← Back to Blog

How to start a software consulting business (updated)

minute read
Access Bonsai's suite of consultant tools: contracts, invoices, proposals and more. Try it for free.
Access Bonsai's suite of consultant tools: contracts, invoices, proposals and more. Try it for free.
Try it free
Updated on:
December 11, 2022
December 11, 2022
Table of contents
Access Bonsai's suite of consultant tools: contracts, invoices, proposals and more. Try it for free.
Discover Bonsai all-in-one business management software.

If you are planning to start a software consulting business, you will be in for a nice surprise. Working as a software consultant can be very profitable, especially with the IT industry becoming so important.

Every small business owner will need software advice at some point. Therefore, starting your own business will bring you, numerous clients.

You just need to set up the consulting firm correctly. This guide will give you a few tips on how exactly you can do that.

Note: If you are starting your software consulting business, try Bonsai's full suite of small business tools to help you run your business. We have small business bank account, task management, time tracking, tax, and a library of pre-made invoice, contract, software proposal templates you can try. Claim your 7-day free trial here.

What Is Software Consulting?

As a consultant in general, your job is to offer knowledge and advice to a third party against a fee. If you own a software consulting company, your expertise is obviously in the IT industry.

That being said, as a software consultant, you don't just offer advice. Some may say that you sell software development labor to consulting companies with this job.

In a way, it is true, mainly because of the nature of software. Regardless, you are not working for that company. You are simply offering your expertise on a certain idea.

Steps to Start a Software Consulting Business

When you are starting a consulting business, there are certain steps that you need to follow. These include:

Assess Your Skill Set and Strengths

As a consultant, you will offer advice and solve problems that your clients cannot fix on their own. Even so, the hiring company wants the security that you know what you are doing.

This is why it is recommended you assess your skillsets and strengths. Pick the niche that you want to get into, and then serve it well.

You may want to offer a little bit of everything, but this may end up backfiring. Broader niches may mean bigger competition. A smaller niche will bring much smaller competition, and subsequently a steady flow of clients.

Set the Documents Straight

As a software consultant, you may have various documents to exchange with your clients. This can include anything from engagement letters to proposals to contracts and invoices.

The more clients gather around, the more difficult it will be to write each document from scratch. This is why programs like Bonsai can be so helpful, as they can offer templates. You just need to customize them to your liking.

Note: try Bonsai's full suite of invoice, proposal and software contract templates today. We have pre-made templates you can use to edit and send these documents to clients. Claim your 7-day free trial here.

Design a Software Consulting Business Model

To open your own software consulting business, you need to know where you want to be on the market. What kind of business do you wish to start?

For instance, you may work as an independent contractor or a solo client, talking with potential customers yourself. You may also open your own consulting firm in the form of an LLC, which allows you to hire people. Read more about the right time to set up an LLC.

Decide on the business model and determine exactly how you wish to run your company. If you are not sure, a hybrid model can bring the best out of every world for you.

Note: Try Bonsai, the best software for consulting businesses, today. Our suite of business tools has everything you need from tax, task management, time tracking to pre-made templates (invoice, contract, proposal) to grow your business. Claim your 7-day free trial here.

Create a Security and Defense Protocol

When you work in IT, you will be exposed to a lot of virtual threats. This is very serious, as you have your client's information to protect. This is why you need to create security and defense protocols.

This will help you on the consulting part as well. Nowadays, most clients are looking for cybersecurity-niched consultants. Knowing about this will bring your business up a notch.

Bring an Elevator Pitch

Once you set everything straight, it is time to create an elevator pitch. Also known as the value proposition, this pitch will tell your clients everything they need to know about you.

Elevator pitches are short and take no more than five sentences. They will tell your clients exactly what they can achieve by working for you. To put it simply, an elevator pitch tells them why you are a better choice than your competition.

Create a Pricing Strategy

You have your business model set up, and you also have a pretty good idea about what you want to offer. Now, you need to figure out a pricing strategy.

Software consultants usually get paid at an hourly rate, project-based or by performance. Hourly rates are the most common, as the consultant gets paid an accurate fee.

If hourly rates are not your thing, you may set up a flat fee for every project. This may be a good solution if you have consistent projects all around. Flat fees are great if the specifications are clear and you have good time management skills.

Keep in mind that pricing may also depend on the attitude of the customer. For example, if the client never pays on time and disputes every single line in the invoice, this causes you trouble. A higher fee would be necessary to make up for the lost time.

If the client has enough technical expertise and understands the need for changes, your job is made much easier. This can lead to lower prices.

Arrange for Payment and Accounting Software

You have your pricing plan, payment terms for consulting and know exactly how much you expect to get paid. The other problem now is how you are going to get that money in the first place.

You need to arrange for a good payment medium. For instance, Bonsai's business account can be a very good option for professional clients that prefer credit cards.

Plus, Bonsai allows you to save money and keep your accounting. For instance, the "Envelopes" feature enables you to set money aside for your needs. This may be equipment expenses, worker's pay, or money owed on taxes. Bonsai also lets you manage invoices and has billing software for consulting services.

Note: Open a small bank account with Bonsai today. Our online account has no hidden fees or monthly minimums and lets you organize/separate your finances for taxes. Manage all of our finances in one bank account with Bonsai's business account today. Claim your 7-day free trial here.

Be Careful About Taxes

As someone from the software industry, you need to be very careful about your tax handling. Consulting work comes in smaller batches, and your expenses may also be all over the place.

Once you register with the IRS, you must find a way to manage your taxes. Bonsai Tax can be very helpful here, as it tracks your expenses and points out potential deductions. You can save up to thousands from your tax bill.

Note: If you are looking for an automatic expense tracker to scan your bank/credit card receipts to discover potential tax write-offs, try Bonsai Tax. On average, users save $5,600 from their tax bill with our tax deduction tracker. Claim your 7-day free trial here.

Look for Potential Clients

Last but not least, now that you set up your small business, it is time to look for prospective clients. You can only be your own boss as long as people are buying from you.

In the beginning, you should start locally. There will definitely be some small businesses in the area that could use your expertise. Perhaps there are even some companies that you previously worked for.

Make sure not to create generic proposals. They need to be company-specific and personalized to the tasks. You may use the proposal templates provided by Bonsai to customize a letter.

Once you've covered the local area, you should try going further. The Internet is your best friend here - so, you can join social media groups and forums, promoting your content there.

It is also recommended to buy a domain and create a website. WordPress is usually very popular in this regard. Still, if you do not have the funds yet, you can start a blog instead.

Tips to Make Your Software Consulting Services A Success

Going through the steps by the book can lead you on the path to success. However, there are some cases in which you should take the extra mile. Here are some things you could do to improve your sales funnel:

Start Working with a Software Consulting Company

If you want something concrete and gain more consulting experience, you may try working with an agency. They'll teach you what needs to be done, and then you may use that knowledge to start your own company.

Once you have the basic knowledge and a pool of clients, you can get your consultant certification. You'll know how the business works, which will help you look more professional.

Consider Moonlighting as a Consultant

If working for an agency is not your thing, perhaps you may want to start moonlighting. Keep in mind that this is an achievable solution only if you are a consultant.

If you work with software development, it may be too much trouble. This applies even more if you still have your day job. Moonlighting can help get you integrated with the domain until you start securing clients.

Minimize the Startup Costs

This might seem obvious, but if you want to succeed as a tech-savvy entrepreneur, you need to learn how to manage your money. Each startup will require a certain capital, so it's up to you to determine how big it should be.

Rather than thinking expensive, go for smart. Go for small business suite tools such as Bonsai that offer you all the basics at a very good price. As for the domain, getting a template and custom-building it yourself may turn out more affordable.

Money saved during startup can be invested in the actual product. This can help you raise more success in the long run.

Let the Bad Clients Go

Not every relationship is bound to work. Sometimes, you need to learn when to let go. Maybe you are not able to communicate effectively, or perhaps they are too demanding. There is a chance that what you have to offer is not exactly what you are looking for.

Bad clients will only make your life miserable if you are not a good match. If it's not worth the trouble, you may want to refer them to other people. With that in mind, remember to always maintain a professional attitude.

Arrange Proper Time Management

Working hours are changing for consulting firms. More and more of them are trying out the flexible pattern. For some, this may be a good thing - it allows them to take care of personal matters during "work days."

The problem is that this schedule may also be inconvenient. Since there are no fixed hours, you may no longer be able to differentiate between personal and professional life.

This is why you need a good time management system. For instance, Bonsai has a consultant time tracker that keeps a record of your hours. This will also help you bill your clients accordingly.

Note: try Bonsai's time tracking tool today. Organize and see what tasks take the most of your time to bill or charge accordingly. Our software does not get in the way of your productivity when it records hours for each task. Claim your 7-day free trial here.

Use a Task Management Tool

When you are working within a software consulting company, you may lose track of your tasks at some point. And when your workers cannot properly manage their projects, they may lose sight of the goals.

A task management tool, such as the one provided by Bonsai, can help you map out your software consulting services. You will know what tasks to address as a service provider, helping you finish your job with as little delay as possible.

Ask for Referrals

Once you finish working with a client, you may consider asking for referrals. New clients will always look for reviews, to see whether you can bring value or not. If they see that you have successfully helped others, this may improve your leads.

You may start a referral program as well. For instance, each time a client refers you, they get a bonus. This will be beneficial for both of you.

The Bottom Line

Starting a consulting business is not necessarily that difficult. You just need to be organized and follow the steps. Whether you want to be a freelancing sole proprietor or a bigger business owner, software consulting can be very rewarding.

Access Bonsai's suite of consultant tools: contracts, invoices, proposals and more. Try it for free.
Related Articles