How do you start an HR consulting business?

You start an HR consulting business by getting experience as an HR consultant, creating a business plan, and forming a legal entity. Before starting your business as an HR consultant, completing the training and education requirements to become an HR consultant and build your knowledge and skills is a good idea.

To become an HR consultant, you will need to:

• Earn a bachelor's degree

• Build professional experience

• Choose a specialization (if you choose)

• Pursue certification as an HR consultant

• Build your client base

It can be beneficial to have an extensive background in HR consulting before starting your own business to ensure you're familiar with specialized aspects of human resources, such as best practices, common procedures, and laws and regulations.

When becoming an HR consultant, you can train as a generalist consultant who can advise on several areas of HR or might specialize in a certain area of HR, like compensation or labor relations. Once you have industry knowledge, it is time to build your business plan.

When building your business plan, it is important to identify your why. Determine what you want and how you want to achieve it. Are you looking for a freelance lifestyle, or are you simply looking for an exit from corporate life? Do you want to be highly systemized and expand rapidly? Are you looking for a franchise business?

It is also important to determine if you want to be a generalist consultant or if you want to be specialized. You should also ask yourself questions like:

• Do you want to work in various industries or a small market segment?

• Do you want large employers, small employers, or government work?

• Are you looking for embedded roles, part-time, or other?

• Do you want small projects, large projects, or retainer work?

Your business plan should also include a plan for your cash flow. Consulting can be very lucrative; however, you need to consider the wide range of setup costs and recurring expenses that come with owning your own business. You will also need to account for the delay in receiving your funds.

From the day you start your business, you will only be able to invoice your clients after the work has been completed (or at a predetermined milestone). At this point, you will have to wait for the invoice to be paid. In some cases, you will have to follow up multiple times before you will receive the funds.

You will hear all sorts of reasons why the invoice hasn't been paid, so you will need a plan for when this happens. It is a good idea to save money before you start your business and line up 3 to 6 months' worth of work before you leave your current day job.

Now that you have your plan, it is time to create your business. The first step is to establish your business as a legal entity. You can do this by choosing your business name and your legal structure.

Some states also allow businesses to register online at their government's website. Once your paperwork is approved, you can take more steps to legitimize your business, such as registering for taxes, obtaining business insurance, opening a business bank account, and setting up business accounting.

Registering your business means deciding if you will operate as a sole proprietor, partnership, or limited liability corporation (LLC). The primary advantage of an LLC is that it reduces your personal financial risk. A sole proprietorship is simple to set up, as is a partnership if you're going into business with other people.

However, both of those structures leave you exposed to any financial liability that might come up from operating your business. You will then need to apply for the licenses required to operate as an HR consulting business.

Once you have created your business as a legal entity, it is time to start building your client base and taking on projects.