Starting a Consulting Business: What You Need to Know

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You have the knowledge, know your niche and you also have that all-important gut feeling that now’s the right time to step off the corporate treadmill and go it alone…

If this sounds familiar then the chances are that you’re toying with the idea of becoming a consultant. You’re certainly not alone. The UK management consulting market is valued at an estimated $19.4 billion and self-employed consultants are now firmly part of the landscape in virtually all industry sectors.

Why is consultancy attractive?

Low start-up costs, being your own boss (and reaping the rewards) and the prospect of being able to put your talents to use across multiple organisations means the consultancy model has many attractions. But, before you dive straight in, remember that having the tag ‘consultant’ after your name doesn’t make you immune to the issues that all entrepreneurs need to think about before they make that leap. Here’s some food for thought.

Start thinking like a consultant

Making the move from employee to consultant requires a shift in thinking. Prepare yourself for a different type of relationship with different types of people you’ll work with, not just high-level management and bosses. Here are some things to consider:

  • You are no longer part of the ‘corporate loop’. Consider the reasons why consultants are hired. It may be project specific, i.e. you are drafted in on a certain job to compensate for skills gaps. In other cases, your help may be needed to effect organisational changes and those changes may not be appreciated by some of the people you’ll have to deal with. You’ll need to get used to working with a team, without necessarily being regarded as ‘one of them’.
  • You need well-placed confidence. This involves the ability to pitch yourself successfully to potential clients, whilst resisting the temptation to over-promise on results that you know are likely to be unachievable. Once you’re hired this confidence may be called upon to offer candid opinions that may be at odds with what your client wants to hear.
  • Get used to being your own manager. Running your own business need not be an administrative nightmare, but it’s up to you to keep on top of your to-do list. On specific projects, you may just be given a deadline date and sent off to get on with it. If your past experience involved a manager breathing down your neck the shift to consultancy may take some getting used to.

Putting together a client base

  • Start with your own network. It’s common for professionals to put out feelers to their existing business contacts before making the move to consultancy work. Check carefully for any non-compete clauses in your existing employment contract that may cause difficulties here. Enforceability of any such clause depends on its scope and reasonableness, so seek legal advice rather than making assumptions on what’s covered.
  • Widening the net: go niche or stay general? You may find it easier to establish your authority as an expert in a specific area rather than trying to be all things to all people. This applies to online marketing, too. It’s generally easier to rank higher in search engine results for very specific search terms than it is for catchall terms. Make sure the niche you choose is still wide enough to offer enough opportunities for work and check that it hasn’t already been saturated by competitors.
  • Choosing specific jobs. One survey showed that 90% of clients had previously been let down by management consultants, often involving over-charging and under-delivering. Resist the temptation to take on jobs you’re unsuited for as an early blow to your reputation can be extremely costly. Be clear on what you’re promising and be sure to stipulate this in your contract.

The ‘business’ side: what’s involved?

What should my business look like?

New potential clients will be looking for reassurance that they’re in safe hands. Here, first impressions count. For instance, would trading under a company name help give your business that all-important ‘corporate feel’? Bear in mind that setting up a company in your name is a relatively cheap and straightforward process. Once it’s set up you can hold on to that company name until you’re ready to trade under it.

Competitor analysis

Rather than trading under your own name would a brand name offer you an edge? Competitor analysis is key here. See how other consultants in your chosen field present themselves. Use this as a guide for what’s acceptable and what’s not. Your aim isn’t to mimic everyone else. Rather, it’s to find a way to present yourself in the clearest possible way and in a manner that inspires confidence.

Does ‘doing your own paperwork’ take the gloss off being a consultant?


Tax may be inevitable, but a tax-related headache isn’t. For instance, sole traders submit a Self Assessment tax return each year. The good news for consultants is that there’s a simplified expenses procedure for mileage and for using your home as an office.

Companies House

Company directors file an annual return with Companies House each year. This essentially sets out whether there have been any changes in the company structure. They also file company accounts with Companies House and HMRC. Remember that companies are liable for Corporation Tax. Online filing goes a long way in making this easier to keep on top of.


If your turnover is or is expected to be less than £82,000 there’s no requirement to register for VAT purposes. However, it may still be worth registering. This is even if you’re below that threshold and especially if you’re mostly working for other VAT registered businesses. By not registering you’re telling the world that your annual revenue is below a certain level. It’s worth checking this with your accountant.


For specialist tech consultancy work it’s common for clients to require you to have your own insurance coverage in place. Even if it’s not a pre-requisite you may wish to consider getting this in any event. It offers protection if things go wrong. It also shows you are serious about how you approach your work.

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