If you're skilled at helping businesses to operate smoothly, setting up as a management consultant might be the right option for you. Our guide gives you all the essentials you need for starting up and running your own business.
- Research your target market
- Establish your client profiles
- Your fee income
- Decide which services to offer
- Buy an existing business
Research your target market
Be aware that management consultancy has become highly competitive in recent years. The profession is a popular choice for new graduates in the UK and the number of consultancies increased significantly during the 2000s. When you research the market, focus not only on the sector as a whole, but also on consultants who offer similar specialist services to yours.
As part of your market research think about the level of demand both locally and nationally for your services - and you might also look at the international market if you plan to take on projects abroad. In many countries new consultancies have also sprung up, making it more difficult for UK businesses to compete overseas.
As a first step it makes sense to find out whether there is enough demand for another management consultancy in your area that offers the range of services you are planning to provide.
Check out the local and regional competition to identify how many management consultancies are in existence. A look on Yell.com and a web search should give an indication of the number of competitors you will have in your area. It will also help to identify the size of these consultancies and the range of services they offer. Their adverts may include details of membership of professional bodies such as the Institute of Consulting (IC) and the Management Consultancies Association (MCA).
You could also check the 'find a consultant' pages on the IC and the MCA websites. You'll be able to find out more about existing consultancies, the specialist services they offer and the fees they charge.
Identifying the potential demand for your consultancy on a national basis is a little more difficult. If you have previously worked for a large consultancy before deciding to set up on your own you will have some feel for what the demand for your services might be. Similarly, why not speak to former clients to find out if they might use your services again in the future. It would also be a good opportunity to discuss your fees with them and to tell them about any new services you might be able to offer them. Be aware that the government has become a major user of management consultancy services, so you might decide to focus on this area of the market - particularly if you're based in London.
It is also possible that your consultancy will work in the international market. If so, it is important that you keep up to date with global developments. In particular, it is important to remember to keep abreast of developments in countries that are expanding economically and where new markets for consultancy may begin to open up. The financial crisis in the late 2000s and the downturn in the economy following the Brexit vote in June 2016 led to an increasing number of management consultants looking for new markets overseas.
Your network contacts may help you to gauge the level of competition in your chosen area, whether that's locally, nationally or overseas.
Research current trends, plus legal and tax issues
- Sector trends for management consultants
- Legal issues for management consultants
- VAT rules for management consultants
Establish your client profiles
Your client base will largely depend on whether you plan to offer consultancy services on a local, regional, national or international basis, and on your area/s of specialisation. For example, if you specialise in human resources you may be engaged by a small local company to undertake staff development or by a large national firm planning a major recruitment drive. It may be that you're happy to relocate temporarily to work on medium and longer-term projects throughout the UK and even abroad.
Many of your clients might be local concerns that have contacted you through Yell.com or as a result of an advert in a local business directory. Possibly some may contact you from further afield through your network contacts, your website, LinkedIn or word of mouth recommendations. You might get some work from a specialist agency. You could be engaged for your specialist expertise as part of a team working on a larger project - for example on a local or central government contract. Although the Brexit vote and negotiations have resulted in more difficult times generally for the economy, and therefore management consultants, some consultancies have been engaged on short-term contracts to help the overburdened Civil Service cope with the additional work arising out of Brexit.
The working relationship you establish with your client provides the foundation for the entire project and no matter who your clients are it is vital that you both understand what the desired outcome of a project will be. Make sure that a new client gives you a clear brief so that you know what they want you to do and what they expect at the end of the assignment. When you take on a new client it is important to send them a letter of engagement which clearly sets out the terms and conditions of your engagement, the basis on which you will be charging and when you expect your invoices to be paid. Draw up, discuss and agree with your client a detailed work plan that sets out a timetable for the project. Your clients want to make sure that you deliver the benefits that you outlined to them on time and to budget - the Management Consultancies Association (MCA) predicts that one of the key trends for the future will be contracting by results, creating a partnership between consultant and client.
Your fee income
You will probably charge your clients for the work you undertake either by billing them for objectives met (although you will have given them an estimate based on the time you will spend on a project) or, more likely, by keeping a record of the time you spend on a project and billing your client at an hourly or daily rate.
Your hourly or daily rate may vary according to:
- the type of work undertaken
- the size and prestige of the consultancy
- your level of qualification. For example, if you have the widely-recognised Certified Management Consultant (CMC) qualification you may be able to charge higher fees
- the location of the consultancy. Rates in London and south-east England are likely to be substantially higher than those charged elsewhere in the country
It would be helpful to find out what rates your immediate competitors are charging and what is the 'going rate' for doing a particular type of work for a certain type of client. Although you will have to base your own rates on your costs and on the level of income you want to bring into the consultancy, you will also have to remain broadly competitive.
You might be prepared to offer some clients a lower or discounted rate. For example for long running projects, or to clients who regularly require your services. In some cases you might need to quote a particularly competitive rate to win a consultancy contract. And in other cases a contract that you go for might specify the daily rates on offer, with no room for negotiation. If you do some work on a sub-contract basis for another management consultancy you'll probably also be prepared to accept a lower fee.
When you think about your hourly rate for yourself and any other consultants you might employ remember that only a certain proportion of the hours you work will actually be chargeable hours. This is because you have to spend quite a significant amount of time on other things such as:
- managing your consultancy
- continuing professional development (CPD)
Make sure that you and any staff you employ are very disciplined when it comes to keeping time records.
Give some thought also to what your fees will or will not include. Whether you're charging on an 'objectives met' basis, or on a time basis, you'll need to be clear whether or not the fees include expenses like materials, travel and subsistence. Make sure your clients are clear about this too.
Don't forget to set out in your engagement letter the basis on which you will charge and your terms and conditions.
Successful networking is vital to the success of your consultancy. By building up and updating a network of other consultants, partner organisations and prospective clients you can find work through referrals, recommendations and shared projects. Networking will also make your consultancy better known and help to establish your reputation.
Joining a professional body and attending management consultancy events and conferences can provide you with networking opportunities. The Institute of Consulting (IC) and the Management Consultancies Association (MCA) both have a full list of national and regional events on their websites. They also run special interest groups for the different areas of consultancy.
Online networking and social media services like LinkedIn also provide networking opportunities, enabling you and like-minded professionals to make new contacts and exchange information, ideas and business opportunities.
Decide which services to offer
The range of services you decide to offer your clients will depend on your own training, qualifications, experience and areas of specialisation. Some of the services you could offer might include the following:
- business strategy and planning, to provide a clear sense of purpose and direction in your client's business
- improvement of business processes, to help your client become more customer focused and efficient and adopt best practice wherever possible
- knowledge management
- IT systems - advising on suppliers and systems, and supervising implementation and training
- human capital management, such as staff training, recruitment and employment issues
- crisis management
- risk management
- change management and disaster recovery planning
- privatisation of public services
- business culture improvement
- quality management, to increase sales presence and customer satisfaction
- marketing, market research and business forecasting
- outplacement services
- environmental management, to help businesses 'green' their operations
You might want to keep an eye on the sectors that earn the largest share of consultancy fees and consider undertaking additional training to keep your consultancy at the forefront of those offering the services currently most in demand. At the moment, the sector earning the largest share of consultancy fee income is financial services. Other important sectors include retail and leisure, energy and resources and private health and life sciences. Fees from the public sector are down, with defence consultancy performing best.
The projects you work on will vary in length, depending on how large the client is and how complex the assignment. It's important to make sure you know which people you'll be dealing with in the client's organisation and, if required, plan in regular meetings with them. They may want you to let them have progress reports throughout the project.
Skills and qualities
As well as your areas of specialist knowledge most clients will expect the management consultants they appoint to have the following skills and qualities:
- client handling skills
- business analysis skills
- team building skills
- strategic planning skills
- implementation skills
- the ability to deliver
- the ability to think creatively
Advertising your consultancy
For your management consultancy to be a success it's essential that your potential clients know about you and the services you offer. You should be aware that promoting a management consultancy requires constant marketing activity and networking with your contacts. If you are a member of a professional body such as the Institute of Consulting (IC) or the Management Consultancies Association (MCA) your consultancy and details of your specialisations will be included in their searchable online directories.
There are a number of other things you can do to market and promote your consultancy services:
- use a professional networking website like LinkedIn
- advertise in a business directory
- have your own website which lists your services, qualifications and CV, details of some of the successful projects you've handled, testimonials and contact details
- have leaflets printed that you send out to your contacts and businesses that might use your services. It's essential to have some business cards printed so you can leave them with contacts you meet
- constantly update your contacts and attempt to find new ones
Buy an existing business
You might decide to buy an existing management consultancy business rather than start your own venture from scratch. Buying a going concern can mean that:
- there are established clients and network contacts
- the business can generate income immediately
- the business has a reputation and a track record, which can help if you are looking for finance
- any staff are already in place
However, look critically at any consultancy that you are interested in to make sure the price you negotiated with the seller is a fair one. Try to establish why the business is for sale - for example, is the owner keen to retire or is there another personal reason for selling up.
Your market research into the sector as a whole will help you establish whether or not the owner is selling because he or she can no longer generate enough income from the consultancy. This may not necessarily deter you - many business people are confident that they can turn a failing business around. The important thing is to have established the current position so that the price you pay for the business is not too high.
Other matters to consider include:
- whether your own skill set is a good match with the range of services offered by the consultancy business you're considering taking over
- the client database, network contacts and partner organisations
- existing staff rights
- how to retain key personnel once you've taken over
- does the business owe money that you will be responsible for
- if you are paying for goodwill to what extent does this depend on the skills, personality and contacts of the seller
Be aware that many small management consultancies own little in the way of physical assets and may amount to little more than one or two individuals providing their services to clients. In many cases, the individual/s are essentially the business. If these individuals are leaving, is there any guarantee that their client list and contacts will remain loyal to the business?
Look critically at the business accounts for the past three years and consider the selling price in light of what the accounts reveal. Make sure you budget for professional fees such as legal fees and valuation and survey costs if you are also buying business premises.