Clueless Consultant
October 13, 2011 1:40 AM Subscribe
Becoming a Consultant: After being an employee of a major consumer goods company for over six years, and climbing up the ladder very quickly, I am leaving my job to be with my fiance halfway around the world. I have a job offer to do the same as I was before, except as a consultant. What's the difference between being a consultant and a regular company full time employee?
I've had a great career at my current company but have taken a great leap and resigned to leave at the end of this year to be with my fiance. I will be moving nearly halfway around the world to Russia, where I do not know the language. However, I happened to quickly have an inquiry with a consulting company (which my current company happens to use and I never worked with them before) about a position to do roughly the same work. I have never worked with a consultant before.
- How is it different working for a company directly versus as a consultant
- what are some perks/negative points of being a consultant?
- Do consultants have difficulty afterwards entering companies directly in the industry? Such as, what if I don't want to be a consultant in the future but want to be back direction in a business.
- Consultants have a reputation for being expensive. Does this translate directly to making more money than I would as a regular full time company employee?
- Any other things I should take note of, even in regards to Russia?
If it helps, I'm in lean manufacturing /continuous improvement. The position I am leaving is as an expat based in Asia working in a regional position, so I have experience doing heavy duty business traveling.
I've had a great career at my current company but have taken a great leap and resigned to leave at the end of this year to be with my fiance. I will be moving nearly halfway around the world to Russia, where I do not know the language. However, I happened to quickly have an inquiry with a consulting company (which my current company happens to use and I never worked with them before) about a position to do roughly the same work. I have never worked with a consultant before.
- How is it different working for a company directly versus as a consultant
- what are some perks/negative points of being a consultant?
- Do consultants have difficulty afterwards entering companies directly in the industry? Such as, what if I don't want to be a consultant in the future but want to be back direction in a business.
- Consultants have a reputation for being expensive. Does this translate directly to making more money than I would as a regular full time company employee?
- Any other things I should take note of, even in regards to Russia?
If it helps, I'm in lean manufacturing /continuous improvement. The position I am leaving is as an expat based in Asia working in a regional position, so I have experience doing heavy duty business traveling.
I agree with most of the things Three blind mice said, so I am not going to repeat those.
In addition to that, I would like to add, that most of all being a consultant is a very commercial job. You have to sell. Sell yourself, sell other consultants. I know quite a lot of new consultants who find that the most difficult part. So you can be the best lean/cont. impr expert, if you can not sell it, you will not be successful.
I don't know if you plan to go to a big firm, or a small one, but the big ones tend to be very competitive, so you have to be able to handle that.
Finally, you will have multiple bosses with high and different expectations, which can be conflicting.
But yes, the flexibility..... the flexibility is indeed fantastic.
posted by eau79 at 4:07 AM on October 13, 2011
In addition to that, I would like to add, that most of all being a consultant is a very commercial job. You have to sell. Sell yourself, sell other consultants. I know quite a lot of new consultants who find that the most difficult part. So you can be the best lean/cont. impr expert, if you can not sell it, you will not be successful.
I don't know if you plan to go to a big firm, or a small one, but the big ones tend to be very competitive, so you have to be able to handle that.
Finally, you will have multiple bosses with high and different expectations, which can be conflicting.
But yes, the flexibility..... the flexibility is indeed fantastic.
posted by eau79 at 4:07 AM on October 13, 2011
There's also several types of consulting arrangements. I'm a consultant, but I work full-time for a consulting company. If I bill 0 hours or 60 hours one week, I make the same (very good) salary. My year end bonus, however, does predicate upon on my hours. I'm not too worried about building work or getting more work. I have to ask off for vacation like a FTE.
My thoughts:
1. You won't feel as tied to the company you are working for (i.e. the client).
2. You will be held to a much higher standard than a FTE. Remember what new hires are expected "to pick up" in a month or so as a FTE? Cut that to a couple days (or less) for a consultant.
3. You will be expected to play nice, be more professional, dress better, etc
4. Some FTEs will be openly hostile towards you, but sometimes you will be well integrated in the team.
posted by sandmanwv at 5:20 AM on October 13, 2011
My thoughts:
1. You won't feel as tied to the company you are working for (i.e. the client).
2. You will be held to a much higher standard than a FTE. Remember what new hires are expected "to pick up" in a month or so as a FTE? Cut that to a couple days (or less) for a consultant.
3. You will be expected to play nice, be more professional, dress better, etc
4. Some FTEs will be openly hostile towards you, but sometimes you will be well integrated in the team.
posted by sandmanwv at 5:20 AM on October 13, 2011
I used to manage consultants who worked for us and manage consultants who worked for a client. There are two types of consultants, 1) consultants who work for themselves and sign a contract with a company, and 2) consultants who are actually consultants/employees of an umbrella company who sends you out to consult for another company. It sounds like you might be considering the latter.
Let's talk about the former first though. Consultants should expect to make at least twice as much on an hourly basis as a FTE doing the same job, but receive none of the benefits. It's more money for you, but then you need to get insurance and deal with tax issues and what not. Benefits for the company are so expensive that it's pretty much a wash for them. I don't know about how it is in Russa, but here in the US, technically you're self-employed, need business cards to say so, and technically need at least two or three clients over some period of time to show you're truly a consultant and not just helping your boss get out of paying payroll taxes.
Now for the latter. Depending on your arrangement with the consulting company you may be an employee with benefits in which case you will probably make a little more money but not much than you're making now. Or you may be a consultant for the umbrella company (no benefits but paid well, see above...) who then pimps you out to your existing employer. You may be working on projects for not just your current company but whomever else your umbrella company wants to hire you out to. Additionally, you may end up doing work for the umbrella company. In any event in this case, you don't actually have a relationship with your current employer, the umbrella company does, and the umbrella company in turn has a relationship with you. This means that they take a cut of what you could be making. Your current company may pay them 3x what you're making now, but they only pay you 2x what you're making. There are probably institutional reasons (HR, ease, taxes, etc) why your current company would want to deal with them, and let them deal with you.
posted by pwb503 at 8:19 AM on October 13, 2011
Let's talk about the former first though. Consultants should expect to make at least twice as much on an hourly basis as a FTE doing the same job, but receive none of the benefits. It's more money for you, but then you need to get insurance and deal with tax issues and what not. Benefits for the company are so expensive that it's pretty much a wash for them. I don't know about how it is in Russa, but here in the US, technically you're self-employed, need business cards to say so, and technically need at least two or three clients over some period of time to show you're truly a consultant and not just helping your boss get out of paying payroll taxes.
Now for the latter. Depending on your arrangement with the consulting company you may be an employee with benefits in which case you will probably make a little more money but not much than you're making now. Or you may be a consultant for the umbrella company (no benefits but paid well, see above...) who then pimps you out to your existing employer. You may be working on projects for not just your current company but whomever else your umbrella company wants to hire you out to. Additionally, you may end up doing work for the umbrella company. In any event in this case, you don't actually have a relationship with your current employer, the umbrella company does, and the umbrella company in turn has a relationship with you. This means that they take a cut of what you could be making. Your current company may pay them 3x what you're making now, but they only pay you 2x what you're making. There are probably institutional reasons (HR, ease, taxes, etc) why your current company would want to deal with them, and let them deal with you.
posted by pwb503 at 8:19 AM on October 13, 2011
Upsides: You can hedge your employment. You can work for multiple employers and so if/when you get fired by one, you still have an income stream from your other employers/customers. Once you get yourself set up as a consultant (business licenses, tax numbers, workflows for billing, etc.) it is easy to add on other smaller jobs. If you have a skillset where there are a lot of companies that need your skills but can't afford to have a full time employee doing that work, you might be in a great spot.
Downsides:
1- Cashflow. As an employee, you generally get paid for your work consistently and quickly. As a consultant, there will usually be a larger delay between when you work to when you bill to when you get paid. Treat it as if you are starting your own business, because that's what you are doing. Have a business plan which includes cash management. And have a pile of cash to use as a buffer. (Or reliable access to cheap credit.) If your clients are all paying on net 90 terms, you need at least 90 days worth of expenses to ride out the time gap. I would personally want 180 days.
2- Expenses. You now have to pay all your own employment expenses. In the US, this means basically doubling what you pay for SS and Medicare tax. It also means potentially paying workers' compensation and unemployment insurance, if your state mandates it. It means paying your own health insurance costs, and the costs of any other perks of employment. That is, of course, offset by the fact that you would be able to charge more per hour. Which is itself offset again by the fact that many of your costs will be fixed at a dollar amount and your income won't be. Which is why you need #1.
3- Planning. You need to be good at it, and work your calendar very far in advance. You will have work hour flexibility in theory, but maybe not so much in fact. If you have a commitment to a client, they aren't going to want to hear about things like sick days and travel time.
4- Selling/marketing. You'll have to spend time cultivating new customers. You'll have to have some kind of formal or ad hoc pricelist that you can use to negotiate contracts with customers. You can and should charge more for jobs that limit your ability to work other jobs, and less for jobs with flexibility. In my work as a field technician, we have service levels and response times. The longer the customer can wait between break and fix, the cheaper the rate. The couple of hours, day or night, response rate is about 3x the 8 hour, business hours response rate. Your pricing should be in a range where it is a clear win for you and the customer- your work should be a better value to them than hiring an employee or some other contractor. But you also don't want to undercut yourself either.
5- Have an exit strategy. If it doesn't work, have a way to re-enter the regular employment marketplace. I know of a number of consultants who got burned because they didn't maintain certifications or connections with the state of the art. (Including myself to an extent.) Give yourself a training budget, for example.
posted by gjc at 8:44 AM on October 13, 2011 [1 favorite]
Downsides:
1- Cashflow. As an employee, you generally get paid for your work consistently and quickly. As a consultant, there will usually be a larger delay between when you work to when you bill to when you get paid. Treat it as if you are starting your own business, because that's what you are doing. Have a business plan which includes cash management. And have a pile of cash to use as a buffer. (Or reliable access to cheap credit.) If your clients are all paying on net 90 terms, you need at least 90 days worth of expenses to ride out the time gap. I would personally want 180 days.
2- Expenses. You now have to pay all your own employment expenses. In the US, this means basically doubling what you pay for SS and Medicare tax. It also means potentially paying workers' compensation and unemployment insurance, if your state mandates it. It means paying your own health insurance costs, and the costs of any other perks of employment. That is, of course, offset by the fact that you would be able to charge more per hour. Which is itself offset again by the fact that many of your costs will be fixed at a dollar amount and your income won't be. Which is why you need #1.
3- Planning. You need to be good at it, and work your calendar very far in advance. You will have work hour flexibility in theory, but maybe not so much in fact. If you have a commitment to a client, they aren't going to want to hear about things like sick days and travel time.
4- Selling/marketing. You'll have to spend time cultivating new customers. You'll have to have some kind of formal or ad hoc pricelist that you can use to negotiate contracts with customers. You can and should charge more for jobs that limit your ability to work other jobs, and less for jobs with flexibility. In my work as a field technician, we have service levels and response times. The longer the customer can wait between break and fix, the cheaper the rate. The couple of hours, day or night, response rate is about 3x the 8 hour, business hours response rate. Your pricing should be in a range where it is a clear win for you and the customer- your work should be a better value to them than hiring an employee or some other contractor. But you also don't want to undercut yourself either.
5- Have an exit strategy. If it doesn't work, have a way to re-enter the regular employment marketplace. I know of a number of consultants who got burned because they didn't maintain certifications or connections with the state of the art. (Including myself to an extent.) Give yourself a training budget, for example.
posted by gjc at 8:44 AM on October 13, 2011 [1 favorite]
Health and welfare benefits are not often offered to consultants. Also, you usually have to manage your own taxes, meaning, withdrawing from your earnings whatever percent of them you'd normally owe as a tax liability, so that you have a way to pay when you file.
posted by Lynsey at 11:01 AM on October 13, 2011
posted by Lynsey at 11:01 AM on October 13, 2011
This thread is closed to new comments.
- How is it different working for a company directly versus as a consultant
Well, you are a consultant. Hired help. You are part of the team, but not part of the team. That's the biggest day-to-day difference. You do what you are told/asked to do, instead of doing what you think you should do. You take instructions from people with much less experience. You end up doing a lot of tasks as a consultant that you as an employee would consider not really your job, but billable hours are billable hours.
- what are some perks/negative points of being a consultant?
See above. Also the work is lumpy and inconsistent. Some months I bill 240+ hours. Other months I only get 40 hours for the whole month. Cash flow is always a challenge. In the current environment companies use consultants as a temporary work-force that they can increase of diminish on demand. My Dutch client last month said no more net 30, now it's net 90 - and we won't advance you any money for travel! Take it or leave it. As an employee I would consider quitting such a company - as a consultant you don't drop clients, they drop you.
If you are accustomed to being treated with some respect by your employer, do not enter the world of consulting.
One the other hand it is for me a lifestyle choice. I have a 3 year old and a 5 year old and all I really want to do is hang out with them and consulting gives me a very flexible schedule. I am always home at 5 for dinner, I can take a day off more or less when I want to. I can work on a Saturday night when the kids are sleeping. I can work a 60 hour week and still not miss any mornings of afternoons with my kids.
I have a bottle of scotch within view. Sometimes I open it during working hours and pour myself a drink. My company has a strict policy on alcohol - it is permitted and tolerated and encouraged. Same with smoking although I do not smoke.
- Do consultants have difficulty afterwards entering companies directly in the industry? Such as, what if I don't want to be a consultant in the future but want to be back direction in a business.
Only personal difficulty. You get used to the lifestyle and being a slave to a schedule is hard to go back to. In my job I negotiate for my clients with lots of other companies so the networking opportunities have been huge.
Consultants have a reputation for being expensive. Does this translate directly to making more money than I would as a regular full time company employee?
Absolutely, with the downside that you accept a lot of risk. Your client can call you at anytime and dump you. Companies are willing to pay extra for that sort of flexibility.
And as a final comment, you have to have the right attitude. Companies do not hire consultants because they are really interested in learning something from your knowledge and experience: companies - specific people in the company that is - hire consultants to MAKE THEM LOOK GOOD.
Do not ever make the person who hires you look bad. Do not ever criticize their work, department, etc. even if you should. You are there as an extra laborer and to make your boss look good.
For me this was the biggest change in thinking. When I was an employee, I routinely argued and butted heads with my boss, expressed my real thoughts, and generally tried to do the right thing. As a consultant this is the quickest way to find yourself looking for a new client.
Good luck.
posted by three blind mice at 2:14 AM on October 13, 2011 [3 favorites]