Should you start your own HR consulting business or stay in-house?

I have done both. I spent years in an in-house HR business partner role, handling employee relations and multi-state compliance, before I founded Urban Human Resources in Oakland in 2017. Neither path is the better one in general. Each is better for a particular person at a particular point, and HR careers rarely come with an honest comparison of the two.

Here is the one I give people in coaching sessions when they ask whether to go out on their own.

What does an in-house HR career offer?

The case for staying is stronger than the “be your own boss” crowd admits.

• Pay that is reliable and high. In the San Francisco and Oakland metro, HR managers earned a mean of $219,270 a year in the latest federal survey. The HR manager salary in the Bay Area also varies a lot by side of the bridge; see my breakdown of that gap.
• Benefits someone else pays for. The average employer-sponsored single health plan cost $9,325 in 2025, and the employer covered all but $1,440 of it.
• Depth. You see one culture through hiring, growth, layoffs and leadership changes, and that is how you learn what actually holds an organization together.
• A ladder and a bench. There is a next title, a budget, a legal department to call and colleagues to learn from.

The costs are real too:

• A ceiling you don’t control, set by the org chart and whoever sits above you.
• Exposure to cuts. HR often runs the layoff and then gets cut in the next round.
• Narrow scope. You solve one company’s problems, in one industry, with one set of tools.
• Ownership: the policies, programs and training you build belong to your employer when you leave.

What does running your own HR practice offer?

• Your own mission. I built mine around first-generation professionals and the urban organizations that hire them, a focus no employer would have designed for me.
• Your own prices and clients. You decide what the work is worth and whom you serve, and you can say no.
• Range. Ask what does an HR consultant do in a given month and the answer is a little of everything: in a single month you can see a startup’s first handbook, a nonprofit’s pay equity question and a restaurant’s scheduling problem. Over 60 clients since 2017 have taught me more patterns than any single employer could.
• Assets that compound. Templates, courses and content keep working after the engagement ends. I have run Online Facilitation Skills since 2017, and that training work still feeds this practice.

The costs:

• No paycheck. Revenue arrives when clients pay, which is often 30 or more days after the work.
• Selling is the job. Every month starts with finding the next client, before any HR work happens.
• Isolation. There is no one down the hall to check your thinking against before you advise a client.
• Concentration risk. Losing one large client can take a third of your income at once.

What does independence actually cost?

Price the move against your current total compensation, not your salary. As a self-employed consultant you pay both halves of Social Security and Medicare, a self-employment tax of 15.3% on net earnings. You buy your own health coverage, at a price your employer was quietly absorbing. If you form an LLC in California, you owe the $800 annual minimum franchise tax whether or not you make money. Add insurance, software, a bookkeeper and the hours you can’t bill. Clients will ask you these questions about an HR consultant.

The practical test: work out the day rate that replaces your salary, benefits and those costs, assuming you bill only about half your working days in year one. If the market in your niche will not pay that rate, the business is not ready yet. My HR consultant cost estimator shows what Bay Area small businesses typically pay for this work, which is a useful reality check from the buyer’s side.

What are the odds a new practice survives?

Federal data is sobering. Of the business establishments that opened in 2013, 34.7% were still operating ten years later, and the steepest drop came in the first year. A consulting practice has lower startup costs than most businesses, but the same core risk: not enough paying clients, soon enough.

The practices that last usually share three things: a narrow audience they can name, a referral source that does not depend on the founder’s personal network alone, and a service with a clear price and a clear finish.

Who is each path built for?

In-house fits you if you want to go deep on one culture, you need predictable income for the next few years, you are still building the judgment that only comes from living with your decisions, or you want to lead a large HR function someday.

Your own practice fits you if you already have a specialty clients pay for, you have savings for at least six months, you are willing to spend real time selling, and the mission matters more to you than the title.

There is a middle path. Fractional HR, where you serve a few small businesses part-time each, lets you test independence with recurring income. If that model interests you from the client side, here is what fractional HR costs in the Bay Area.

How should you test the move before you quit?

1. Name the client. Write one sentence on who pays you and for what. “HR for small businesses” is too broad; “first HR policies for Bay Area nonprofits under 50 employees” is a business.
2. Get paid once before you leave, if your employer’s outside-work policy allows it. One paying client tells you more than a year of planning.
3. Leave clean. California does not enforce noncompetes, but you still cannot take client lists, files or confidential information; see what the noncompete ban does and does not cover.
4. Build the runway: six months of expenses saved, and a plan for health coverage on day one.

If you are weighing a career change in either direction, this is exactly the decision my career coaching is built for: we map what you have, what the market pays for it, and the order of moves that protects your income while you find out.

McKinley holds a J.D. but is not a licensed attorney. Articles here are general information, not legal advice. For your specific situation, talk with an employment attorney.

Data current as of September 2026. Sources are linked where each figure appears.