Guide on how to set up an HR consultancy

A career in human resources can be rewarding and offer stable employment. One option for human resources professionals is to become an HR consultant who advises businesses on their HR operations. There is plenty of potential business out there for an HR consultancy, including generalist HR consulting, recruitment and selection, employee engagement, training, learning and development (L&D), employment law, and so on.

Many consultants who work in human resources choose to start their own HR consulting businesses to build a career as a consultant independently. With the rise of HR Tech, artificial intelligence, and machine learning, there is a huge market for new start-up HR consultancies to help employers get the best out of their workforce. So let’s dive into what exactly an HR consulting business is and explore steps for how to start your own.

What is an HR consultancy?

Put simply, HR consultants are professionals hired from outside of a business or organization who are tasked with solving or meeting a human resources-related need. Often they are hired to provide high-level solutions and recommendations to management teams.

There are many reasons why organizations bring in external HR consultants. Some small businesses simply don’t have the internal HR support or expertise needed to take on significant projects such as implementing a new training program or creating a new employee handbook. In these situations, companies may seek out an outside professional for guidance.

On the other hand, larger companies may opt to enlist an HR consultant with the hopes of getting an outside perspective on a particular project or challenge. The consultant can then focus on addressing actual problems without getting wrapped up in internal organizational politics or other issues that may make objective decision-making challenging.

HR consulting businesses can operate in almost any industry, so there are typically many opportunities for consultants to find clients.

Steps to set up your own HR consultancy

A solo HR consultant or small HR consulting company needs a lean and agile approach. Here are four steps to help you get started building your own HR consultancy business or becoming an HR consultant:

1. Determine your preferred style of business

Before you embark on your entrepreneurial journey, it’s important to pause and reflect on what you want and how you want to achieve it. 

Are you looking to build an asset that you can one day sell or are you aiming for more of a freelance lifestyle to create a new career path? Are you looking to work on an exciting new HR Tech product? Will you be a generalist consultant or do you plan to narrow your focus on a particular skill set or industry?

It’s important to ask yourself these questions early on and be able to answer them when starting your HR business, so you know what you need to focus on from the start. Depending on what your objectives are and the type of services you want to provide, you might also need specific training to broaden your own expertise. For example, many HR consultancies offer training and L&D services, if you want to provide innovative training that will make you stand out from the competition, you can get training yourself to help you develop it.

2. Create a startup HR consultancy business plan

It might sound obvious, but plenty of independent HR consulting firms fail in part because they lack a well-researched business plan. As the old military adage goes, “Prior planning prevents poor performance,” so take the time to really think it out before making the jump.

Consider the following:

  • Your target market. 
  • Your value proposition. What do you specialize in? Do you have a unique selling point (USP)?
  • Your costs (office space, supplies, travel, taxes, etc.).
  • Your prices. How much will you charge for your services? Compare the figure with that of your competitors
  • Your clients. How will you attract new clients? And how will you retain existing ones?

Make a plan that outlines the details of your HR consultancy. Consulting, in general, can be very lucrative and the HR consulting business model is no exception. However, as a new, independent HR consultant, you have a wide range of set-up costs and recurring expenses that need to be taken into account. Having a clear plan in place can help establish your business by ensuring that each element is considered and developed effectively.

3. Start building a network now

Knowing that it will take time to receive your first payments, you need to start building your referral network as soon as possible. Make a list of family, friends, current and former colleagues, clients and suppliers, and people you’ve met along the way. Obviously, look at your list of LinkedIn connections too. Get back in touch with people and reconnect. Tell them about your plans and ask them to keep you in mind.

Successful consultants need a steady pipeline of work to remain viable, and one of the best ways to maintain that pipeline is to put a constant emphasis on networking. A good option is to develop relationships with other HR consultants or service providers who have expertise in particular areas you might not be as well-versed in. This can result in a mutually beneficial relationship where you provide referrals and vice versa. It can also create opportunities for partnerships, which can allow you to offer services to your clients you otherwise wouldn’t be able to, such as training and L&D.

4. Develop a sales and marketing plan 

Now it’s time to create a marketing plan for your HR business. There are many channels to choose from to acquire new HR consulting clients, including search engine optimization (SEO), email marketing, business partnerships, speaking engagements, events and conferences, etc.

Determine what you want your brand to be and find ways to establish it in the public eye. You can build your HR consulting firm’s brand by creating an online presence through social media and websites and through advertising campaigns that tell potential clients about what your business offers. Think about who you’re trying to reach, you want to be seen by the right people, so you need to be on the right platforms.

This is where you need to have a very clear business plan so you are able to advertise your business successfully. If you have a well-defined USP, make sure you’re communicating it effectively across all your marketing channels, from your social media accounts to your own website. 

Is starting an HR consultancy for you?

Setting out on your own to launch an HR consulting business is a big step that needs careful consideration and planning. Training is often a smart option if you want to make the leap. You need professional techniques in HR consulting services for small businesses. If you don’t have much experience, starting with HR consultant qualifications such as a bachelor’s degree in human resources, project management, or organizational culture is a fine place to begin. 

However, if you’ve already established yourself as a professional in HR and want to explore other types of HR consulting services, you might want to look at other options. You could invest in a relevant Master’s degree or opt for less time-consuming (and financially draining) HR or L&D consulting courses, certificates, and qualifications. Whatever you decide, if you follow the steps outlined above you have a good jumping-off point to start building your HR consulting business.

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