Sample Manual

How to start and Operate a Consulting Business


This document is a guide intended to provide you with general information and suggested resources to assist you in researching your project. The extent to which this information will apply to you is dependent upon the circumstances related to your project.


  1. Industry Overview
  2. Licenses and Regulations
  3. Managing Your Operation
  4. Other


What is a Consultant?

A consultant is an independent contractor who sells professional expertise in a particular area of specialization. A consultant assesses situations, analyses information, and presents proposals for action. The consultant then performs the proposed work for a fee within an agreed time frame (short-term or long-term). Depending on the specialization, the consultancy field can be highly competitive. Recent trends in downsizing and restructuring have resulted in increasing numbers of qualified people who have started their own consultancy businesses.

Do You Have What It Takes?

When you become a consultant, you take the leap from employee to entrepreneur. You are starting a real business which requires a complex blend of:

  • "Expertise" - your unique skills are your businesses products;

  • Knowledge in business and management practices including accounting, selling, organizational and time-management skills;

  • Self-awareness, inner drive, perseverance, confidence, and the ability and willingness to work independently for long hours, often sacrificing personal time;

  • People skills, in order to establish, expand, and sustain client relationships. You must be able to gain a thorough understanding of a client's needs by being sensitive, perceptive, and an attentive listener to what is said and not said during discussions. You must then establish trust by following through on all commitments with exceptional, quality work, in an atmosphere of confidentiality.

Who Hires Consultants?

Business, government, and non-profit organizations hire consultants for their expertise, and to help them identify, analyze, and solve problems. Consultants offer "outsiders" unbiased perspective, and allow other employees to carry on with daily business. In general, consultants are hired to:

  • Conduct research, analyze and summarize data; predict trends;
  • Create or improve designs and processes; recommend changes;
  • Evaluate designs and processes, communicate ideas, or motivate employees; and
  • Identify ways to save money, or to obtain funding or financing.

What is the Process?

  1. Entry and Contracting
    Setting up the first meeting, exploring the problem, determining the client's expectations, defining your own expectations, and deciding whether you are the right person for the work,

  2. Data Collection and Diagnosis
    Analyzing who will be involved in defining the problem, the methods to be used, the data to be collected, how long the project might take, and assessing the corporate culture.

  3. Feedback and Decision to Act
    Identifying and working with different forms of resistance, reducing large amounts of information into a manageable number of issues, presenting data comprehensively, and making appropriate decisions on how to proceed.

  4. Implementation and Evaluation
    Being involved as trainer, coach, analyst, trouble-shooter; designing measurement systems to track progress, running meetings, and promoting change.

  5. Proposals
    To establish a clear understanding between both parties, consultants prepare written proposals to describe what they can do for particular clients. The proposal is usually written after meeting with the client. In one or two pages, proposals contain sections such as opening statements, disclaimers, work objectives, action steps, responsibilities of each party, time schedules and fees, expected results, and concluding statements. For further information regarding suggested contents and formats, refer to some of the many books on developing proposals.

  6. Contracts
    An accepted proposal leads to a contract, a written agreement which provides a framework within which obligations, rights, and remuneration's are clarified. Disclaimers should be clearly stated in all contracts. Contracts may be brief and informal, or lengthy and formal. Many contract books provide samples of contract styles. Consider consulting with a lawyer, especially if a contract is complex, or if you are selling "advice".

In brief, there are 2 kinds of contracts:

  1. Letter of Agreement
    A simple contract summarizing the agreement, including the nature of the work, method and time of payment, start and end dates, resource material and personnel supplied by the client. The letter is forwarded for approval and signature.

  2. Formal Contract
    A formal contract is used if the project is complex, if financial costs are high, or if there is a financial commitment to suppliers or sub-contractors.

Consulting Fees

Consultancy fees must cover not only the time spent on a project, but also the time needed for marketing and administration, and to pay for things such as equipment, overhead, and insurance. Your fees depend on a number of factors, such as your experience, the current market rate, and the urgency of the project. Do your research - find out what your competition charges and avoid undercharging. Agencies and clients use price as a screening device for quality consultants. They are unlikely to believe that the best consultant charges minimum fees.

Consulting Opportunities

Experts have outlined seven different opportunities that exist for the consultant. When these situations are apparent, there is generally a need for a consultant.

These 7 areas are:

  1. Technical Aid
    Short-term assignments for the purpose of helping businesses find solutions to problems of a technical nature represent the largest market for consulting services today. Consultants who provide technical assistance often work as supplement to or extension of a company's own staff, who are experts in the field in question.

  2. Political Liaison
    This is a specialized public relations function. Most organizations find themselves being heavily monitored by groups and associations that, although external to them, influence their operations.

  3. Turnaround
    The Turnaround consultant deals primarily with the problem of low cash flow. At one time or another, many organizations face a decrease in readily available funds, either through their own doing or some unpredictable outside force.

  4. Specific Skills
    The Specific Skills consultant is the person who can evaluate a particular kind of situation and find a workable solution.

  5. Capital Raising
    Most organizations need increased capital. Smaller organizations often require assistance for growth and expansion purposes. There is a big demand for specialists skilled in fund-raising.

  6. Bail Out
    A bail out consultant is retained by an organization with a problem that should have been handled by an employee. The bail out consultant comes in to save someone's neck, or to save an entire department.

  7. Government Compliance
    There has been a rapid increase in the number of regulations that an organization must adhere to. This requirement for compliance has put many industries in need of consultants. A government-relations consultant must stay on the cutting edge of new laws and regulations.


Marketing can be the key to a consultant's success. The right kind of marketing and the right amount, can develop into a stream of new clients and contracts. In fact, 25% of a consultant's time should be devoted to several marketing methods:

  • Scan consultancy opportunities advertised in newspapers and government award publications;

  • Register with business directories and government resource lists. Contact agencies, contract officers, human resources personnel, and large consulting firms who are known to receive consulting contracts;

  • Network with others and develop a wide range of contacts who are willing to refer clients to you. Keep in touch personally;

  • Join professional and trade associations to meet others in your particular area of expertise and to exchange information about your business;

  • Develop newsletters, brochures, or flyers to keep your business in view with former and prospective clients. Attach them to proposals, mail them after receiving requests for information, distribute them at seminars or presentations;

  • Send specialized mailings to executives who have recently moved into new positions, either within their present organizations or in new companies; and

  • Write and send news releases or articles of interest to prospective clients. Once you have identified prospective clients and potential opportunities, you must then 'sell' your skills to these clients. This in itself is a critical and complex part of a consultancy business. If necessary, seek training in the selling process.


A Web site should have details to describe the location (your address, telephone and fax numbers, and directions on how to get to your location), hours of operation and anything else you think may be of interest to potential customers. However, once you launch a Web site, you must update it on a regular basis.

Market Research

Successful businesses have extensive knowledge about their customers and their competitors. Acquiring accurate and specific information about your customers and competitors is a critical first step in market investigation and development of a marketing plan.

In developing a marketing plan, your primary functions are to understand the needs and desires of your customer, select or develop a product or service that will meet customer needs, develop promotional material that will make the customer aware and ensure product or service delivery.


One area of rules and regulations that all new businesses must comply with is that of licenses and regulations. When creating a business, the entrepreneur must contact the municipality involved, along with the provincial/territorial and federal governments.

Each municipal government has the authority to issue its own business licenses within its jurisdiction. Since there is no uniformity throughout the country regarding municipal licenses for businesses, you should consult with the appropriate local officials to determine whether your business will be affected by local regulations and licensing requirements. Businesses (including home-based businesses) must also meet the zoning by-laws that control property uses in their municipalities.

You can get permit, license and regulation information by contacting your province/territory, local city hall, town or village office or rural municipal office. Contacts for local, provincial and federal governments can be found in the government listings of your telephone directory.



Upon deciding to establish a Consulting business, you should obtain the expertise of an insurance agent regarding insurance coverage for your business. If you own, rather than lease your place of business, you will need insurance coverage for your property. Also, regardless of property ownership, you will require insurance protection for your furniture, fixtures, office equipment, etc. Some of the other areas you should be concerned about are liability coverage against mishaps, damages or lawsuits resulting from business operations and business interruption insurance.

The following list is included to remind you not to overlook the complex areas of business insurance. It is best, however, to discuss your specific requirements with your insurance agent.

Basic insurance:

  • fire insurance (extended coverage on buildings and contents);
  • liability insurance;
  • burglary protection (theft coverage);
  • dishonesty insurance (covers thefts by employees).


A good record keeping system should be simple to use, easy to understand, reliable, accurate, consistent and designed to provide information on a timely basis.

The legal requirement concerning financial records specifies only that they be a permanent, accurate and complete record of your daily income and expenses. There are many types of record books and bookkeeping systems available. For example:

  • double entry bookkeeping;
  • commercial bookkeeping systems;
  • one-write systems;
  • computerized systems;
  • single entry bookkeeping.

Furnishings and Equipment

The type, size and kind of service will determine the type of equipment you will require. For assistance in this area, you may get the advice of a sales representative or consult trade publications and manufacturers' Web sites that list equipment and its cost to you. An important factor to consider when choosing equipment is the after-sales service and repair and their affordability.

Used Equipment - Consider buying used equipment as a cost-saving measure. Sources of used equipment could be a business that is closing or dealers in second-hand equipment. The drawback to this approach is that, often, there are no guarantees with the purchase.

Leasing Equipment - Another alternative is to lease equipment to help keep start-up costs down. To obtain financing for capital leasing for new or used equipment for the creation of your business, see the document Leasing

Setting-Up a Pay System

Pay administration is a management tool that enables you to control personnel cost, increase employee morale, and reduce workforce turnover.

Profit Watching

Making a profit is the most important -- some might say the only objective, of a business. Profit measures success. It can be defined simply: revenues - expenses = profit. So, to increase profits, you must raise revenues, lower expenses, or both. To make improvements, you must know what's really going on financially at all times.

Full Business Information covered in other areas of the Consulting Manual

The following main areas are covered in other sections of the Consulting Business manual:

  • Accounting Systems
  • Advertising & Promotion of your Consultancy
  • Banking and Finance of your Business
  • Business Records to keep
  • Care of Offices
  • Cash Flow and Cash Projections
  • Cleaning Policies
  • Computing Requirements and Systems
  • Customer care
  • Duties and Responsibilities
  • Financial Budgets
  • Food safety and Regulations
  • Hours of Work
  • Information for your Benchmarking
  • Insurance Cover and Records
  • Management Policies and Responsibilities
  • Managing the Office
  • Marketing Plan
  • Cleanliness and Hygiene
  • Selling Strategies
  • Staff Rules and Employment Policies
  • Uniforms
  • Use of the Internet for Consulting
  • Work & Safety Rules