path, but it will make you stand out.

5. Audience-targeting
Business author Orvel Ray Wilson once said that, "Customers buy for their reasons, not yours." And there's a lesson there.

When most professionals start thinking about consulting, it's for self-centered reasons. They think about the skills they have, the experiences they've gained and what they could do for potential customers. On the surface, there's nothing wrong with this, but you need to reverse your thinking if you want to succeed.

Don't think about what you want to do. Instead, think about what customers will need you to do. Target the audience members you can serve best, and pitch to them in a way that they'll find valuable.

6. Pricing
Price ranges for consultants are all over the place, ranging from less than your old salary to $1,000 an hour or more.  So, setting the right price point is key, if you want to succeed; the problem is,there's no surefire calculation that can help you do that.

Clearly, setting the price too high will scare away potential customers, but setting it too low could make you seem inexperienced. On top of that, you'll need to consider your profitability, and that means estimating not only the value of your time, but the extra costs it takes to run your business.

7. Reputation
Much of your consulting success will boil down to your reputation in the industry. If you try to start a business before you've made a name for yourself, you'll fight an uphill battle to try to develop yourself at the same time that you're building your client base.

Without having a pre-existing reputation, you'll find that the effort to secure those first few clients is brutal.

Taking the first step
Despite the unique challenges it presents, the consulting industry is not an unapproachable one. Most of these obstacles present themselves in the earliest stages of your business's development, so if you're prepared enough to get past them, you'll be able to build enough momentum to keep your company alive for years.

These Tips Will Help You Become Into A Good Business Consultant

Professionals seeking increased work-schedule flexibility and more professional autonomy are often drawn to consulting. With so many business consultants in the marketplace, it can be hard to narrow down a specific niche. One specialty area that is growing in demand is business analysis. Being able to interpret current business trends into strategic company goals is a powerful skill to utilize amid a constantly changing and ever-expanding global economy. If you are considering a career move into the area of business consulting, consider the following:

1. Skills and Education

While consultants often have a diversified background, identifying a niche and setting yourself apart from competitors is a popular way to gain word-of-mouth referrals and build brand recognition. For professionals with a four-year baccalaureate degree in a business-related field, professional mentoring in a specific area of expertise can augment other professional experience and/or internships.

There are a number of reputable professional organizations that offer a variety of career development opportunities. In addition to networking, busy professionals can also build an area of expertise through rigorous online business analyst training. Respectable online courses are often taught by industry leaders who bring their own experiences and practical knowledge to the virtual classroom. The go-at-your-own pace of online education makes it a popular choice among working professionals with busy family lives.

2. Soft Skills

In order to be a successful and popular consultant, clients need to like you, trust your services and be willing to refer you to others. Mastering a wide range of successful communication skills goes beyond just writing effective business letters. Understanding the needs and expectations of clients also involves anticipating the amount of communication necessary, as well as understanding when to pick up a phone vs. sending an email. Personality and tone of inter-personal interactions make a big difference in consulting relationships.

3. Understanding a Company's Basic Need

An executive or company is going to bring a consultant on board anticipating a positive ROI. Consultants who bring a creative problem-solving style to the table can leverage team cooperation. Consultants trained in business analysis understand that streamlining processes, improving inter-department communication and strengthening the IT tools that track profitability all play a key role in securing an aggressive success strategy. Setting goals and bringing all key stakeholders together in the day-to-day shift that needs to happen to secure the ROI takes knowledge, skill, experience and patience. For this reason, the top business analysts are generally well-seasoned professionals who continually invest in professional development to maintain the competitive edge.

4. Other Considerations

Business analyst training is one way to secure the knowledge needed to become a successful business consultant. Seeking professional mentoring through a formal career-related organization is another popular way to gain the nuances of the field. For young professionals who know that consulting is their ultimate career goal, seeking internships while in college at larger consulting firms may open the door to an entry-level job where shadowing the best of the best becomes one of the most rewarding perks of the job.

Many mid-career business managers are enticed into consulting for greater flexibility and enjoy the process of establishing a niche or specialty area through additional education in areas like business analysis. Seeking partnership with another consultant with complementary skills may also be a great strategy to increase initial client pool. With the growing demands on business to do more with less while increasing triple bottom-line effectiveness, consultants with expertise in business analysis are well aligned to meet the current needs of businesses across industry. Corporate leaders seek top consultants to offer the skills, guidance and strategies to secure the competitive edge in today’s global marketplace; being well-prepared with a success strategy of your own is the best way to secure notoriety in your niche.