Summary: In this post I outline some of the things I wish I’d known about becoming an independent consultant before taking the plunge.
Intro
Just before the pandemic I’d snagged what seemed (it wasn’t) like my dream job in London. I applied for my visa, packed my bags and had a plan to relocate in early 2020. In January 2020 a pandemic was declared and the world’s borders swiftly closed.
I mention this, as some part of my independent consulting origin story came down to luck. Sure, I wasn’t a passive observer, but it’d be a lie to claim I’d enacted some intricately crafted master plan to get where I am now.
As a statistician, I’m also aware that I’m subject to survivorship bias. The physically fit are more likely to become and remain fitness instructors. Successful traders are more likely to have strong investment performance. And I am a successful consultant as I’d have already found another job if I wasn’t.
Source: Survivorship bias, Wikipedia.
Of course, it would also be a lie to say I’ve learned nothing along the way, which is what I hope to share here: simple insights into what it’s like to transition from a traditional job to working as a freelance consultant.
Setting up a runway
When I worked in a startup everybody was interested in discussing how long their ‘runway’ was. I usually just played along by citing aeroplane facts, until I figured out it wasshorthand for how long a startup could financially sustain itself. Have too short a runway and a startup might not have enough cash to achieve profitability. Do the same as a freelance consultant and you might not be able to pay your rent.
I often tell people that freelance consulting is either a flood or a drought: one year you have more work that you can handle then suddenly there is a drought. Having a runway can help you manage this.
So how much runway is enough?
Well, as I’m not a financial advisor I have no idea. But, if I had to give a number I’d point to what’s recommended for startups: you should aim for savings to comfortably sustain yourself for 18 months or more.
Maybe your sector is experiencing a lean year, perhaps all the projects thrown your way aren’t a good fit for you, maybe a project you’ve been promised falls through or maybe you face an emergency that has nothing to do with work. Whatever the reason, the longer your runway the more options you have available to you and the more likely you can stay afloat if things don’t go to plan.
Bread and butter work
One of the best pieces of advice I’ve received was to focus first on building a portfolio of ‘bread and butter’ work that guarantees you can keep the lights on. While this might seem obvious, the practical implication of this rule is that you might need to take on less sexy projects to make it happen.
This isn’t to say you can’t turn down work (I frequently do). It’s just to make the point that having a reliable stream of clients (and a runway) is what provides you with the luxury to turn down work and target projects that you’d like to do more of but maybe are harder to land.
Choose your own adventure
When you’re an employee you’re hired to manage a specific set of functions, resources and outcomes, which are typically outlined in a formal position description. If you’re an economist, you might work with others in your team to develop advice on a programme and/or policy assigned based on a ministerial directive. Though you may occasionally tackle tasks outside your formal role, these tend to be peripheral tasks that draw on your existing skills and expertise.
As an independent consultant your job description is written by the worse boss you’ll ever have: you. Perhaps you need to write a proposal to bid for a project, manage your pension or create a website to advertise your services. Whatever the task, you’re the one responsible for getting it done – regardless of whether it’s your area of expertise or not.
Think in milestones, not jobs
Another thing that makes consulting different to a more traditional job is that job moves from fulfilling responsibilities to producing outputs. Maybe the client has a question they need answered, a product they need built and/or a programme they need implemented. Or maybe they aren’t sure exactly what they need and need someone to help them figure it out. Whatever the scenario, as a consultant your role will normally be to produce stuff that helps the client meet their goal. Meaning that when you’re engaged as a consultant, when and how much you get paid will normally depend on what, when and how you deliver stuff for the client.
Aside from the mindset change required when transitioning to freelance consulting, there are some practical implications it’s worth being aware of.
Firstly, when clients advertise consulting opportunities publicly, they’ll typically outline the outputs they want you to produce and how these relate to a set of specific outcomes and/or objectives. When submitting applications your focus will pivot from recounting how your experience in position X in company Y has prepared you to do the job, to convincingly outlining how, when and at what cost you would deliver the outputs asked for by the client. Requiring that you become far more output and delivery-focused in your work.
Secondly, because consultants are only paid when they provide the products and/or services they promise, you’ll need to get comfortable with not getting paid until you’ve delivered what was agreed (and the client is happy!). This is a significant shift from traditional employment where you receive a regular salary and something new consultants frequently struggle with. It’s also another reason I recommend securing a enough of a runway to manage the periods in between doing the work, submitting an invoice and getting paid.
Pricing your time
Because you need to specify the cost of producing what the client has asked for, you’ll need to put a price on your time so you can calculate the cost of producing an output or service for a client. Although I don’t have a simple approach for figuring this out, my suggestion is to think of a typical project and try to answer the following:
What is the minimum daily rate you’d require to accept working on project?
The minimum daily rate should be the lowest amount that would make the work worthwhile compared with other options available to you (such as a traditional job). This should not just cover the time spent on work, but account for associated costs such as taxes, healthcare, pension contributions and professional development.
What is your desired daily rate for working on a project?
Your desired daily rate should give you a sense of what you’d like to earn based on your expertise, experience, and the value of what you can provide to clients. This rate should reflect your professional and personal aspirations and take account of your unique skills, specialized knowledge, and track record of delivering results.
What is typical the daily rate charged by consultants providing comparable services to you?
The daily rate charged by other consultants should serve as a rough indication of the market rate for consultants in your industry. Ideally this will lay somewhere between your desired minimum and maximum fee.
The statisticians out there will have already guessed what these questions are trying to do: provide a reasonable estimate of what price you probably should charge for your time and your scope for being flexible. Go above the typical daily rate and your proposal might not be financially competitive. Go below this and you might not be fairly compensated for your time.
Finding Work
To find work as an independent consultant will depend on your sector and the way work is typically contracted in your industry. Some industries have well-established consulting marketplaces where opportunities are regularly advertised, while others rely heavily on personal networks and word-of-mouth referrals.
I feel shockingly under-qualified to advise how and where to find consulting work. As most of my work has come from my reputation in the field. But, if I had to suggest a good place to start when looking for work, I’d speak to people you know (or can find) that work in the same industry as your clients. As not only might they tell you where to look, but they might be able to help you land projects by vouching for you to others, introducing you to potential clients, or directly providing you with work that they need done.
Another approach is to identify companies you’d like to work with and see how they engage consultants. Maybe they post opportunities on website or via a procurement portal. Or perhaps there’s an industry-specific marketplace that firms post opportunities to that you can sign up to and monitor for opportunities.
Small fish, big pond
A final point to consider for those pondering freelance consulting is how much being part of an established hierarchy matters to you.
On one hand this is because working as an independent consultant means you’ll frequently be an outsider to the organization you’re working for, which might make it harder to drive change and can at times feel isolating. On the other hand, this might matter as becoming an independent consultant means letting go of many of the hidden perks of working in an organization: having a title, job security, a career path, colleagues and a set of existing systems and resources to help you do your job.
This requires a fundamental mindset change. Rather than deriving your identity from your title and position, you’ll need to build this independently. Your credibility will come from your personal brand and track record. Your career path will no longer be defined by a predetermined set of steps. Your support network will need to be independently cultivated rather relying on existing institutional relationships.
For some, this independence is liberating – offering the chance to build a practice that perfectly aligns with their values and working style. For others, the loss of an institutional structure can be challenging. After all, it takes courage and resilience to step away from the security and familiarity of traditional employment into the world of independent consulting.
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