Are You a Consultant or a Freelancer?

People often confuse the terms “freelancer” and “consultant” and even consider them interchangeable. Freelancers and consultants both provide services as contract workers, so in this regard the terms seem quite similar. However, freelancers and consultants offer different types of services and have different types of relationships with their customers or clients. 

Understanding the differences between being a freelancer and being a consultant is a significant part of positioning yourself for success. Read our article to figure out what you are: a consultant or a freelancer.

Freelancer or consultant: What’s the difference?

To understand whether you’re a freelancer or a consultant, it’s important to understand how society perceives these roles.

To define the difference between them, we consulted several of the largest dictionaries. Their explanations are provided below.

When to call yourself a consultant

The role of a trainer or consultant is to empower the customer, not to make himself indispensable. Bertrand Meyer

Consultants are perceived as seasoned professionals who bring their skills and knowledge in their particular area of expertise. They are typically drafted in by clients who have a pressing problem but no time or possibility to solve it on their own.

Consultants provide field-specific expertise to individuals or companies but do not complete the work themselves. They give their opinion or advice so their clients may make grounded decisions and select the best strategies to achieve their desired outcomes. 

In a word, consultants are problem solvers who assess particular business processes and offer suggestions and guidelines on how to solve problems or make improvements.

Generally, consultants have extensive expertise and considerable experience in their field. That means they’ve held high-ranking positions in the spheres in which they’re providing advice.

When to call yourself a freelancer

A freelancer is someone who gets paid when they work. You are selling your time. You go to work you get paid; you go to sleep you don’t get paid. Seth Godin, Author and Marketing Expert

Freelancers deliver services by remotely fulfilling specific tasks or projects for individuals or organizations. They are independent self-employed specialists who join a project, do their work, and get out with no commitment to a particular client. 

Typically, freelancers implement recommendations or strategies consultants provide. As a rule, freelancers don’t pursue a long-term or permanent arrangement with one client. Rather, they work with multiple clients and multiple projects.

As you can see, both terms seem to convey the same idea: performing services for individuals or companies. What is different is that freelancers usually do the task for the client, while consultants only provide expert advice on what task to do and how to do the task. This is a rather broad definition, but it does help to understand the difference between freelancers and consultants.

Essentially, consultants get paid for their advice, while freelancers get paid for their labor.

Main differences

To clearly understand whether to define yourself as a freelancer or a consultant, let’s dive deeper into how these roles compare from various perspectives.

Industries

Consultants operate in nearly every sector and can assist with almost every role. They are in demand in finance, business, healthcare, education, human resources, law, marketing, engineering, public relations, architecture, security, IT, science, and many other fields.

Among freelancers, there are many representatives of creative professions, the IT sphere, and advertising. Recently, engineers, teachers, and managers have also become freelancers. 

Clients vs customers

Another aspect in which freelancers and consultants differ is in how they refer to the people for whom they provide services. For a consultant, those people are clients, whereas for freelancers, they are customers.

These terms are also quite similar and are often interchangeable. However, they do differ. A client is by definition someone who receives professional service or support from a company or an individual expert, while a customer is somebody who buys services or products.

Jay Abraham, an American marketer, consultant, conference speaker, and author, has given an exhaustive and precise definition of customers and clients: “Customer: A person who purchases a commodity or service. Client: A person who is under the protection of another.”

Roles

To clearly define whether you are a freelancer or a consultant, let’s see the roles each performs. Below, you can see a scheme of a creative process. It’s divided into quadrants, each representing a certain stage of this process:

• Planning/Strategy. Understand what is to be accomplished, set goals, and prepare a plan of action. 
• Creation/Development. Create assets to execute what was planned.
• Execution/Production. Deploy the assets you’ve created based on your strategy.
• Analysis/Optimization. Analyze whether what was executed works as you expected. If you’re not satisfied with the result, optimize your strategy to achieve better results (and so the cycle repeats).

If we divide the scheme in two parts vertically, we get two areas of responsibility. The left-hand side is a consultant’s area of responsibility, and the right-hand is that of a freelancer. 

Simply put, consultants develop a strategy and work out a plan of action necessary to reach a desired outcome and analyze whether the actions taken were successful; freelancers actually execute what was planned.

Rates

Both consultants and freelancers have the luxury of setting their own rates; they can work at hourly or daily rates or on a project basis.

According to The 2020 Freelancer Income Report by Payoneer, the average hourly rate charged by freelancers globally is $21. The average hourly rate of an independent consultant globally was $26 to $55 as of March 2021 according to salary.com. 

Work environment

Typically, freelancers work outside their customers’ premises, usually from home, and manage their schedules and workloads as they wish. They may make occasional visits to their customers’ offices, but this is rare. Independent consultants may head to a client’s office for their first meeting if necessary, further working remotely from the comfort of their home or office.

Education and experience requirements

To become a freelancer, it’s not obligatory to have a university degree. Lack of education or experience shouldn’t hinder your desire to work freelance. However, it’s obvious that customers aren’t likely to entrust you with important tasks or projects without your being able to back up your promises with a decent portfolio.

The more excellent examples of work you can provide to potential customers, the more likely you are to get more customers and more projects and be able to charge more money for your services. However, people often hire freelancers to do some simple tasks. You’ll make less money out of them, but it’s a nice step to start your career as a freelancer. By continuing your education in your chosen field, you’ll be able to enjoy success and raise your rates.

Consultants are expected to have at least a bachelor’s degree to be competitive and gain clients’ trust. Besides that, consultants with certificates issued by reputable institutions are highly appreciated. By investing in field-specific training, you get the chance to become a trusted expert.

An impressive portfolio is also extremely important for a consultant. If you can boast of results achieved by your clients after you’ve consulted with them, you’re more likely to find work with high-paying clients.

Job prospects

Job prospects are quite similar for both freelancers and consultants. Both can easily find customers/clients and projects by joining general or field-specific platforms or job boards. They can also find jobs on LinkedIn and in Facebook groups. Another way to find a job is by checking the Careers section when visiting company websites. This section can also be called something like “Work with Us,” “We’re Hiring,” or “Join Our Team.” 

Taxes

If independent consultants and freelancers gross $400 or more per month, they are considered self-employed in the US and must file a tax return with the IRS. In addition to regular income tax, US freelancers must pay 100% of the self-employment contribution that comprises Medicare and Social Security taxes. The self-employment tax rate is 15.3% of net earnings. It consists of two parts: Medicare (2.9% insurance) and Social Security (12.4%). The Social Security tax is adjusted annually for inflation.

You can learn more about tax obligations for freelancers and consultants who must pay US taxes on the IRS Self-Employed Individuals Tax Center.

Pros & cons of being a consultant

Nothing is completely one-sided. Being an independent consultant has its pros and cons.

Pros

• Flexibility and control. This is probably the biggest advantage of being an independent consultant. By being able to manage your projects, schedules, and activities the way you like, you can become happier, less stressed, more productive, and able to achieve a better work–life balance.
• Continuous growth. Being an independent consultant means having a chance to work on multiple projects that each provide a fulfilling, unique, and valuable experience, new challenges and opportunities, useful insights, and learnings.
• Exposure to a variety of clients. Consultants can provide advice to various clients from industries of all sizes. That means an opportunity to work with different products and services, target audiences, goals, needs, and expectations. 
• Enhancing and expanding your skills. With every new project and client, you get the chance to broaden your skill set to solve your clients’ problems. By acquiring new skills and practicing them, you can become a highly demanded expert.
• Freedom of setting your rates. You are free to set the rates you consider best for your services. The more experienced and skilled you are, the higher the rates you may charge.
• High compensation. Consultants are usually highly compensated for their professional advice. Clients are aware of the fact that your valuable recommendations may significantly improve their revenue, so they’re ready to reward your services.

Cons

• Early career sacrifices. You can’t earn a fortune as a consultant right after you’ve finished university. When you get started as an independent consultant, you should be ready to sacrifice lots of your time and work 60 to 80 hours a week. It’s an inescapable reality, but it’s a huge investment in your future.
• High pressure. Many clients hiring consultants set strict deadlines, which is rather pressing because some projects may require more time to analyze and provide recommendations than expected.
• Project risks. As a consultant, you will often face risks. For example, some actions you suggest can be delayed or missed, or the project may exceed a client’s budget or schedule. What’s worse, a project can be considered a failure. This can badly affect your relationship with a client.
• Continuous investment. You should be ready to invest resources, time, and energy on a regular basis for your professional advancement, acquiring new technologies and methods, and marketing. In a word, being an independent consultant is a 24/7 undertaking.

Pros & cons of being a freelancer

Let’s consider the advantages and disadvantages of being a freelancer.

Pros

• Control your workload. Freelancers are free to choose what customers and how many customers they want to work with. As a freelancer, you can work as much or as little as you wish.
• Independence. Being a freelancer means being exclusively independent. You don’t need to stick to a five-day work week and a nine-to-five schedule. Besides, you can work alone wherever you are with no need to adhere to a corporate culture, rules, and beliefs.
• Exposure to a variety of industries. By working for one company, you may lose the chance of gaining experience in other industries. Freelancing offers more opportunities to broaden your horizons and acquire specialized skills.

Cons

• Lack of benefits. Freelancers rarely receive benefits from their customers and are fully responsible for their financial health.
• Sporadic work. Finding customers and projects is considered the biggest challenge for freelancers according to a survey by FlexJobs. Not having steady work is a downside of freelancing. You may be overwhelmed with tasks in one period and completely jobless in another.
• Ultimate responsibility. Being a freelancer, you’re an employer and an employee all in one. You should manage your schedule, customers, projects, and tasks, collect payments, pay taxes, etc. and bear responsibility for all that. 

7 challenges of being a consultant

Being independent sounds lucrative. However, you shouldn’t look at this through rose-tinted glasses. Let’s consider a few realities of being an independent consultant.

1. You’ll sometimes need to travel to serve clients, which is rather inconvenient, time-consuming, and costly.
2. Working from the comfort of your home is awesome until it comes to distractions. That’s why it’s not always productive. You should have strong time management skills to fulfill your work and have some time for rest and relaxation.
3. Independent consultants sometimes may not be paid on time, which is especially challenging if they have few clients.
4. There’s a risk of non-payment. Some clients may fall on hard times, while others are simply irresponsible.
5. You’ll spend a lot of time on tasks that are not billable. These include education, administration, marketing, and accounting.
6. When you don’t know the answer to a client’s question, it’s your job to find it. No matter how skilled and experienced you are, a client may ask you a question you can’t provide an answer to on the spot. 
7. Marketing and promotion are pain points for many consultants, especially in the early years of their careers. Finding clients is a real challenge, and you must invest time, effort, and money in promoting your services. As your experience grows, so will your list of clients.

7 challenges of being a freelancer

1. Finding and keeping clients is the first and most difficult challenge for freelancers, but it is also a never-ending job. Since word-of-mouth referrals are so important, the more jobs you take on, the easier it will be to find new customers. However, this takes time.
2. Periods of no work are common for freelancers. It takes time to establish a steady flow of work, and even if you do, there’s no guarantee it will last. There will always be peaks and troughs in your workload. One day you’ll be shrugging off job requests, the next you’ll spend hours looking for work.
3. Being your own boss may sound appealing, but this entails taking responsibility for every aspect of your job. It’s crucial to stick to deadlines if you want to keep your customers. So you should be disciplined and avoid procrastination to achieve success.
4. Your finances will be unpredictable and entirely dependent on your workload. 
5. Ensuring you are paid on time is one of the biggest challenges of being a freelancer. Waiting for your work to be paid for is quite common. Besides, it can be awkward to ask a client for payment, particularly if you’re relatively inexperienced.
6. Although freelancing is not a new phenomenon, you may face a common bias: everyone thinks you’re unemployed. Sometimes, parents and friends will not take you seriously and won’t consider freelancing a “real” job.

Wrapping up

What’s more comfortable for you: selling your knowledge or selling your work? Would you rather be a freelancer working for yourself, beholden to no one, and enjoying a variety of assignments while mainly working from home? Or are you more interested in manifesting your vision and sharing your expertise with others? Knowing the distinctions between the two very different categories will help you decide.

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