Skip to content

How to Start an HR Consultancy Business – Ultimate Guide

HR consultants provide vital services to companies of all sizes, assisting them in recruiting, training, and managing their employees. If you’re considering launching your HR consultancy business, this guide will provide you with step-by-step instructions on how to get started.

Human resource consultancy is now a growing field. Businesses of every size need HR professionals to help them with tasks like recruitment, training, compliance, administration, and payroll. While large corporations may choose to outsource to the big HR consulting firms, small and medium-sized businesses are looking for more personalized human resource consulting services to fulfill their needs.

Is HR Consulting Business Profitable?

As this report suggests, there are more than 60,000 HR consulting companies in the US alone making revenue of over 23 billion US dollars.

Human resource consulting is increasingly popular with companies that have realized the cost-saving benefit of it instead of keeping their HR department.

Related: Best HR Consulting Business Ideas

The first thing to consider before starting an HR consulting business is to ask yourself whether you feel comfortable in the profession or not. One must have good interpersonal communication skills to be successful in this profession.

It is a good business opportunity for one who has experience in this field and has smart ideas to share with the clients and to bring innovative solutions to their issues. Skills and contacts are the key success factors in the human resource consulting business.

As per Payscale, the average HR consultant’s salary of $67,591. Experienced HR consultants are paid more than $100,000 whereas the starters make around $40,000 in the United States.

14 steps to Start an HR consulting Business

1. Understand the Industry

Before diving into the HR consultancy business, it’s essential to have a clear understanding of the industry. Research various aspects such as the services offered, target market, competition, and legal requirements.

2. Conduct Market Research

Do market research and determine the demand for HR consultancy services in your area. Identify your target market, including the types and sizes of businesses you want to serve. Analyze your competition to find out what services they offer and at what price.

3. Define Your Services

Decide on the specific HR services you’ll offer. These may include recruitment, training, performance management, employee relations, and HR policy development. Specializing in a niche area can help you stand out in the market.

4. Choose your Niche

HR Consultancy is a big industry with plenty of specialized verticals. You will see a lot many HR generalists offering 360-degree HR services to their customers. Most of them are unable to sustain their business in the long run because they fail to provide quality services.

As a beginner, it is advisable to find one or mostly two areas of specialized services, to begin with. Try to provide the best possible services to your customers in those specialized fields. As you create confidence with the client, money starts flowing in, so hire professionals, and extend your service range.

Read: Best HR Consultancy Business Ideas

5. Create a Business Plan

As with any other business, creating a business plan for your HR consulting business is very important. If you are starting on a shoestring budget, try to make your business plan. It may take some effort but it will prove to be extremely helpful in running your business venture successfully.

6. Name your HR Consulting Business

You must be careful when you choose the name of your HR consulting business. The name should not be too close-ended as it can be difficult to relate the name of your organization when you decide to extend more services into the business. Another issue, you must consider before finalizing is the availability of a related domain name. Check our complete guide on how to name a business.

7. Choose a Business Structure

Selecting the right business structure is extremely important. Every country and state offers varied options. For example, if you are from the United States, you can go for a sole proprietorship or as an LLC. Starting as an LLC has got certain advantages but it will cost you a little more.

8. Make Business Legally Compliant

Check with the local authority about the licenses and permit requirements. Every state and county has different regulations. After you get the necessary licenses, apply for a business bank account.

9. Create Client Contracts and Fix your Rate

Draft clear, comprehensive contracts that outline the scope of your services, fees, and terms of the agreement. Having a well-written contract is essential to protect both you and your clients.

You can fix your rates for a one-time specialized service on a specific solution or a contract basis. Initially, getting a client is normally a tough ask. At an initial phase, it is better to price not too high as you are not tested yet. You have always the scope to increase your rate at an appropriate time.

10. Equip your Workplace

The workplace plays a critical role in any consulting business. You need to have a private chamber where clients are comfortable enough to share their issues. Also ensure, you have a sufficient reception area for clients to relax if they need to wait before meeting you. If you are starting from home, no need for a reception area but your workplace should be clean and comfortable to talk to.

11. Develop Your Brand

Create a strong brand identity, including a business name, logo, and tagline. Your brand should convey professionalism, reliability, and expertise in HR consultancy.

12. Join Professional Associations

Companies prefer consultants who are recommended by the people around them. Professional organizations like the local chamber of commerce and human resource-related associations provide you with a platform for excellent networking. Being a member of these types of organizations will not only give you a platform for networking but also help you with the latest trends in the human resource industry.

13. Be Patient

Any consulting business takes time to grow. It takes time to build goodwill and trust among clients. Never try to build an HR consulting business in a hurry. Listen to your customers address their issues as dedicated as possible and prove you are trustworthy. Once you successfully prove you are competent and can be trusted, customers will flow automatically.

14. Promote your Business

Networking is the key to being successful in the HR consulting business. Make a list of potential customers. Talk to them in person or send them emails listing the services you are providing to clients. Creating a website for sure will enhance the credibility of potential customers.

Frequently Asked Questions

What is an HR consultancy business?

An HR consultancy business provides services to companies in managing their workforce effectively. HR consultants offer services such as recruitment, training, performance management, employee relations, and HR policy development.

Why start an HR consultancy business?

Starting an HR consultancy business offers the opportunity to provide vital services to companies of all sizes, helping them manage their workforce effectively and ensuring compliance with labor laws and regulations.

What services can I offer in an HR consultancy business?

Services offered by an HR consultancy business may include:

  • Recruitment and staffing
  • Training and development
  • Performance management
  • Employee relations
  • HR policy development
  • Compliance and legal issues

What are the legal requirements to start an HR consultancy business?

Legal requirements may vary depending on your location but generally include registering your business, obtaining the necessary licenses and permits, and complying with industry-specific regulations.

How do I set my consultancy fees?

Consultancy fees can be set based on factors such as the type and complexity of services provided, the level of expertise required, and the prevailing market rates. Researching competitors’ rates and determining your costs can help you set competitive yet profitable fees.

Do I need any specific qualifications to start an HR consultancy business?

While there are no specific qualifications required, having a background in human resources, business administration, or related fields is beneficial. Additionally, obtaining professional certifications in human resources can enhance your credibility and expertise.

How can I attract clients to my HR consultancy business?

Some effective strategies to attract clients include:

  • Building a strong online presence through a professional website and social media.
  • Networking with potential clients and other HR professionals.
  • Offering free consultations or seminars to showcase your expertise.
  • Providing exceptional service to build a good reputation and generate positive word-of-mouth referrals.

How can I expand my HR consultancy business?

To expand your HR consultancy business, you can consider:

  • Offering additional services to existing clients.
  • Targeting new markets or industries.
  • Hiring additional staff to handle an increased workload.
  • Investing in marketing and advertising to reach a broader audience.
  • Continuously evaluating and adjusting your business strategies to meet the changing needs of your clients.

How can I stay updated on HR trends and best practices?

Staying updated on the latest trends and best practices in HR is essential. Consider joining professional associations, attending industry events, and investing in professional development courses or certifications.

What is the difference between an HR consultant and an HR manager?

An HR consultant provides HR services to various companies on a contract or project basis, while an HR manager is typically an employee of a single company and is responsible for managing the human resources department internally.