If you decide to venture into the world of HR consulting, you’ll gain an expanded understanding of business and how to manage yourself and your work. I'll share a little bit about my journey and some resources for you to consider as you explore the idea of starting your own HR consulting practice.
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Over the past couple years, I discovered many of my fellow HR and People professionals are dreaming about moving out of their current position into HR consulting. This discovery happened when I made my own move from Head of People at a SaaS startup to founding my own HR/People Ops consultancy, Seedling Stage. When I introduce myself and share my work, one of the first questions I’m met with is, “How did you get started in HR consulting?”
This question is one I asked a lot of people when I got started, and I’m happy to share a little bit about my journey and some resources for you to consider as you explore the idea of starting your own HR consulting practice.
Before we get into pricing, structuring engagements, and the like, I want to center on why you are interested in consulting. There’s no wrong answer, in fact, there’s a million reasons the change may appeal to you.
For myself, I wanted to take everything I’d learned about building People Ops at startups and apply those lessons in different contexts. Without the demands of a day-to-day role, I was looking to clearly define the projects I could take on and experiment with multiple types of engagements.
There may also be aspects about your current situation that drive you towards consulting. Personally, a sense of burnout led me to take a break and then slowly start working again on my own schedule. I’ve talked to other consultants who were forced to pursue consulting after being laid off from a job and in need of any income.
Some people start consulting to grow their own business with a unique product offering, and eventually bring on a team to help them manage it. Others simply want to work solo and make a positive impact at different organizations until they find the right opportunity for a full-time role.
Defining your why helps you make choices along the way about what kind of services you’ll offer and how you want to run your business. If flexibility is a main driver in your decision to consult, you may need to say no to engagements that require on-call support. If you’re hoping to interface with a specific industry, you’ll need to craft your messaging and contacts to reach folks in that space.
Once you know why you’re making the transition into consulting, you can focus on the how.
Let’s talk about money! While HR pros may be used to negotiating total compensation packages, poring over market data, and creating protocol for salary increases, setting up your own rate and payment structure can be an intimidating task.
For most people, it’s easiest to start with a base hourly rate to build your pricing off of. A common equation I’ve seen used is taking the hourly rate you would earn in a salaried position, and double that number to account for taxes and benefits you would receive as an employee that you do not receive as a consultant.
This starting point can help you determine an hourly rate you can offer to clients if you prefer to work on an hourly basis. Companies often default to this approach when hiring HR consultants because it’s an easy calculation for the money spent and time received in return.
But you don’t necessarily have to charge by the hour. There are other options to consider, including:
Retainer Fee
When you charge a retainer fee, the company pays upfront for the time or project you’ve agreed to in the contract. You can set a monthly rate or another cadence to set a more predictable income, and you’ll want to be transparent about what services you’re providing within that ongoing fee.
Project Fee
With a project fee, the client will pay a single amount for the entire project you’ve outlined to deliver. This lump sum or flat fee payment can be broken down into partial payments for different points of completion on a longer term project.
Understanding how you’re spending your time and where your hours are going are key metrics to track no matter what fee structure you decide on, because you still need to understand your business’ profitability based on your efforts. These calculations can help you figure out new pricing strategies for the next client, or highlight negotiations that need to happen with existing contracts.
If there’s one piece of advice I can give you on pricing, it would be to set up short-term agreements that allow you to revisit and adjust your pricing and offerings as you learn to navigate HR consulting. It’s normal to underestimate a project’s investment or undersell yourself as you get started, but working through those experiences can help you gain confidence and knowledge to better negotiate for yourself in the future.
I also appreciate the perspective Jake Jorgovan shared in CareerFoundry, “While there are some criteria to consider, it is important that you understand that there is no formula and are no rules to pricing.” Try out different pricing strategies and see what works best for you and your business!
Besides pricing, you need to decide how to structure the services clients are paying you for. This aspect of your offerings may change over time, but there’s a few different formats to consider from the outset.
Project
Perhaps you have a succinctly outlined service you can provide a client, like writing an employee handbook or performing a compensation review. Established deliverables and timelines are perfect for a project-based agreement.
Engaging with companies on a project basis allows you to clearly define your offerings and possibly construct repeatable resources you can implement again and again. For new clients, a project can be a great short-term way to establish if your working style fits their needs before engaging in a longer term agreement.
The most obvious fee setup for project-based deliverables is a project fee, but you may also be able to break up projects over a retainer or hourly payment structure if you prefer.
Fractional
You may have heard of a “fractional” executive, and wondered what that term actually means! Fractional leaders are embedded in the teams they work in, but usually not on a full time basis. They often balance partnering with multiple companies simultaneously, and provide both a tactical and strategic impact.
Karina Mikhli, founder of Fractionals United, broke down the differences between a fractional leader, a consultant, an interim leader, and an advisor in the table below.
These types of agreement are more nuanced based on the fractional leader’s expertise and the client’s needs, and often make sense for companies that are at an earlier stage and may not need a full time HR/People executive.
These are just a few examples of different ways you can structure your work with clients, and it may take a little experimentation to find the right fit for you and your services.
Ultimately, you need to actually book contracts to find out if consulting is right for you! When you’re starting your consulting business, there’s a few common avenues for finding your first clients.
Past Employers
Sometimes, you can restructure the relationship with your past or current employer to kickstart your journey into consulting. Converting from an employee to consultant can help you reframe the work you do at the organization, and the company can benefit from your institutional knowledge still making an impact.
Referrals
People who will recommend you and your offerings can help connect you with potential clients. Sharing your new service offerings and ideal customer profile can help previous colleagues, friends, and other connections know who to send your way.
There also may be opportunities for you to establish mutual referral networks with other vendors or consultants who handle services that are related to yours, but are not in direct competition. For example, a financial firm may have clients with HR needs and can benefit from a trusted partner they can send referrals to.
Social Media
Distributing valuable content consistently can help establish your brand identity and keep your services front and center. There’s a lot of different approaches and strategies around which platforms may make sense for you, but exploring these options is worth considering in order to expand your reach.
Groups and Networks
By joining a consulting group or network, you may be assigned projects or introduced to clients you wouldn’t have access to otherwise. There’s often an application or interview process associated with these opportunities, and there may be fees or rates you agree to in exchange for the business development they’re doing on your behalf.
This article has only scratched the surface of all the intricacies that come up when you start your own HR consultancy. There’s a lot of details you’ll encounter and decisions you’ll need to make, but even if you’re a solo HR consultant, you don’t have to do it alone!
Find your community
Communities like TroopHR can help you connect with people on similar journeys who can share their insights along with tools and resources as you get started. TroopHR’s quarterly meetup for fractional CPOs and HR consultants is a great way to connect with others in this space!
Invest in yourself
When you’re creating your budget, make sure you have resources to continue your personal and professional growth. Whether that’s partnering with a coach, joining a community, or gaining a new certification, your development is important for your business.
Give yourself grace
So often, you may feel like you have to have it all figured out before you get started. You’re going to learn a lot in the process of doing the work, and you can give yourself some grace as you make mistakes along the way. Few people experience overnight success, and most businesses take time to find their niche and accelerate their trajectory.
If you decide to venture into the world of HR consulting, you’ll gain an expanded understanding of business and how to manage yourself and your work. This expertise and experience will benefit your career whether you choose to return to an in-house role, or continue to grow your own business.
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