The 7 Biggest Challenges of Starting a Consulting Business

The 7 Biggest Challenges of Starting a Consulting Business
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For experienced professionals looking to break out of the traditional game, consulting has a lot of appeal; you can set your own hours, share your expertise with others, and quite possibly, make a lot of money. In fact, there are over 600,000 consultants in the United States making an average of close to six figures.

Unfortunately, the reality of consulting is less glamorous than it appears on the surface. It’s not an easy path to take, and if you want to be successful, you’ll need to be aware of the unique challenges associated with starting a consulting business.

Major Challenges to Overcome

Regardless of whether you’re consulting individually or as the head of a consulting firm, you need to be aware of these challenges:

  1. Finding the right target audience. First, you need to have a niche target audience that can afford to pay your rates, needs your services, and isn’t already being served. It’s hard to find an audience with this combination of qualities, so you may need to expand your search beyond your usual realms. For example, New Zealand native Sam Ovens ended up moving his consulting business to the United States because the audience potential was far more lucrative. Study your key demographics closely, and be willing to adjust your approach accordingly.
  2. Building credibility. annually ranks some of the best consulting firms in the world. These prestigious firms don’t have any trouble attracting clientele due to their existing reputation—and even have to turn clients down. Reputation is your greatest asset as a consultant, but when you first get started, you won’t have anything to work with. You’ll have to rely on your experience in your past profession, along with any portfolio pieces you might have. It’s a long road to build a reputation for yourself, and you need to be prepared for a steep curve.
  3. Finding your first client. In the same vein, your first client won’t come easily. You won’t have any reviews or testimonials—other than some words of recommendation from your past professional relationships. Chances are, you’ll find your first client through word-of-mouth or circumstantial meetings, so turn to networking to start building your business’s momentum. Even with a large network, you may find your first client to be a strenuous obstacle to overcome.
  4. Establishing consistent revenue. Your early days as a consultant will see clients coming and going. You may engage with your clients in limited relationships, or you may see high turnover. Either way, your revenue stream will start out inconsistent and borderline unpredictable. Crafting that into something predictable and reliable will present a major challenge, but you’ll need to do it if you want to keep your cash flow positive and make accurate projections about your business’s growth.
  5. Differentiating yourself from the competition. There are a ton of consultants out there, both within and outside your niche. If you want a chance at winning the attention of potential clients, you need to differentiate yourself from that competition. The best way to do that is through your branding and approach—research the competition, and find a unique angle that you can take. How are you different? What’s your unique value proposition? If you want some inspiration, Hubspot has a great article filled with examples of brand differentiators.
  6. Setting the right price. As Eileen Figure Sandlin and Entrepreneur Press write, you’ll need to find a fee structure that pays what you’re worth but also doesn’t dramatically exceed your average client’s budget. This is notoriously difficult, especially when deciding between hourly, project-based, or retainer-based rates. Do some research on consultants in your area and set your prices accordingly, keeping your level of experience and reputation in mind. You can always make adjustments later.
  7. Scaling. Finally, consider how you might scale your operation over time. You may start out as a solo consultant, but would you be willing to grow into a larger firm, with other individual consultants and a wider client base? How can you keep your customers around for the long term? How will you invest in more resources for your business? Unless your goal is to merely stay afloat, scaling your firm will be a major challenge.

Why Consulting Isn’t For Everyone

Yes, consulting is appealing on the surface, but it isn’t the right career move for everyone. It’s definitely possible to be successful—even lucratively so—but only if you’re willing to invest the time and energy necessary to overcome these key obstacles. Before quitting your job or investing your capital in a consulting business, make sure you understand the stakes and are committed to making this dream a reality.

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