Going Solo – Is Independent Consulting Right for You?

Going Solo – Is Independent Consulting Right for You?

This post is breaking away from the usual data management topics to focus instead on independent consulting as a career. For many of us, the decision to go independent was a game changing career move. I hope this article will help those of you who are either on the fence or just diving in with going solo.

The “gig economy” has been growing globally for years. Independent work has attracted the attention of professionals looking for more flexible and rewarding careers. There are several good publications that provide guidance on becoming self-employed, and many of them focus on freelance consulting and setting up your own business. At the end of this post I will refer to some references that provide some helpful information. I encourage you to add your own experiences and self-employment resources in the comments.

A Disclaimer Before I Get Started

I am not a professional career coach. The goal of this article is to share some considerations I have gathered after 17 years of working independently and onboarding new consultants in my consulting practice.

What is Independent Consulting?

As I am using it, independent consulting is a profession held by non-employee personnel that specializes in one or more disciplines. Self-employed, contract-based work is common in the technology field, but there are independent professionals in other occupations with similar characteristics. The distinction I need to draw is with the non-employee aspect, and that describes the target audience being addressed here. Most considerations that I discuss will not apply to employees of a consulting firm.

As a non-employee, your work is typically arranged on a contract basis, sometimes with a limited timeframe and/or budget. Independent consultants can identify their business entity in different ways, whether it be as a casual freelancer or a registered corporation. They may arrange contracts directly with clients, or subcontract indirectly through another business. I will not be going into the advantages and disadvantages of different business formations, but for this post we can assume that the independent consultant bills a customer for work as agreed upon in a written contract.

Take Some Time to Reflect

For those of you considering the independent route, there are several considerations. You may get stuck thinking that this change is too complicated. To help you avoid that mistake, I have assembled a list of five questions you should consider before going independent. These questions should offer you enough perspective to decide on the next step.

To provide some additional viewpoints, I have reached out to several current and former independent consultants who shared their stories. I have blended their experiences with my own to offer insight on these questions, and I hope these reflections will add clarity to yours.

Question 1: What is motivating you to go independent?

Going independent has many potential benefits including increased earning potential, freedom to choose the type of work you do and how you do it, being your own boss, etc. Those benefits are attractive but going independent also carries a fair amount of risk. Having several other motivating factors will increase your chances for success. Let’s hear some thoughts from others on what drew them to independent consulting:

“The ability to choose the type of projects I work on was very appealing, as was the opportunity to make more income from my work.”

“Working with multiple clients means that I get to work on different things, often with different technologies. I also get to see, first hand, a wider variety of what works and what doesn’t.”

“Technology and the money.”

“I was worked to the bone as a full-timer [employee]. I felt a duty to give more hours, and I was expected to give more. I was also essentially ALWAYS on call, for no compensation.”

“Independent consulting was attractive because you can feel the impact of your work close to the ground.”

“A big draw for me to be independent was to stay hands-on with technology – as a full-time employee at various consulting firms I was constantly being pushed towards management and less hands-on development.”

Just about every independent consultant I surveyed had multiple motivations for making the change. While having multiple reasons might not be surprising, this aspect is critical. Wanting to be your own boss for example is a great reason, but it cannot be the only reason. If you are working for yourself, there is nobody else to keep you sharp, focused and engaged. If you have trouble keeping yourself organized and moving forward, you may find trouble in the independent world. Working on your own terms is great, but it also helps to have ongoing motivation to grow as a consultant – and that means professional development and developing your own work discipline.

Another motivation is the potential for higher income, and higher pay is what draws many professionals to independent consulting. The problem is that there is always the risk of down time. Your first consulting engagement may pay well, but once it finishes things can change. The economy could be different, or the market demand for your skills may change. To mitigate these risks, you need an ongoing commitment to keep your consulting pipeline flowing. If your decision to go independent is motivated only by higher anticipated income, you may not have the additional effort and momentum in place to sustain your income. The key is to have several motivations for going (and staying) independent.

Question 2: How do you feel about becoming a business?

I think this concept is the least understood and among the most important. Regardless of the formality you choose (e.g. casual freelancer, subcontractor, corporation, etc.), it helps tremendously if you treat independent consulting as a business. As an independent consultant you are the product, and you are responsible for marketing, selling, billing, training, liability insurance, bookkeeping, and taxes. YES, that also means devoting some unpaid time to managing yourself as a business. While you can outsource some of this work (I strongly recommend getting a good accountant), you still need to view yourself as a business to keep things running smoothly.

Establishing a formal or informal business identity will help maintain the discipline you need to manage the ups and downs of being independent. Many of the negative experiences you hear about going solo could be avoided with a business-like perspective. For example, finding work is a function of advertising, promoting and networking. Another example, investing in yourself (training, skills development, certifications), is like bolstering your business inventory. These activities will keep you more in demand and busy as a consultant.

If the idea of starting your own business energizes you, then you are off to a good start. But even if you are less entrepreneurial in spirit, problems like uncertainty (dealt with next) will be easier to manage if you adapt to this change as a business operator.

Here are some thoughts that reflect on the business side:

“Didn’t want to have to do my own marketing, legal contracts, accounting, payroll, etc.  Just wanted to have more freedom to do the programming work I love.  Fortunately, it’s easy to farm out all those chores.”

“I had no idea how to incorporate, how taxes worked, what I should charge for my fee or how I was going to find work…. Thank goodness for the Internet! I spent the next few weeks researching everything. I filed for my LLC, got hold of an accountant and landed my first gig as an independent. That was 12 years ago, and I don’t regret a day.”

“The biggest adjustment was learning how to run a small business. Having a good accountant who can answer your questions is so important.”

“I spent more time networking. So, while I commanded a higher hourly rate, I was still working ‘free overtime’ but that work was for myself.”

“My biggest adjustment was having to deal with the bookkeeping and ‘HR’ aspects of running a business. There are things that “regular” employees do not worry about, or might not even realize exist, but have to be done. …things like health insurance, business insurance, filing quarterly taxes, etc.”

Question 3:  How do you handle uncertainty?

This question is the true test, and you may not know the answer until you start your first independent consulting engagement. Let’s dive right in and look at some reflections shared by current and former independents:

“It was a rude awakening when my first gig ended after only 6 weeks when it was supposed to be a 6-month contract and I realized I had to find my own work.”

“My biggest fear when starting out was (and still is) not being able to find clients and having to go back to being a ‘regular guy’ and working on a series of dead-end projects until I can retire.”

“Like many, I fear not being able to find work after a contract ends.”

“Money adjustment. Not a steady income, but ups and downs in income. Some years I made a killing and sometimes very low.”

“I have seen some of my friends who got into consulting just for the money fail miserably. They rushed back to a full-time job just after their first project.”

“Some payments were late. You cannot live paycheck to paycheck as a contractor or you will have a lot of anxiety.”

I have noticed over the years that both rookies and veterans deal with uncertainty during their independent careers. People new to contract work tend to have much more anxiety over a project end date, or brief delay in receiving their payment. These are valid concerns, but if you consider the previous question and reinvent yourself as a business it becomes much easier to handle and mitigate the uncertainty.

A gap in your income, for any reason, is a prime example of the uncertainty. Most of the veteran consultants I spoke with maintain some form of reserves so that they can handle down time and delayed invoice cycles. They are acting like a business whether they know it or not, and it allows them to avoid the basic cash flow problem every small business faces. If you are living paycheck to paycheck before going independent, keep working and delay taking the leap until you fund your business and build up the reserves you will need going forward.

Despite your best efforts, you may still suffer from anxiety during your independent consulting career. Even if you market yourself, update your professional skills, become great at networking and fund a reserve account you may still feel the weight of uncertainty. Everyone is wired differently, and you must come to terms with your own limits. For me, the stress factor has faded over the years, but for most of us I doubt it will vanish completely. I decided that if I ever start losing sleep over anything – it’s time to move on. Fortunately, independent consulting has been good to me, and having a business viewpoint is a big reason. Uncertainty is part of the independent game, but with experience behind you it becomes easier to handle.

Question 4: What kind of demand is there for your skill set?

There are several factors to consider about how well you (the product) will remain in demand. First is the basic supply/demand equation. If you have a common skill set in a profession, you will face a lot of competition in finding new work even when there is demand. On the contrary, some specialists in a high-demand field can be hard to find. They tend to stay busy and are well equipped to justify their pay. But a limited supply of specialized skills is no guarantee – some niche professionals may find their unique skills are no longer in demand.

Your services and skills may require ongoing maintenance to stay in demand. Do your skills require constant education and training to stay relevant? Training, education and certifications are your responsibility when you are working independently, and the associated cost and downtime should be a consideration. Investing in training is more important for some professions than others. One independent consultant who stays busy as a programmer weighed in…

“There is no employer to send you to classes when they need you to learn something. Instead, you have to read, play, practice and attend user groups and conferences, on your own time and your own dime to teach yourself the new things that your next client might need you to know.”

If you are unsure of the demand for your skills or your current marketability, you can benefit from working with an agency that places contract professionals. Many independent consultants choose this path rather than hunt for their own clients. A good agency can locate decent consulting gigs and place you in a client for a fee or percentage from your billings. While this saves you the chore of finding client work, you still need to maintain your business focus. You should have a solid contract in place with an agency, just as you would with your own direct clients. This is an agreement that clearly outlines your services, contractor status and payment terms. One consultant learned early on that it is worth having a good contract in place even if it requires some help:

“I’ve learned that I can be taken advantage of – if I’m not careful. After a horrible experience with a vendor I contracted through, I now have a contract lawyer and I don’t sign any contracts without them being reviewed.”

Question 5: Are you better off as an employee?

While reflecting on the previous questions, you may have already pondered this one. Many people considering going solo might find that staying with an employer is a better fit. Your feelings about uncertainty, the economy or ability to market yourself may draw you back to working for a stable employer. Still, there are some other reasons unique to your situation that might warrant a delay in your independent career.

Gaining broad industry experience is a big reason to stay working with an employer. I think this is crucial for younger professionals. Independent consultants are expected to show up with a high level of experience. This is a big part of why the clients hire you in the first place – they need your expertise. If you are new to your field but really want to work with clients as a consultant, it may be better to work for a consulting company that can provide you the training and range of experiences you will need to earn your stripes and test drive consulting as a career.

Other reasons to remain an employee are purely economic. For example, the rising cost for healthcare in the United States is frightening. If your spouse is employed and carries your medical benefits, you are in a better risk position to go independent. As of this writing, you can check out the health care exchanges and see what plans are available to you should you need to find coverage. For some who are banking on a higher income potential than their current employment offers, the cost might be too high to justify leaving their benefits. A colleague of mine who has been independent for over a decade recently considered returning to full-time employment due to the rise in his family’s health insurance premiums and related expenses.

Creatures of habit may also reconsider their decision to move to independent work. Full-time employment can offer things like the same daily commute (or remote work option), same group of co-workers, laid back office culture and chic office décor. Going independent means that you need to be open to losing some or all the accommodations you were used to. Your commute time might double, you may have clients who (still) don’t want to hire remote contractors, or you might find that your client’s staff is not very welcoming to outsiders. Independent work is full of variety and is not for those who lack flexibility.

In short, there are several factors that can make independent consulting a bad fit, even if only for a limited time. Some consultants I spoke with mentioned going back to working for an employer for various reasons:

“After two months of not finding any good-paying contracts that were relatively close [to home] I opened the scope of my search to full-time opportunities and just recently accepted a full-time position. So, this is the downside to being a contractor. You don’t always have another gig to fall into right away. And you may have to ask yourself how long you’re willing to not work before finding that next good contract. I decided I had waited long enough.”

“I lined up a new contract, but the company had unexpected layoffs and I lost the gig on the day I was supposed to start. I eventually went back to full-time employment, at a much larger salary than when I left [my previous full-time employer] and with far more confidence, but it was less than what I made as a contractor.”

“I went back to working as a consultant for an established firm so that I could get broader experience on more complex, non-niche projects. Consulting for a firm also provides opportunities for expanding soft skills, like client engagement and business development. I would consider going back to independent consulting when I feel satisfied with the experience I am acquiring, but for now, I am very happy with the opportunity and people here.”

Timing The Decision

Be Your Own Boss

My intent with this post was not to scare anyone – in fact my goal was quite the opposite. By sharing the experiences of myself and others, my hope was to leave you more prepared when the time comes to make your decision. I have heard stories from some independents that jumped in head first without thinking it through, and I know some others who I think are too scared to pull the trigger.

The best part about this is that you can take the leap at any time. You can wait until you are at a stage in your life or career where you can reinvent yourself as your own boss. In the meantime, I recommend taking the time to research your options and educate yourself on the business aspects. Most people I spoke with came to a point of clarity that independent consulting was the way to go. It was a career change I don’t regret making, and I wish you the best if you decide to go for it. I will close with some thoughts from those who took the leap:

“I struck out on my own and started my own firm, with a partner, in 2003. There have been a few hiccups but if I had to do it all over again, I would.”

“I went independent, and although I had some periods of down time, I stuck it out and always found new work and am still independent after over 10 years. I enjoy being my own boss, and it will be a long time before I choose to stop working independently.”

“I ended up going independent 22 years ago, and I’m still loving it. I get to pick/choose my clients, taking long sabbaticals in between, if I want.”

“Once my situation changes, I will look to go back to independent contracting again.”

“After 20 years of working as a fulltime consultant both as a developer and an architect I knew I was ready to be on my own. A big advantage of being independent is working no more than 40 hours per week; how many people in business can say that? This is one of my favorite benefits – achieving a great work-life balance.”

Further Reading:

A place to start:

An Insider’s Guide to Building a Successful Consulting Practice , Bruce Katcher; This book moves quickly into topics around starting a business, and it covers some good ideas you should consider before you take the plunge.

Help on managing your small business:

Small Time Operator: How to Start Your Own Business, Keep Your Books, Pay Your Taxes, and Stay Out of Trouble , by Bernard Kamoroff. This is a classic that gives you a no-nonsense take on getting setup right with no worries. It has been updated a few times since I first read it, and I still refer to my copy occasionally.

www.mbopartners.com , MBO partners is a business solution provider for independent consultants. In addition to listing their services, their website offers several free resources that help you sift through the business aspects as well as the terminology (e.g. independent contractor vs. independent consultant).