How to Start an HR Consulting Business
Starting a business is difficult and often doesn't work out for many people. In the HR Consulting industry, starting your own company is a tough but not impossible task. HR Consulting refers to an organization or company that helps other companies with their HR needs. This can include performance management programs, leadership training programs, exit interviews, etc.
There are many pros and cons to starting your own HR Consulting firm; this guide will cover those factors in more detail so you can make an educated decision on whether or not it's right for you.
What is an HR consulting business?
An HR consulting business is a company that provides their expertise in the field of Human Resources to help other companies with their Human Resources needs. These Human Resources needs can include employee satisfaction, leadership training, compensation analysis, exit interviews, etc.
There are many different types of HR consulting businesses, we've broken down the most common below:
· Performance Management and Leadership Consulting: This is where an organization or individual uses the knowledge of their HR Consulting firm to help them understand how their employees are performing in the workplace. The HR consultant will come up with a plan of action, compile a data base and come up with appropriate solutions. The final product may be one-on-one meetings, group meetings, employee surveys or exit interviews.
· The exit interview is another type of performance management and leadership consulting service. This is where the company holds an exit interview with a current or past employee to determine why they are resigning and what actions can be taken to retain them.
· Talent Acquisition Consulting: This type of consulting business specializes in determining which candidates are the best fit for a job opening, who should be interviewed first and which candidates need additional training. This may include more than one candidate and the HR consulting firm is responsible for being there to ensure the process goes smoothly.
· Compensation Consulting: Compensation consulting involves the expertise from an HR consulting firm where they evaluate a company's salary structure and determine if any changes need to be made. They may also help determine how much to pay for their new hires, what the salary will be for their new hires or if current salaries should be raised or lowered based on company performance.
· Personnel Consulting: This type of HR consulting business may be involved in every step of the hiring process. They may be involved in pre-screening, interviewing, reference checking and post-placement training. They also oversee the transition between positions with the organization and make sure that both parties are satisfied with that transition.
· Operations Consulting: This HR Consulting business is responsible for conducting exit interviews, employee satisfaction surveys, training, recruiting and onboarding with organizations. This type of work is usually done by a smaller business rather than a large firm.
· Employee Engagement Consulting: An employee engagement consulting business specializes in making sure the employees of the organization are happy and feel good about their roles within the company. These HR Consulting firms help create programs that better connect the employer and employees so they can create an enjoyable experience for everyone involved.
· Benefits Consulting: This type of HR Consulting business focuses on how a company can better provide benefits to their employees by implementing a retirement plan, health plan or dental insurance. They may also be involved in keeping track of the reimbursement checks for employees who have medical expenses and make sure that they are received with no delays.
These are just some of the HR consulting services that an HR consultant may offer to their clients; however, they can also be involved in almost any aspect of an organization's Human Resources needs.
How to start an HR consulting business
There are many steps that need to be taken before an HR consulting business can begin operating. Below you will find a list of the necessary steps to take when starting your own HR Consulting Business.
Step 1: Become an HR consultant
The first step of starting an HR consulting business is to obtain the necessary skill set. In order to be considered a certified HR consultant, you need to have a combination of education, experience and professional training, which may include:
· Certified Human Resources (SHRM-CP/SHRM-SCP) –SHRM is the Society for Human Resource Management, this certification requires work experience in an HR office or as an employee of a company that implemented an HR department. There is a fee for this certification as well, typically around $200.
· Certified Employment/Organizational Development (I-CED/O-AED) –This certification requires that you have previously worked in an HR department or been employed by an organization that implemented an HR system. There is a fee for this certification as well, typically around $300.
Step 2: Create a Business Plan
One of the most important steps of creating an HR consulting business is to create a Business Plan. A Business Plan is essentially a blueprint for your company, it outlines what services you will provide and how they will be provided. It also includes how much it will cost to produce the services, how much profit you will make and where you plan on getting your business. This plan should be accurate and realistic to ensure that the business has a strong foundation to build upon.
Step 3: Legal Requirements
In order to be in business, there are some legal requirements that must be acquired. The most common requirement is a Business License, which is typically free to acquire with little paperwork involved. Another legal requirement is a Federal Employer Identification Number, which is also fairly easy to acquire.
Step 4: Financial Requirements
All new businesses need to have some type of capital before they can begin operations. This capital may be in the form of savings, credit, a business loan or a combination of all three. The amount of capital required will vary between businesses, but most HR Consulting businesses require somewhere between $5,000 and $10,000 for start-up costs.
Step 5: Form a legal entity
The most common legal entity for an HR Consulting business is a Sole Proprietorship. There are a few reasons why a Sole Proprietorship is effective, first being that the start up cost is lower than any other type of business and it does not require any extra paperwork for registration since it is already formed by default. The drawbacks of this type of business are that you are personally liable if the company runs into financial trouble, this could mean going bankrupt. Another drawback is that you may have to pay self-employment taxes, which can add up over time if you are unable to hire employees. The other most common type of legal entity is a Partnership, which has many of the same benefits and drawbacks as a Sole Proprietorship except that the Partners share in taking on liability and in the self-employment taxes.
Step 6: Obtain licensure
In most states, in order to offer HR Consulting services to clients, you must be licensed by the state. This license is obtained through the Secretary of State's office in the state that you wish to operate your business. Licensure typically requires a fee which can vary between states. The requirements for obtaining a Human Resources Consulting license may vary from state to state, but typically include experience in or education regarding HR Consulting and passing an exam that is administered by the Secretary of State's office in your state.
Step 7: Create a business website
A business website is one of the most important things that you can do in order to create trust with your clients and provide credibility to your company. A business website can easily be created for as little as $300. It may seem like a lot at first, but if you take into perspective that this is not something you will use very often, it may seem like an affordable expense. This can easily be paid for out of your start-up capital.
Step 8: Determine the services you will provide
Once you have a business website, the first step to determining the services that you will offer is to come up with a list of different types of clients that may need your services. Once you have this list, categorize them in groups, such as companies that are looking for new employees or employees who may need help filing their taxes. Then, come up with a list of services that you may be able to provide for each group.
Step 9: Decide what type of clients will be served
Once you have a list of services you can provide, the next thing to determine is who you will serve. In order to do this, it is very important to consider the different types of clients that may need your services. For example, if you are looking into HR Consulting for a company that has over 100 employees, there are often many more things that they might not want to deal with than they want. On the other hand, if you are looking into HR Consulting for a small family business that may have fewer than 10 employees, there are often many more things that they will be dealing with and therefore have a greater need for your services.
Step 10: Determine how to market your services
There are many different ways to market your business so that you can reach out and find the right clients. Some of the more common ways to market your services include:
. Printing business cards
. Including a business card with a thank you note
. Creating a brochure
. Using search engine optimization (SEO)
. Advertising on Google, Yelp, etc.
. Creating a website
. Social media such as Facebook, LinkedIn and Twitter
Frequently Asked Questions
1. What are the best places to work as a human resource consultant?
India, China, the UK and Germany are all great places to be a Human Resource Consultant. Countries like Canada, Australia, the US and France are also highly popular but it can be difficult to get your foot into these markets without connections or experience.
2. How does human resource consulting work?
Human resource consulting is a job involving research and analysis of an organization’s human resources policies and practices. It consists of the inception of a plan for enhancing the functioning and efficiency of an organization’s system. Specifically, it addresses issues regarding: 1. The human resources policies and procedures, 2. The recruitment process, 3. Human resource evaluation, 4. Employee benefits and incentives, 5. Employee relations and management, 6. Training and management development
3. How to start an online HR consulting business?
To start an HR consulting business, you will need to create a business plan – this will help you to determine whether that this is the right job for you. You will also have to have a good understanding of your market and who you are offering your services to. It is also important to check what requirements are needed in your local area for licensing. Once you have thought about where you might want to base your business, contact local organizations and businesses in the area, letting them know about yourself and what services you can offer.