To Consult Or Not to Consult – That is the Question

Ok, tell the truth. Don’t tell me you never thought of being a consultant if you are a full-time employee or unemployed. Let’s face it, consulting is pretty sexy. Many times no boss to deal with, come and go as necessary, travel to different locations, no office politics and great pay. Who wouldn’t want this job?

In this article I hope to provide some insight into the mystique of the consulting world having been both on a payroll and been an independent consultant with my own company. If I appear negative, actually just the opposite but I will point out the things you must consider first.

Question:  It seems a lot of people are making a lot of money going into consulting. I’m a little afraid to make that jump as I need a salary and benefits. What do you recommend?

Response: Having been in your position I completely understand your situation. I was independent for 10 years and the jump to that was harder psychologically than it was financially actually.

The question(s) you have to ask yourself first though are the following:

  • Do I have a truly marketable skill that people need?
  • Can I make enough money to make this financially worth the effort?
  • Do I have the ability to sell myself for my next assignment even when I’m on s or between assignments or do I am in a business that people will do this for me?
  • Do I have a financial reserve of 3-6 months for times I may not be working? e. Does my spouse or partner have the nerves to wait out the times I may not be working?

Let’s address these one at a time:

1. Do I have a marketable skill? First of all, it really doesn’t matter what you do… it can be marketed as a consultant pay by the hour or pay for performance role. I have friends that have turned their individual skills into very profitable full-time businesses; a machinist who turned his carpentry skills into a full-time flooring business paid by the job; a salesman who knew he could cold-call better than anyone else and became a fulltime telemarketer at $75 per hour; a manager who did such a good job holding people accountable he became a full-time business coach. Myself, I combined my computer, accounting and business knowledge to implement software systems and could bill over $100 per hour . It doesn’t matter what it is, it can be marketed and turned into a full-time business.

2. Can I make enough to live on? This is a trick question actually. Just as good a question is how many hours a year do I want to work or can work? The beauty of consulting is in some industries you can work 50% of the year and take off half the year. An independent haircutter though may have to work 80% of their time or starve. Remember that as a consultant you may not always have work. A carpenter may go days before the next assignment, a computer programmer may have to wait months between assignments, etc… Two things to calculate: can you live if you’re only working half the year and what hourly rate will you have to make to make this happen? If you’re not sure of either, a good rule of thumb is whatever the salary is you’d earn , then take off the ’000s and you’ll have your hourly billing amount. For instance if you’re an accountant making $60,000 per year you can probably bill in the $60 per hour range, give or take a few dollars. Now if you bill out 2000 hours, a full year, that’s $120,000 before taxes, insurance but that’s no vacations, sick days, etc. You’re responsible for all that.

3. Do I have the ability to Sell myself? Another trick question as part of this is can I get represented by a good agency who will sell on my behalf while I’m employed? If you can sell yourself directly and have a large enough customer list to do this you’ll make your full rate. If you don’t have time to sell, hate to sell or have no customer list, figure you’ll be cutting your rate anywhere from 30-50%. That takes you back to #2 above. This is the biggest killer of consulting careers… technical specialists who think everyone will want their service but they don’t realize they have to go out and find the business first until enough people know enough to buy their services.

4. Do I have a financial reserve? Face it, you probably wouldn’t be thinking of it if you didn’t have a job lined up already. The question is what happens when that ends and you end up in a recession, or glut of people with your skills, or your skills get outdated, or a new administration changes the laws making you vulnerable? You may have 3 – 6 months before you work again.

5. Is my spouse/partner supportive of this career? Some consultants travel, some don’t. Some work from home some have to drive long distances daily. Many hours in their free time are being spent doing the accounting, sales and paperwork that a full time salaried person would be able to be watching a movie. Besides the financial gyrations, the independent life takes a toll on personal work hours as well. Is it worth it? It very well could be or you may realize that your lifestyle goals don’t support the life of a consultant.

Think it through, read the many books, websites and attend industry groups on the subject. Once you decide to make the leap you will want to figure out your business structure; you will want to talk to an accountant about the tax benefits and consequences, how to invoice, how to set up bank accounts, etc…; you’ll want to make sure your family is on board and set time for each other; speak with an attorney about liability and insurances, and many other things. This is all another topic though.

No matter what your choice, you will find it a thrilling self-discovery and possibly financially rewarding experience that I think everyone should try at least one in their lives. A great by-product of having gone solo no matter what the result, you never fear losing your job again and that’s a huge mental advantage when you work for someone else.

My final advice on this: If you’re going to make the jump, it’s safer to keep your day job and do this part-time and grow it first. If that’s not possible, make sure there’s some kind of net to break your fall in case the jump doesn’t go as smoothly as you initially imagined.