Define Consultant: One who gives expert advice on topics they are intimately familiar with, usually in exchange for fees in a 1099 or corp-to-corp tax arrangement. Freelancer: A consultant that doesn't work for a company, or who has established their own company. Contractor: A consultant that takes fixed-bid contracts rather than wages.
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Considering becoming a consultant?
If you're reading this, chances are you're not a consultant yet. Because if you were, you'd probably know all this. You'd know the pros and cons; you'd know the risks of consulting, and you're comfortable enough to continue. But if you're not a consultant yet, read a little and let us know what you think.
Pros and cons of different types of consultants
Have you ever wondered which type of consultant you feel the most affinity with? What the pros and cons of each are? The risks? Find out where you fit in below.
What is a consultant, and what are the pros and cons?
Normally, consultants work for a larger consulting organization. They may be normal employees that receive a W2 tax form showing their yearly income, just like any other employee. The obvious pros for such an arrangement is guaranteed work. You don't have to find your own gigs. You don't have to bill clients. You don't do any of the accounting. You just go to work every day, and consult for clients you're assigned to. Maybe you sit in a client office instead of your employer's office. And maybe you travel a little to and from client offices. Pretty nice, huh!
Are there any cons to a job like that? Maybe. Travel can sometimes be a killer, especially if you're flying every week, and only spend weekends at home. Another con might be not having ownership of the company, and not sharing in the upside potential. But having a steady job is usually enough to satisfy most people. Who needs the headaches of ownership?
What is a freelancer, and how is that different than a consultant?
Think of a freelancer as the consultant above. Except for one big difference. You own the company. And in many cases, you are the company. You may still have to travel. You may still sit and work in client offices instead of your own. In some cases, you may appear to those you work with to be just another employee. But you are independent, and have the flexibility to choose a different gig if this one doesn't work out.
The pros for freelancers are independence and freedom. You can take days off. You can work the hours you set. You can pay yourself whatever salary you feel is financially responsible. Reward yourself and take a bonus. And buy yourself a new tablet when you get the urge. Those are some pretty nice perks! How can there be any downsides to that?
The cons are almost all related to risk. What happens when business isn't going so well? What happens when you suddenly lose a customer you counted on? Or lose half your customers in an economic recession? Will you make it? Can the business survive?
Those kinds of pressures can eat you up. Consultants are somewhat insultated from those daily financial pressures when you consult for a larger organization. But not really... they'll just lay you off suddenly and you'll have to look for work anyway. It's just that freelancers feel the pressure more closely, whereas consultants don't see the harm that's about to befall them. In the end, everyone is responsible for their own livelihoods.
What is a contractor?
Contractors are closer to freelancers than consultants. They normally work on fixed-bid contracts. Employers pay them on milestones, normally when they start, and at some milestone in the middle of the contract, and then finally at the end. Three big payments. Those contracts have to pay themselves a salary out of those three payments. They usually own their own companies, like freelancers. And find their own gigs. Employers request estimates, and choose contractors on price and their percefived ability to perform.
What software will you need for consulting?
Consultants need a client timesheet. They need to account for their time and expenses. That means software that runs on the cloud... software that runs on smartphones... and is accessible everywhere. They need something that fits their personality and feels good in their hand... like a good hammer.
Does that remind you of any software in particular? Exactly! Standard Time®