Young Business Colleagues

How to start a
HR company

With the advent of new technology and artificial intelligence, some may consider employees to be a less integral part of a business, and may feel that starting an HR consultancy has few benefits.

However, despite technological progress, employees will most likely always be a business's most valuable assets and therefore, the HR department or an HR consulting business will serve as a crucial source for recruiting and engaging the desired workforce.

The last few years have given rise to new challenges for starting and running a business, but the expertise of a human resources consultant is now perhaps more imperative than ever in order to assist in the planning, recruiting, and training process of a business.

Therefore, if you have some experience in the field, are prepared to provide a reliable service, and have taken some inspiration from HR leaders, now is the time to start your own HR company.

If you are ready to begin the business of consulting, there are many aspects that you need to pay attention to. Here are some valuable tips on how to begin HR consultancies.

How to start your own HR consulting business

1. Understand why clients need you

Before we tell you how to go about setting up your own human resources business, let's explore why a company may want to hire human resources consultants rather than have an in-house HR department.

First of all, hiring an HR manager and HR professionals restricts their outreach and the level of expertise one person or a small team may have is limited compared to the connections that an HR consulting company can offer.

Moreover, for a small business or startup with only one or two HR professionals in their human resources department, it may be difficult to handle all aspects such as payroll, planning, recruitment, training, strategy, etc. and outsourcing to an HR consulting firm may be the most efficient option.

According to research, 57% of businesses have claimed that outsourcing helps them focus on their main competencies rather than trying to manage tasks that they may have little to no expertise in.

Hiring an HR company is also ideal for a small business or startup because it helps get an outside perspective on problems.

Additionally, a human resources consulting firm provides flexibility and saves clients from making a long-term commitment that would be required if they developed an HR department.

There are many benefits that a human resources consulting firm can provide clients, and therefore such companies are likely to have an ample client base- from both small and large corporations.

2. Understand your market

The second step in beginning an HR consulting firm is to properly understand your market. Within the last year, many businesses have switched to working from home.

Nevertheless, business owners and HR departments often still want workers on-site to handle crisis situations. Therefore, it is crucial to understand the market and determine whether your client base prefers remote workers, workers within the area who can work on-site, or whether they are willing to assist professionals from afar to relocate to the area.

Understand the pain points of your target audience. What are their needs? What is their current headcount? Look at business structures and hierarchies to understand the type of skills, knowledge, and experience level different businesses may be looking for.

Research and understand their business activities and how they generate revenue.

This will help you determine what your local businesses are looking for and allows you to develop a sketch of how you can assist your target market in achieving their business goals.

You also should connect with your local Chamber of Commerce or find a local Business Network International so that you can liaison with other business owners, develop a better understanding of their activities and discuss their pain points.

Most organizations will allow you to attend one meeting without membership or signing up formally. You should ensure you ask the right questions to get as much insight as possible.

3. Lose the management jargon

You may be tempted to use fancy words and provide advice or solutions in more technical terms than the layman understands. If you think this will benefit your business, and make you seem more professional, think again.

Startups and small to medium enterprises use HR consultants in Australia and their core objective is to align workers with their business performance. Such companies want to recruit workers who understand their work culture, their business, and can play a value-adding part in it- and they want to use consultants who can do the same.

Using management buzzwords or jargon that is usually used in large corporations will only be a turn-off for SMEs. They will not get the feeling that you understand their business and are aligned with their core objectives.

They are looking for someone who can sort out their particular issues and tell them a way to progress, rather than someone who uses corporate solutions that may not be applicable to them.

Refrain from giving advice or providing service with management jargon and difficult terms, because small and medium business owners will not appreciate it.

Try to be as simple as possible in your approach. Clearly address their pain points, and try to resolve issues that business owners may face. Your consulting services are a key component in them achieving their business goals and recruiting the right workers, so break it down into language and steps that they can understand rather than making it sound more complicated than it is.

Simplicity and straightforwardness is the key here. Businesses are not looking for fancy language, they are looking for workable solutions.

4. Leverage your network

Networking and interacting with people is still the best way to expand your number of connections and strengthen your human resources consulting firm. However, an HR business owner may believe that most of their clients will come from their own network. What does a network entail?

A network includes the people you have met in person, your social media contacts, and anyone who is in direct communication with you. If HR business owners believe that a lot of their clients will come from their own network, they aren't wrong- yet that is not the full extent of it.

Most of your clients may not come directly from your friends, family, colleagues, and social media connections, but may come from the networks of your network. The people with whom your friends, family, colleagues, and social media connections are associated may form a large section of your client base.

It is important for you to work on educating your network about your business and what you are doing. If you give out more information regarding your consulting services, your network will have more information to pass on.

You can do this by regularly posting about your business on social media, developing and implementing marketing strategies with campaigns that your network has access to, and writing blogs, white papers, and articles regarding human resources practices and what type of services your business can provide employers.

Your network can then easily digest this information, ask relevant questions, and refer you to people and companies who may require your services. This is imperative for your HR business to flourish.

5. Maintain a 60/40 split

A problem that a new human resources consulting firm may face is the feast or famine predicament. What's this?

Basically, it's the state of either having many clients and a lot of business, or having almost none. This state arises when consulting businesses initially spend a lot of their time networking and acquiring projects but don't look for new opportunities while the projects are underway.

This means that they gain a lot of business, and solely focus on those projects. But then once they are done, their work dries up because they haven't spent any time increasing their network and strengthening their connections.

Obviously, this model is not sustainable. However, how do consulting businesses find the time to network while they have many projects underway?

It is advisable that consulting businesses in Australasia maintain a 60/40 split, where they generate 60% of their revenue from their time, while 40% of it is gained from products or tool-based solutions.

A study of 130 Australiasian HR companies has suggested that this is the most effective method of managing a consulting business and has proven to be the most successful strategy in managing time, especially for businesses in Australasia.

The time that consultants save by using product or tool-based solutions can then be allocated to network building, administration, marketing, developing funnels, and other essential tasks required for a successful HR business.

Therefore, it is always advisable to use models that can free up your time and allow you to grow your network while also focussing on core competencies, rather than just planning and implementing client projects.

Software such as Employment Hero, BambooHR, and Oracle HCM Cloud are popular with HR companies in Australia. This software can help streamline operations, and perform tasks like recruitment, employee management, payroll, and compliance quicker and in a more organised manner.

Businesses all over the world have found that product and tool-based solutions in human resources provide real-time connectivity, improved efficiency and productivity, improved security and risk management, and easy data retrieval. Such tool-based solutions are the basis of a strong business foundation.

If time and technology are used together, a human resources consulting firm can climb the rungs of success quicker and stay there.

6. Practice what you preach

Practising what you preach is especially important in the consulting business. A consulting business cannot be ignorant of new technology, needs, or business structures. Therefore, it is essential to not only focus on the professional development of your clients but to pay attention to your own training and development.

Before you provide advice to another business, make sure you are aware of everything that is going on in the world of your industry. In order to do so, invest time and money in gaining further experience and expertise.

It may seem like time spent on training or courses could be better spent on other things like networking. However, remember that a company will want to hire you for your expertise. If you're not at the top of your field, someone else will be.

Always be in sync with the latest technology and what it means for different businesses. Will it have an impact on their bottom line? Will it have an impact on the type of workers they need?

You need to be able to add more value to a business's bottom line in order to be a successful human resources consulting business. Ensure your expertise is sufficient to sustain a business's entire life cycle by continuing to renew your skillset to better facilitate your target market.

Final thoughts

Human resources consulting firms are very important, especially to small and medium-sized enterprises in Australia who do not want to opt for a full-time and long-term commitment with an HR team. As evident from everything discussed above, it is important to leverage your network and always spend time on networking in order to have a successful HR consulting practice.

Workers are the lifeline of every business and companies strive to develop a culture that helps them fit in and be at their most productive. Specific, targeted solutions and advice from HR consultants can help achieve this.

FAQs

Is HR consultancy a viable career choice?

A study in 2016 by the Australian Human Resources Institute said that out of 437 HR professionals, about 85% were satisfied or happy with their work. It is true that HR is often at the core of frustrating conflicts in a business and there are a number of challenges- like with all other businesses and departments.

However, with the increasing number of small to medium-sized businesses in Australia and a growing number of people who prefer to use outsourced consultancy services as opposed to hiring full-time staff, HR consultancy is a very promising career choice.

Can you open a consulting firm without HR experience?

Getting into HR without prior experience or education is common and many people discover that they particularly enjoy it once they are in the field. However, opening a consulting firm without prior experience may be a bit tricky and risky.

First of all, your clients may want to see some certifications or endorsements of your experience before they hire your firm.

Additionally, it is important to know how to grow a network and manage different aspects of a business before opening one. Since many issues in HR can get technical and frustrating, it is advisable for you to have some sort of training before you start working as a consultant and providing services.

Is a strong online presence essential to running an HR consulting business?

A strong online presence is highly advisable when running an HR consulting business because it is the fastest and most effective way of growing and leveraging your network. You can have thousands of contacts and educate your network about the services you offer via social media.

Social media plays an important role in presenting your message, disseminating it to a large audience, and helping you connect with an extended network.

Moreover, if an HR business is not on social media, clients may have a hard time trusting the business and communicating with the business. It is sometimes said that if you aren't on social media, you simply don't exist.

Therefore all HR consulting companies should work hard to develop a strong and engaging online presence and continue to interact with their target audience virtually.