Plus your real question: how much can you make and how hard is it to get started?
Having done a fair amount of consulting for F500 companies working for consulting companies and independently, I was recently asked how to start independent contracting or consulting work.
Usually someone who asks this is really wondering, “Why not cut out the middle man and start raking in the big hourly rates myself? I’m already doing the same work.”
Isn’t it funny how some things seem like a way to get rich easy, yet there’s usually a bit more to it? Let’s look at the realities.
Consultants vs Contractors
Both get paid by the hour and provide expertise and professional services. However, the pay can be very different.
The closer you are to true consulting, the higher the pay. Contract pay can start at lower than market rates, up to significantly above market. Consulting can pay as much or more than full time senior executives earn! Keep in mind, only a small percentage command these high-end rates, but in general consulting is more lucrative.
Understand the differences between contracting and consulting. The terms overlap, are loosely defined, and depend on context. Here are a few examples, but ask around for a balanced viewpoint. It’d be hard to find two people with identical perspectives.
In contracting you’re more likely to hear, “Here’s some work, go do it asap.” Consultants are more likely hear, “We have a business problem. Please present solutions and partner with us to implement one.”
In a more specific technology example, a contractor might hear, “Write code to implement these features according to this spec and be finished by this date.” Consultants more likely hear, “We need solutions to solve this business problem, which happen to require coding or other technical skills for part or all of the solution.”
I heard one software developer say, [Doing independent work is harder and less rewarding. There are hidden costs. It’s impossible to make more than $6,000 per month unless you’re a renowned expert…]. Their statement was incorrect but illuminates some realities, like making accurate pay comparisons.
However, it doesn’t match reality, including the difficulty of breaking some arbitrary $6k per month barrier. Not everyone who tries will be successful, but it is also very possible and happens frequently. It doesn’t require being a renowned expert.
How to get started
Consulting can be more difficult to break into. It can also pay much more. If you’re new to this sort of thing, a contracting company or agency is the easiest way to get your feet wet with some simple projects.
The downside is agency pay may be less than what a normal job pays. Don’t get too excited about $50/hr. being a six-figure salary.
Company benefits provided by full-time jobs directly translate into cash value. In the US companies pay part of your tax bill, while independents must pay the tax on their own. Salary, benefit packages, paid time off, stock options, 401k contributions all add up to a single dollar figure of what it costs a company to keep an employee on board. Your salary is just part of the equation.
As an independent consultant or contractor, you must do the same to know your true earnings. Search for “fully loaded salary” for details. Once it’s in a simple spreadsheet, it’s easy to quickly plug-in what-if numbers for different scenarios. This is really the only way to make apples to apples comparisons. If you don’t consider it, you might be making less than thought net income.
You want to buy commodities not be one
In business, we know there’s not as much profit in selling generic, commodity products. The same applies to selling your time.
Your time becomes more valuable with some degree of specialization. Generic skills like QuickBooks Accountant, or Java Programmer can only yield a contracting position likely to pay on the lower end of the scale.
On the other hand, you don’t have to be a Wall Street veteran with a PhD in Math and an expert in predictive market analysis. A role like that pays well, maybe seven-figures. It’s a nice specialization.
However, it’s irrelevant to most of us because you don’t need that level of specialization to bump up your pay rate. Whatever you can achieve realistically, when well targeted, is often a good return on investment over time. Having a specialty is a matter of degree. A minor specialization like “Java Programmer + SAP” can offer a much different pay rate.
How much more you’re paid for any kind of specialized skill set strongly correlates to industry trends and how hot the specialty is, because those can create conditions of high demand and a short supply of talent. You’ll need to keep up on the state of an industry, trends, and future directions.
These insights allow you to extract the most value from the specialization you invest in. Using this knowledge wisely, sometimes it takes less than a year to acquire the right skills that pay considerably more.
Social skills increase pay
Soft skills, the ability to communicate well, explain concepts in a simple but compelling way, are important. Some call it emotional IQ. It makes a huge difference in consulting, even if less relevant to an underlying industry.
Is that unfair, or wrong? Maybe, but it happens all the time. Especially within a less technically focused company.
Accomplish more than you’re asked
In our tech example (most industries have an analogy), can you think of a way to add business value, not just lines of code? Small picture focus or doing the minimum asked is rarely as lucrative. Understand the company's business, the big picture, and discuss it strategically with leadership. It’s easy to start with simple, casual conversations.
Meet an executive who’ll give a couple minutes of time and say, “I’m excited about software development (or whatever work). I’m also interested in your big picture goals, what metrics define success, and where you’d like to be a year from now.” Notice how your stock price just went up, yet so far you have literally accomplished nothing [yet].
"NOTICE HOW YOUR STOCK PRICE JUST WENT UP,
YET SO FAR YOU HAVE LITERALLY ACCOMPLISHED NOTHING [YET]."
Then to have an intelligent conversation, you’ll need to have learned everything you can about the company, their product line, services, recent news, and what their customers are asking for in discussion forums before they even realize it. Indeed, know this stuff before you even interview.
You are not an NBA player
If you think, I’m not good at those things, I’m socially awkward, I can only understand my tiny department and assignments, I can’t do that. No! None of us are limited to that - if we care enough not to be.
Whatever our starting ability is, we can make big improvements. I’m terrible at basketball (and most sports), but I’d be much better if I practiced a lot.
However, unlike the NBA, you’re not required to be Michael Jordan or one of the best in the world at these things. Just improving your skills by 25% can allow you to earn much more money as an independent worker than you otherwise could.
Don’t think just about can you do it, but more important is do you want to practice the diverse set of skills to rise to higher levels?
If you have the skills already, would you be happy using them and not just checking off daily tasks? There’s no right answer. Each path is valid. Each path leads to different experiences and rewards.
Sales people really do stuff
I’m surprised some underestimate what it takes to simply get a chance to interview as a consultant, even with great talent.
If you don’t do sales, it’s easy to forget the importance. This is the person that gets you the interview with the client. It’s important enough that elite sales roles can be among the best paid positions at a company.
Understanding how to be a rainmaker won’t fit in this post. There are entire books on the subject. But there are some common tactics used by independent consultants. For now, remember you’ll need a way to get your foot in the door and talk to a key decision maker.
Should you make the leap?
Background and experience matter, but this is personal as well. How comfortable are you answering yes to these questions?
- Are you entrepreneurial? Do you like lots of change in your daily routine? Can you deal with a degree of risk?
- Would you be happy learning new things constantly, often in a short amount of time?
- You’ll be expected to know more than people at big companies. When that doesn’t happen (guaranteed sometimes it won’t), can you maintain integrity and honesty, yet communicate with enough nuance and show strength in other areas to not lose credibility?
- You don’t have to love sales, but you must respect it. Will you walk into an SVP’s office and try to convince them your solutions are the best and that you’re the best person to partner with to implement them?
- Can you figure out what solutions or skills are in strong demand and are best to invest your time learning?
- Can you think of ways to offer unique value that others are not providing to similar problems?
Decision time
By now maybe we can agree this is not the best way to “get rich easy”.
To be sure, working independently can pay well for some people, occasionally extremely well for top percentile performers. This requires unique solutions, skills, and value to offer customers that directly benefit a company’s strategy, growth, or bottom line results.
The other side of the coin I hope you take away is it’s not always easy, and some people just wouldn’t care for it even if they could be successful. Think hard about what you want. Could it motivate you strongly? Go with the grain, not against it, because passion gets you as much as ability.
