If you’ve got a whole lot of knowledge and experience in a specific topic or field, some businesses might regard your insight highly enough to pay for you to come in and advise them as a freelance consultant.
Becoming a consultant allows you to focus on what you excel at. No more ‘Jack of all trades, master of none’; you can create a niche for yourself as the pre-eminent brain-for-hire on the subject you know most about. As a freelance consultant, you’re now the master of your trade, as well as the master of your own destiny.
Of course, freelancing (which means you are self-employed) can come with its disadvantages as well. In this article, we’ll be covering the pros and cons of becoming a freelance consultant in order to help you figure out whether this is the right move for you.
Why do you want to become a consultant?
Becoming your own boss means that you play by your own rules - to some extent at least. Many people decide to give up their comfortable PAYE gig to escape the confines of a regular office job, to gain more recognition for their work, or to pursue their own good ideas.
While becoming a freelance consultant offers far more personal freedom in terms of the work you decide to take on (and the locations where you work) it’s vital to consider that the lack of stable income in dry periods may result in you having to take on less desirable work with inconvenient hours.
It’s also important that you aren’t making a rash decision based on wanting to escape from your boss, or not wanting to work as hard. If you’re constantly being reprimanded for poor timekeeping or lack of motivation, you should make sure you can guarantee things will be different when you're embarking on this lifestyle change. You may have a unique set of skills, but if you’re a pain to work with, most companies will end up cutting ties and finding another consultant to work with.
If you aren’t 100% sure about how you want to proceed, you might want to consider trying to get a couple of freelance gigs alongside your full-time role while you decide whether this lifestyle would work for you. Slowly reducing your hours in direct employment while you build up your freelance business is a great way to leave your job while minimising money worries. Our ‘Setting up a small business on the side’ article can help you with this. Though you'll also want to ensure that you don't forget about the tax you may need to pay from your freelancing on the side.
What personal attributes should a freelance consultant have?
Consultants are usually freelancers or contractors rather than employees, and thus can be easily brought in and let go of, so you’ll need to make sure your people skills are top-notch. This includes the willingness to listen attentively to what the client’s needs are, and being able to tell them where you think they’re going wrong without sounding condescending or overly negative.
You’ll need to be able to see the problem that really needs solving, which may not be what the client originally thinks they need help with.
A reputable and effective freelance consultant should have an excellent knowledge of the market they’re working in - not just in the present but also how it has evolved, and any opportunities or threats that may be on the horizon.
You’ll need to demonstrate your value by completing your research thoroughly, while displaying a passion for what you’re doing, and by articulating what positive changes your involvement will bring to your potential clients. Ultimately you’ll be judged on the results of your findings and recommendations.
Questions you’ll have to ask yourself
Leaving comfortable full-time employment to embrace freelance consultancy can be a risk. The rewards can be great, but there are several things you’ll have to weigh up before you take the plunge.
Business coach David Mellor, the author of the ‘From Crew to Captain’ series of helpful books on making the transition from a big institution to working for yourself, has put together a simple test to help you decide whether you’re ready to become self-employed, consisting of these questions:
- Are you comfortable with not having a regular predictable salary?
- Have you worked out your survival budget?
- Are you confident you can exceed your survival budget?
- Is your family supportive of your plans?
- Have you taken sufficient advice on your idea?
- Do you have a vision of what you want your business to look like?
- Do you have the self-belief that you can make that vision a reality?
- Do you have the drive and determination to make it happen?
- Are you passionate about your idea?
- Has anyone stress-tested your business plan for viability?
Mellor suggests marking yourself out of 10 for each item, and then totalling your score.If you score less than 30, you may want to rethink whether this is for you.If you score less than 60, you may want to revisit some of these issues before you make a decision.If you score above 60, you probably have enough momentum to proceed to the planning phase.
You can also check out our handy article “13 things to consider before going self-employed’.
Working out how much to charge
Every aspiring freelance consultant will need to decide how much to charge as a day-rate. It’s important to have an idea of what the generally-accepted rate is for freelance consultants in your sector, and what the businesses who are paying you might deem to be too steep. On the other hand, you won’t want to stitch yourself up by charging too little for your time.
One way to decide on how much to charge is to work out how much you want to earn per year, and working backwards from there. For example, if you’re hoping to take home a salary of £50,000, you'll need to divide this by 225 - the number of working days of the year (discounting weekends and allowing for 28 days annual leave). Based on this, your day rate would be £222.22.
Bear in mind that you might need to haggle to build initial relationships with clients. Once you've established a relationship and demonstrated your value, you’ll be in a stronger negotiating position to secure a better rate.Another option is to find out what the going rate is - we have a Day Rate Calculator tool that shows the average rate both nationally and regionally. This can be helpful if you're not sure what is standard for your area.
How to structure your consultancy business
You also need to decide whether you’re going to be working as a sole trader, limited company or through an Umbrella company there are a number of things to weigh up, but usually, a self-employed consultant would choose to work through a limited company. The professionalism of a limited company can help with attracting clients and it can be more tax-efficient meaning higher take-home pay. We explain the main advantages of a limited company in our knowledge article and our Take-Home Pay calculator can show you the financial impact of the different choices you have.
Decide where you’ll work
Of course, working from home has its advantages and disadvantages. You’ll probably save some pennies on food and travel, but now have to pay for extra gas, water and electricity usage, coffee, equipment, toilet paper… the list goes on.
If bills are included in your rent, your landlord will probably want to increase how much you pay them to make up the difference. Similarly, If you work from home, you may be subject to business rates for the part of your property you use for work, while still paying council tax for the rest of it.
Our article "How to set up a home office (without breaking the bank)" can help you consider cost-effective ways to get your home-office up to scratch and we also have an article on "What expenses you can claim when you work from home".
Alternatively, if you work more effectively when surrounded by the creature comforts of state-of-the-art offices but don’t have the cash to pay for them, a co-working space may be the perfect financial solution for you.
Managing your finances
The annual Self Assessment season (don't leave it to the last minute!) still causes headaches for many. However, staying on top of your business finances needn’t be hard with services like Crunch. We’ve got an article about the benefits of a sophisticated online accounting service.
By the way, if you end up working with a client who is bad at paying up, grab one of our late payment reminder templates to give them a professional but firm kick up the rear. And if that doesn’t work, you can always enlist the help of a professional debt collection service.
Filling up your calendar
Want help finding work as a freelance consultant? Check out our jargon-free article ‘Finding work as a new consultant’ for helpful tips on everything from lead generation to keeping your clients happy.