Some HR practitioners strike out on their own to follow a long-held dream of becoming their own boss. Others are thrust into self-employment after being laid off or furloughed, as has been the case for some during the pandemic.
No matter what path has led you here, becoming an HR consultant presents both opportunities and challenges. We spoke to HR professionals who have made the transition successfully for advice on how to plot and navigate this big career move.
Assess Your Motivations
Before taking the plunge, “take a step back and ask yourself why you want to become a consultant,” recommends Adam Calli, SHRM-SCP, a principal with Arc Human Capital in Woodbridge, Va., and a Society for Human Resource Management certification instructor. He became a consultant in 2015 after a layoff. “Are you planning on starting your own business, or are you just looking to make some money while you’re between jobs? Because those are two very different things.”
Arlington, Va.-based HR consultant Mary Ellen Brennan, SHRM-SCP, suggests evaluating the pros and cons of consulting work before making the switch. Whether a particular factor qualifies as a benefit or a drawback will depend on your individual preferences. For example, some people like being their own boss, while others prefer to work on a team.
Brennan, who became a consultant in 2018, says, “I love having the variety of working with multiple clients as opposed to just working for one employer. I get to support different missions, which I didn’t get to do when I was working in an HR office of one for the 13 years prior to becoming a consultant.”
First, some ground rules. “Be consistent with what you charge clients,” advises HR consultant Mary Ellen Brennan, SHRM-SCP. “They may talk to each other.”
Susan Heathfield, a veteran management consultant, strongly recommends charging clients by the hour. “I don’t like charging clients a fixed cost for a project because you don’t know what issues may crop up and some clients change their mind frequently, so you often end up putting in a lot more hours than you expected to,” she says. “For example, you may find out that a plant manager is the most change-averse person you’ve ever met, so it takes twice as many meetings and twice as much time as you anticipated to get things done.”
In terms of actually calculating what your hourly rate should be, you can use your last job’s annual salary as a benchmark, says Adam Calli, SHRM-SCP, a principal with Arc Human Capital. If you worked a standard 40 hours per week, you’d simply divide your salary by 2,080. (A salary of $100,000, for example, equates to an hourly wage of about $48.) But make sure to factor in any added out-of-pocket expenses, such as travel and lodging costs, when working with an out-of-town client.
Of course, Heathfield says, “you can raise your rates over time as you build up your business.” —D.B.
Lay the Groundwork
If you’re employed, there are a few steps you’ll want to take before you leave your job to become a consultant, Brennan and Calli say, so that your business is up and running on day one:
Form an LLC. Structuring your business as a limited liability company (LLC) offers a layer of protection. Any claims, liens or lawsuits against your business will be limited to the assets of the business itself—effectively shielding your personal assets. Filing fees vary by state, but LLC applications generally cost $50 to $100, according to Nolo.com, a publisher of self-help legal books and software.
Build a professional website. This will help prospective clients find you and learn about the consulting services you offer. You can create a website for free using WordPress, but consider purchasing the site’s premium plan ($8 a month)—it provides a custom Web domain, advanced design tools, Google Analytics support and even the ability to monetize your site with ads.
Set up a corporate bank account. To avoid blending your business and personal finances (and creating a mess), open a checking account that’s dedicated to your business. Having a corporate bank account will also make writing checks for business expenses, tracking receipts and preparing tax returns a lot easier.
Build an emergency fund. One thing the pandemic has shown is that small-business owners—HR consultants included—need to be prepared for the unexpected, including potential disruptions to their income. So shore up a rainy-day fund, if you haven’t already, before you start your business. Many financial advisors recommend building an emergency fund that will cover three to six months of essential expenses. “You need to have a cushion,” says Susan Heathfield, a Williamston, Mich.-based management consultant and human resources writer for The Balance Careers who became a consultant in 1987 after working for General Motors. “Otherwise, you’re putting yourself at risk.”
Build a Client Base
When starting out, be prepared to spend a large portion of your time building references, marketing your services and reaching out to potential clients, Heathfield says.
A good starting point? “Try to convert your current employer to a client,” Brennan suggests. “I told my CEO several months in advance that I was thinking about leaving to start my own business, and he agreed to let me transition out with consulting work.” Brennan also networked at conferences and contacted everyone in her professional network to drum up business. “I told people what I was doing, and I got such a positive response from people in my sphere,” she says.
Calli says another option is to join a consulting firm before flying solo. “There’s nothing wrong with affiliating with an already-established consulting business that can provide you with clients,” he says, “especially if you’re supporting a family and you can’t afford to go without a paycheck while you’re getting your business off the ground.
“Building a client base is like farming,” he adds. “If you plant the seeds in the right soil and you tend to them, they’ll grow.”
Carve Out a Niche
Instead of becoming a generalist, working with clients across a wide range of industries, consider branding yourself as a specialist in a particular field or service. That’s the route Brennan took. “I specialize in association management, and I highlight that on my LinkedIn profile,” she says. Meanwhile, Heathfield specializes in working with small to midsize manufacturing and technology companies, as well as large nonprofits.
Carving out a niche “can also help you identify your value proposition and what you bring to the table,” Heathfield says.
But be careful about pigeonholing yourself or otherwise limiting your options. “You need to think about how to position yourself in your local marketplace,” Calli points out. “If you’re a specialist, you might be able to charge a high rate for what you do, but at the same time, you may be limiting your client base. If you choose to be a generalist, there’s a greater likelihood that you’ll be able to find clients who need the work that you provide because you do a lot of different things. But at the same time, it may be more difficult for you to charge a higher rate.”
Develop an Online Presence
In today’s digital era, establishing an online presence for your consulting business is a must. “As a consultant, the product that you’re selling is your brand, and having a presence on social media is critical to building a brand,” Heathfield says. “It also helps you develop credibility.”
Calli recommends taking a targeted approach. “Think about who you’re trying to reach,” he says. “Are your potential clients on Twitter? Are they on Facebook? You want to be seen by the right people, so you need to be on the right platforms.”
Find a Mentor
Starting your own consulting business can be intimidating, especially if you’ve never been self-employed. But you don’t have to go it alone. “One of the things I did that was really helpful was getting a coach,” Brennan says. “I found one who works in the industry that I work in, and they’ve definitely helped me build my confidence.”
You can find a volunteer business mentor in your area at Score.org, a national nonprofit dedicated to helping small businesses get off the ground.
Daniel Bortz is a freelance writer based in Arlington, Va.