Business ideas
8 min read

How to Start a Profitable Virtual Human Resources Business [11 Steps]

Learn how to start a virtual HR business with our 11+ step guide. Discover the key strategies and tools to succeed in this growing industry. #virtualHR #HRbusiness #startabusiness

By Nick Cotter
Updated Feb 02, 2024

image of a virtual human resources business
This page may feature products from our affiliate partners, which could influence the products we discuss due to potential compensation. Despite this, our evaluations are impartial, based solely on our independent analysis. The content here is intended for informational purposes and should not be seen as legal advice. For professional guidance, consulting with a legal expert is recommended.
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1. Perform market analysis.

Starting a virtual human resources business requires a thorough understanding of the current market. A comprehensive market analysis will help you identify potential customers, competitors, and market trends. Here's how to approach your market analysis:

  • Research the size of the market: Look at the number of businesses that could benefit from virtual HR services and assess the overall demand.
  • Analyze your competitors: Identify existing virtual HR businesses and evaluate their services, pricing, strengths, and weaknesses.
  • Understand your target audience: Determine the needs, challenges, and preferences of the businesses you plan to serve.
  • Examine market trends: Keep an eye on technological advancements, changing labor laws, and other trends that can impact the HR industry.
  • Assess the legal and regulatory environment: Ensure you're aware of the laws and regulations that affect virtual HR services in your target markets.
  • Identify market gaps: Look for services that are in demand but currently underserved, which could be your opportunity for differentiation.
image of a virtual human resources business

Are virtual human resources businesses profitable?

Yes, virtual human resources businesses can be very profitable. Depending on the size of the business, the services offered, and the geographical scope of operations, a virtual human resources business can generate substantial revenues and profits.

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2. Draft a virtual human resources business plan.

Embarking on a virtual human resources business requires careful planning and strategic thinking. A comprehensive business plan will serve as a roadmap, guiding your steps from conception to execution, and ensure that your virtual HR venture is well-positioned for success. Here are some key points to consider when drafting your business plan:

  • Identify your niche within the HR industry, focusing on the specific services you'll offer, such as recruitment, payroll, employee training, or compliance consulting.
  • Analyze your target market, outlining potential clients, their size, industry, and the unique HR challenges they face that your business can address.
  • Establish your value proposition, highlighting how your virtual HR services will benefit clients, including cost savings, improved efficiency, and access to expertise.
  • Set clear business objectives and milestones, including financial goals, client acquisition targets, and service delivery timelines.
  • Develop a marketing strategy to reach your audience, leveraging social media, professional networking sites, and industry events to build your brand presence.
  • Outline your operational plan, detailing the technology platforms you'll use, your business processes, and how you'll maintain client confidentiality and data security.
  • Prepare a financial plan with projections for startup costs, pricing models, revenue streams, and a break-even analysis.
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How does a virtual human resources business make money?

A virtual human resources business makes money by providing services like payroll, hiring and onboarding assistance, employee benefits management and more. For example, a virtual HR business could target small businesses that don't have the resources or capacity to hire a dedicated in-house HR team. These businesses would pay a fee to outsource their HR functions to the virtual HR business. Additionally, the virtual HR business could offer services such as creating a customized employee policy manual and providing training for new hires to provide further value for their customers. Finally, the virtual HR business could reach out to large corporations as potential clients who may need assistance with managing their high volume of employees and benefits.

3. Develop a virtual human resources brand.

Developing a virtual human resources brand is crucial to establishing trust and credibility in the market. Your brand will serve as the face of your business, embodying your values, services, and the unique approach you bring to HR solutions. Here are some key steps to guide you in building a strong virtual HR brand:

  • Define Your Unique Value Proposition: Clearly articulate what sets your virtual HR business apart from the competition, focusing on the specific benefits and expertise you offer.
  • Design a Professional Logo and Visual Identity: Create a logo and visual scheme that reflects your brand's personality and resonates with your target audience, ensuring consistency across all digital platforms.
  • Establish an Online Presence: Develop a professional website and actively engage on relevant social media platforms to showcase your services, share insights, and connect with potential clients.
  • Create Engaging Content: Offer valuable content, such as articles, webinars, and infographics, that addresses common HR challenges and positions your brand as a thought leader in the virtual HR space.
  • Testimonials and Case Studies: Share client success stories and testimonials to build credibility and demonstrate the impact of your services.
  • Networking and Partnerships: Network with industry professionals and explore partnerships that can enhance your brand's visibility and service offerings.
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How to come up with a name for your virtual human resources business?

Coming up with a name for your virtual human resources business can be a tricky task. Consider the goals and mission of your business; this will help you to create an appropriate name. You could also try brainstorming with friends or colleagues who might have helpful suggestions or ideas. If all else fails, there are plenty of online platforms that offer tools and suggestions to help you generate a suitable title. Ultimately it is important to remember that an eye-catching name which reflects your company's purpose is essential in setting up your virtual HR business.

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4. Formalize your business registration.

Now that you've laid the groundwork for your virtual human resources business, it's time to make it official by formalizing your business registration. This crucial step will help you operate legally, and it can also enhance your credibility with clients. Here's how to navigate this process:

  • Choose a business structure that suits your needs, such as a sole proprietorship, limited liability company (LLC), or corporation. Each has different tax and liability implications.
  • Register your business name with the appropriate state agency. If you're operating under a name different from your own, you may need to file a 'Doing Business As' (DBA) registration.
  • Obtain an Employer Identification Number (EIN) from the IRS for tax purposes, even if you don't plan to hire employees immediately.
  • Apply for any necessary business licenses or permits that are required for operating a human resources business in your state or local jurisdiction.
  • Check with your local government about any additional requirements, such as zoning laws or home business regulations, if operating your business from home.

Resources to help get you started:

Explore invaluable resources designed for virtual human resources entrepreneurs looking to stay ahead with the latest market trends, operational excellence, and strategic growth advice:

  • SHRM (Society for Human Resource Management): Offers comprehensive reports, best practices, and legal updates for HR professionals. Visit SHRM
  • HR Dive: Delivers news, trends, and analysis in the HR sector through daily newsletters and in-depth articles. Visit HR Dive
  • Workology: Provides insights into the future of work and HR technology through podcasts, articles, and resources. Visit Workology
  • HR Tech Weekly: Features weekly updates on HR technology, software, and startups, keeping you informed on the latest digital tools. Visit HR Tech Weekly
  • The HR Director: Offers strategic insights and reports for senior HR practitioners, focusing on long-term strategy, leadership, and best practices. Visit The HR Director

5. Acquire necessary licenses and permits for virtual human resources.

Starting a virtual human resources business requires compliance with legal standards and regulations. Ensuring that you obtain all necessary licenses and permits is crucial for operating legitimately and avoiding potential fines. Below are the key steps to guide you through this process:

  • Research local and national business licensing requirements, as these can vary depending on your location and the services you offer. You may need a general business license to legally operate.
  • Contact your state's labor department or a legal expert to understand the specific HR consultancy licensing requirements, if any. Some regions may require special certifications for offering HR services.
  • Check if you need any industry-specific licenses, especially if you plan to work with certain sectors such as healthcare, which may have additional privacy regulations like HIPAA.
  • Apply for permits related to your business structure, such as a home occupation permit if you're working from home, and ensure compliance with zoning laws.
  • Consider professional certifications from recognized HR institutions, like the Society for Human Resource Management (SHRM), to enhance credibility and trust with clients.

What licenses and permits are needed to run a virtual human resources business?

Licenses and permits for a virtual human resources business vary depending on the location. Generally, you will need a business license from your local or state government before you can legally operate. You may also need to register for particular taxes, such as sales or use taxes, or for employer withholding if you will be providing payroll services. Additionally, if you are providing services across state lines, you may need to obtain a multi-state license from each state you do business in.

6. Open a business bank account and secure funding as needed.

For your virtual human resources business to operate smoothly and professionally, it's essential to keep your finances in order. Opening a business bank account and securing funding are crucial steps in managing your finances and supporting your business growth. Follow these guidelines to get started.

  • Choose the Right Bank: Research banks that offer business banking services. Consider fees, online banking features, customer service, and any additional services that could benefit your virtual HR business.
  • Prepare Required Documents: Gather necessary paperwork such as your business registration, EIN (Employer Identification Number), and personal identification to open your account.
  • Apply for the Account: Once you've selected a bank, complete the application process for a business checking account. Some banks may allow you to apply online.
  • Explore Funding Options: Assess your startup costs and determine if you need external funding. Options may include small business loans, lines of credit, venture capital, or angel investors.
  • Develop a Financial Plan: Create a comprehensive business plan that outlines your financial projections and funding needs. This will be crucial when applying for loans or pitching to investors.
  • Monitor and Manage: Once your account is set up and funding secured, use accounting software to track your finances and ensure your business operates within its means.

7. Set pricing for virtual human resources services.

Setting the right price for virtual human resources services is crucial to ensure the competitiveness and profitability of your business. It involves balancing the value you provide with what the market can bear. Below is a step-by-step guide to help you determine an effective pricing strategy:

  • Analyze your costs: Consider all expenses, including software subscriptions, marketing, and staff salaries, to ensure your prices cover your costs and leave room for profit.
  • Research the competition: Look at what similar services are charging to gauge market rates and position yourself competitively.
  • Value-based pricing: Set prices based on the value you offer to clients, such as time savings, access to expert advice, and improved compliance.
  • Differentiate your services: If you offer unique features or specialized expertise, your pricing can reflect this premium.
  • Consider pricing models: Decide between hourly rates, retainer fees, or project-based pricing depending on what works best for your service structure.
  • Be transparent: Clearly communicate what each service includes and any additional fees to build trust with potential clients.
  • Adjust as needed: Regularly review your pricing to ensure it stays competitive and reflects any changes in your cost structure or service offerings.

What does it cost to start a virtual human resources business?

Initiating a virtual human resources business can involve substantial financial commitment, the scale of which is significantly influenced by factors such as geographical location, market dynamics, and operational expenses, among others. Nonetheless, our extensive research and hands-on experience have revealed an estimated starting cost of approximately $41000 for launching such an business. Please note, not all of these costs may be necessary to start up your virtual human resources business.

8. Acquire virtual human resources equipment and supplies.

Starting a virtual human resources business requires careful consideration of the digital tools and supplies that will enable you to deliver your services efficiently and effectively. Here's a guide to help you acquire the right virtual human resources equipment and supplies that will form the backbone of your operations.

  • HR Software Suite: Invest in a comprehensive HR software that offers features like applicant tracking, onboarding, performance management, and payroll integration.
  • Project Management Tools: Choose project management software to organize tasks, manage timelines, and facilitate collaboration among team members.
  • Communication Platforms: Secure reliable communication tools for video conferencing, instant messaging, and email to stay connected with clients and your team.
  • Data Security Solutions: Implement robust cybersecurity measures including antivirus software, firewalls, and secure cloud storage for sensitive data protection.
  • Virtual Office Supplies: Ensure access to basic office necessities like online calendars, digital filing systems, and virtual whiteboards for brainstorming and planning.
  • Professional Development Resources: Keep up-to-date with HR trends and best practices through subscriptions to online journals, webinars, and industry reports.

List of software, tools and supplies needed to start a virtual human resources business:

  • Desktop computer: Price range $500 - $1500
  • Internet connection: Price range $60 - $100 per month
  • Business software: Price range $125 - $350 per month
  • Business Phone System: Price range Varies depending on the provider and plan
  • Accounting software: Price range Varies depending on the provider and plan
  • HR Management software: Price range Varies depending on the provider and plan
  • Marketing platform: Price range Varies depending on the provider and plan
  • Employee onboarding software:: Price range Varies depending on the provider and plan
  • Payroll software:: Price range Varies depending on the provider and plan
  • Communication tools: Slack, Zoom, etc.: :Price Varies depending on the provider and plan

9. Obtain business insurance for virtual human resources, if required.

Securing the appropriate business insurance is a critical step in safeguarding your virtual human resources venture. It ensures that you're protected against potential liabilities and financial risks associated with providing HR services online. Consider the following types of insurance:

  • Professional Liability Insurance: Also known as Errors and Omissions (E&O) insurance, it covers claims of negligence or mistakes in the services you provide.
  • General Liability Insurance: Protects against claims of bodily injury or property damage that could occur during your business operations.
  • Cyber Liability Insurance: Especially important for virtual businesses, as it covers data breaches and other cyber security threats.
  • Workers' Compensation Insurance: If your business employs others, this is generally required to cover employee job-related illnesses and injuries.
  • Business Owner's Policy (BOP): Often combines general liability and business property insurance at a more cost-effective rate.

Remember to consult with an insurance agent or broker who specializes in business insurance to identify the specific needs and requirements for your virtual HR company.

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10. Begin marketing your virtual human resources services.

Once you've established your virtual human resources business, it's time to get the word out and attract clients. The right marketing strategy can set you apart from the competition and showcase your expertise in providing top-notch HR services remotely. Here are some essential steps to begin marketing your virtual HR services:

  • Develop a Strong Online Presence: Create a professional website and maintain active social media profiles to reach potential clients where they spend their time online.
  • Networking: Join online business networks, attend virtual industry events, and connect with other businesses to build relationships and gain referrals.
  • Content Marketing: Share insightful articles, blog posts, and newsletters that demonstrate your HR expertise and provide value to your audience.
  • SEO Strategies: Implement search engine optimization techniques to improve your visibility on search engines and attract organic traffic.
  • Paid Advertising: Consider using targeted ads on platforms like LinkedIn, Google, or industry-specific websites to reach businesses looking for HR services.
  • Client Testimonials and Case Studies: Showcase your successes with testimonials and case studies from satisfied clients to build credibility and trust.
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What licenses and permits are needed to run a virtual human resources business?

  • Desktop computer: Price range $500 - $1500
  • Internet connection: Price range $60 - $100 per month
  • Business software: Price range $125 - $350 per month
  • Business Phone System: Price range Varies depending on the provider and plan
  • Accounting software: Price range Varies depending on the provider and plan
  • HR Management software: Price range Varies depending on the provider and plan
  • Marketing platform: Price range Varies depending on the provider and plan
  • Employee onboarding software:: Price range Varies depending on the provider and plan
  • Payroll software:: Price range Varies depending on the provider and plan
  • Communication tools: Slack, Zoom, etc.: :Price Varies depending on the provider and plan

11. Expand your virtual human resources business.

Once your virtual HR business has established a solid foundation and a steady stream of clients, it's time to consider expansion. Growth can take many forms, from increasing your service offerings to tapping into new markets. Here are some key strategies that can help you expand your virtual human resources business:

  • Introduce new services such as executive coaching, employee training programs, or specialized compliance consulting to address more needs of your clients.
  • Target different industries or sectors that could benefit from your expertise, especially those that are experiencing growth or facing regulatory changes.
  • Collaborate with software providers to integrate advanced HR technology solutions that can improve your service delivery and attract larger clients.
  • Form strategic partnerships with other businesses to offer bundled services, expanding your reach and value proposition.
  • Invest in marketing and sales initiatives to build brand awareness in new markets and generate leads.
  • Consider hiring additional HR professionals with diverse skills or niche specializations to enhance your team's capabilities.
  • Explore opportunities for franchising or licensing your business model to extend your brand geographically without managing new locations directly.
  • Continuously gather feedback from clients to refine your services and ensure that your expansion aligns with market needs and expectations.