How to start an HR consulting business

Jan 15, 2024 · 6 minutes to read

There are over 33 million small businesses in the United States1, and many of them do not have the budget for a dedicated human resources (HR) team. That’s where you come in. Your expertise in talent acquisition, labor law, and other aspects of HR management could be put to use as a human resources consultant.

Senior manager HR reading a resume during a job interview employee.

While there may be demand for talented HR consultants, starting an HR consulting business is about more than just creating a website and waiting for clients to find you. This overview will help you understand the steps to creating a human resource firm to serve the businesses in your area.

What do HR consultants do?

Human resources consultants assist businesses with employee recruitment, selection, and hiring. You will work closely with businesses to understand their hiring needs and goals, and you may help them decide what roles to recruit for next.

HR consultants can also help businesses evaluate their employees. You may also work as an impartial mediator between workers and their employers in matters of company policy, compensation, and benefits.

Basically, you are an expert in all things employee—from hiring and company policy to resolving conflicts and labor law.

Starting an HR Consulting Business

The steps to starting a business vary across the United States. However, you will likely need to do the following to establish a human resources firm:

1. Become an HR consultant

Business owners generally hire HR consultants to fill in knowledge gaps in their business. You’ll likely need an extensive amount of knowledge and experience to be hired.

HR consultants often have a master’s degree or equivalent certification in human resources management. You will also need several years of real-world experience. If you plan to work with businesses in a particular industry, having previously worked in that industry could help you get hired.

2. Write a business plan

Your human resources firm may be small, but that’s no reason not to plan! A business plan is a document that can help guide your decisions and measure success. It can also help you work through potential issues and find solutions before you officially launch.

Business plans typically include information such as:

  • Your target market
  • Info about your competitors
  • Your unique selling proposition
  • How much you’ll charge for your services
  • Your overhead costs and budgets
  • How you will find clients

3. Register your business

Depending on your state or city, you may need to take a few steps to make your HR consultancy legal before you can work, such as:

  • Choosing a business structure (sole proprietor, partnership, etc.)
  • Applying for a business license and necessary permits
  • Registering your business name
  • Setting up dedicated business bank accounts

Check your state and city governments to understand the requirements in your area.

4. Protect your business

Working closely with other businesses creates risk. Regardless of how carefully you work, mistakes and miscommunications happen. A claim or lawsuit could devastate your finances, but consultant insurance can help you manage many risks your business may face.

There are many types of consulting insurance to choose from, including:

An unhappy client could sue you for negligence if they feel your HR recommendations caused them to lose money. Whether it is true or not, this type of lawsuit can be expensive to defend against without Professional Liability insurance to help you foot the bill.

General Liability – Also referred to as Commercial General Liability (CGL) or “slip and fall coverage”, this insurance can protect your business against bodily injury or property damage lawsuits from outside parties.

Depending on the consulting types you provide, you may meet with clients at their offices or yours. In-person meetings can increase the chances of your actions causing a client injury or damaging their property. That’s where a General Liability policy can be useful—helping you cover the costs of setting things right.

Business Owner’s Policy – This is a combination of policies, combining covers such as General Liability insurance and business personal property coverage, to help protect small businesses from costly interruptions to service.
A BOP may be useful if you own separate premises for your consulting business and want to protect your building and the business property stored inside.

5. Build your brand

Your brand is part of what sets you apart from other consultants. This typically includes visual elements—such as brand colors, logo, website, etc.—as well as your business’ values and the services you offer.

Creating an online presence is essential to building a strong, identifiable brand. Consider setting up social media accounts for your human resources consulting business. You can use your profiles and other methods to advertise to potential clients.

6. Hire employees

Many HR consultants work alone. However, if you have the need and budget, you might consider hiring employees to support your human resources firm. You may hire permanent employees or other freelancers to help you take on more consulting work or run your business.

If you are hiring permanent employees, you may need Workers’ Compensation insurance. This coverage is required in most states for full-time and part-time staff. Check your state’s requirements to understand if Workers’ Compensation is mandatory for your HR consulting business.

7. Find clients

It’s time to bring on clients! There are many ways to find potential clients, and you may use a variety of methods to build your client base, including:

  • Cold calling or emailing
  • Seeking referrals from your professional network
  • Attending industry events
  • Placing ads online or in industry publications

Insurance designed for HR consultants

Starting an HR consulting business takes hard work and dedication. Consider protecting it with consulting insurance and BizInsure.

We understand consultants and offer access to coverage tailored to your needs. Compare free quotes online or over the phone and get instant coverage in minutes. It’s that easy!

Get your free quotes today.

1. US Small Business Administration Office of Advocacy, Frequently Asked Questions About Small Business 2023, March 2023.
As with any insurance, coverage will be subject to the terms, conditions and exclusions contained in the policy wording. The information contained on this guide is general only and should not be relied upon as advice. The number of quotes provided varies between products, occupations and other underwriting factors determined by the insurers.
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