Flexibility, control and work-life balance are all good reasons to consider a career as an independent consultant. Some pursue this type of work as a means to "fill the gap" during a hiatus or job search. For others, becoming an Independent Consultant is an entrepreneurial path and an extended part of the career journey.
The following considerations will help you gauge whether independent consulting is right for you:
- Do you have a particular set of qualifications and expertise that is marketable on its own? Perhaps you have deep experience in Lean or Quality operations. Maybe your expertise is related to specific technologies like ERP or CRM systems. Or you have a deep level of industry knowledge which would allow you to advise others in your sectors who are seeking growth or change. Knowing your unique value proposition is essential.
- Do you know where your expertise is valued? Having some established contacts where your expertise is needed will allow you to uncover potential opportunities to engage.
- Do you have (or need) special certifications that lend credibility? For instance, a CPA (Certified Public Accountant) for someone who wants to run his own accounting practice.
- Are you comfortable with self-promotion, building your own "brand", and selling your services directly?
- Can you work autonomously, organize and plan your own time? Without the structure of an employer's organization, you must be disciplined.
- Do you have the communications skills you need to establish and develop high quality and enduring relationships with current and prospective clients?
- Can you sustain yourself financially without a steady or predictable income and corporate benefits? A flexible work schedule may be appealing, but until you are well established with a pipeline of future potential work, the irregular paychecks may be daunting. On the other hand, if you're seeking to supplement your retirement income, or other compensation sources, working independently may be a great fit.
- Are you equipped to establish your own independent business including taxes, billing, and infrastructure?
Establishing a Structure – Even as a self-employed independent contractor, you'll need to determine the form or structure of your business. If you are in the US, the Small Business Administration is a great resource for researching your options.
Setting Fees – How much you charge for your services can be a challenge at first. Deciding what to charge includes an analysis of your probable hourly rate and the state of your market sector. Avoid charging too little for your services! You may think that giving a "deal" will help establish new work but in fact undervaluing yourself can mean you aren't taken seriously. There is no one right answer as to what your fees should be, but there are customary practices and typical market rates in most fields. Common billing methods include:
- Hourly rate – a mathematical approach to finding your appropriate hourly rate is to take your last known salary in the related field, add your overhead (for example paying taxes, maintaining office space, transportation, software and subscriptions), add a profit margin, then divide by the number of billable hours you'll work in a year. [ex. ($120K salary + $60K overhead + $15K profit) = $195K divided by 1,500 billable hours expected for the year, yields an hourly rate of $130/hour]
- Project rate – this is a fixed fee, pre-determined at the outset of the project. When using a fixed fee arrangement, you should have a clear idea of the number of hours required to do the work and set forth a detailed agreement about what is, and isn't, included in the project fee.
- Retainers – the ideal arrangement is to get at a set fee over a period of time for a certain output or number of hours. Once you've established your reputation it becomes easier to negotiate a retainer.
Note: the online Consultant Journal provides much more detail on billing rate calculations.
Sustaining and Finding Work – Establishing an independent consulting business requires cultivating your network and leveraging your reputation. Often your initial engagement comes from a prior employer; building on that first engagement requires both networking and marketing effort. Marketing could include a personal website, brochures, public speaking engagements, a blog, newsletters, and maybe even traditional advertising. But the most important part of "marketing" yourself is developing a strong reputation with your current and potential clients.
Resources for Independent Consultants