Who Is an Independent Consultant? Everything You Need to Know

The project-based nature of work, the rise of the gig economy, and the need for specific technical skills mean organizations frequently look to hire consultants for short-term outside expertise. For many professionals with marketable skills, the flexibility and diversity of a consulting career are appealing. If you feel like you’re ready to share your experience and can help others pursue their business goals, you can be an independent consultant and take home up to half a million dollars a year. 

What is an independent consultant, and what are the benefits of this career path? Read on to learn everything you wanted to know about this line of work.

Who is an independent consultant?

A consultant is someone who saves his client almost enough to pay his fee. Arnold H. Glasow, American businessman and humorist

An independent consultant, often referred to as a freelance consultant, is a person or firm that provides advisory services to clients related to a particular field or topic in which they have expertise on a contractual basis. Usually, independent consultants are passionate, smart, and entrepreneurial experts who have earned a reputation for outstanding work and skills in a particular sphere and have decided to strike out on their own and start consulting.

Independent consultants objectively analyze strategic, operational, or technical problems their clients experience and offer recommendations on how to solve them, prevent their recurrence, and control associated risks. For instance, a company may hire a marketing consultant to determine why their marketing strategy doesn’t bring the desired result. A marketing consultant will analyze the company, their operations, the situation on the market, and the current marketing strategy. They will then prepare a report with possible solutions to optimize, alter, or reconstruct the marketing campaign to meet the current business goals. 

The Internal Revenue Service (IRS) defines independent consultants as business owners, not employees; thus, they receive fees, not salaries. An independent consultant is self-employed (or is an employee of their own company) and is not considered a legal employee of their client or clients.

The services performed by independent consultants include one-day consultations and week-/month-/year-long project work depending on the industry and task.

The difference between an independent consultant, freelance consultant, and freelancer

If we take a look at the work structure and legal organization, there isn’t much difference between an independent consultant, freelance consultant, and freelancer. All these specialists are self-employed and offer their services to clients. However, there are some differences between these experts in terms of requirements and deliverables. 

An independent consultant provides clients with expert advice in the sphere in which they have expertise. For instance, an independent consultant may offer consulting sessions on increasing sales, personal training on professional development, crisis management recommendations for businesses, or suggestions for improving ad campaigns.

A freelance consultant is also a self-employed specialist who works with businesses to provide solutions to issues. The difference is that a freelance consultant can sometimes implement the recommendations given to the client. In other words, they sell not only their consulting services but implementation services as well. For instance, a marketing consultant can recommend marketing strategy improvements and then help realize them.

Popular spheres for consulting are finance, strategic planning, marketing, research, training, business planning, business review, computing, technology integration, medicine, psychology, and law.

A freelancer provides clients with a specific tangible result according to their specialty. For instance, this result may be a blog post, a set of illustrations, a website or app design, an interior redesign, a profit and loss statement, or a link-building campaign.

Popular spheres for freelancers are journalism, writing, copywriting, computer programming, software development, graphic design, film production, landscaping, architecture, translation, fine art, music, and acting.

What independent consultants do

Now that we’ve figured out who an independent consultant is, let’s look at their duties. If we take a look at the list of services consultants provide, we’ll see a myriad of activities. Consulting is more than just giving advice; it also includes performing various types of research, collecting and analyzing statistics, detecting and resolving issues, coming up with strategies and recommendations, and training clients. A consultant’s work boils down to four main tasks. Consultants advise on how to: 

• optimize business processes
• solve problems
• make more money
• save money

Whatever assignment a consultant takes on, they always bring four resources:

• Objectivity. An independent, impartial, and fresh viewpoint is something a client wants from a consultant.

• Broad experience. Skilled independent consultants have faced various challenges in their careers; thus, they can work with a wide variety of clients and tackle their problems.

• Analytical skills. Consultants are trained in a range of analytical skills. They know how to concentrate on the main problem areas and define requirements for solutions and benefits to be gained.

• Full-time attention. Consultants can devote their full attention to the assignment while being free of executive responsibilities.

Types of consulting work

There are many types of consulting relationships. Below, we take a look at three common types.

Part-time consulting

In this type of partnership, a consultant devotes part of their work to a specific client. The client and consultant agree on the amount of time according to the client’s needs (a fixed number of hours per day/week/month). This doesn’t mean the consultant commits the defined amount of time daily or weekly, however, since there might be periods of non-stop work and times when there is little to do. It all depends on the sphere and the client’s tasks. A consultant typically gets paid by the hour. This flexibility can be a significant benefit to some consultants.

The part-time approach is widespread among consultants with all levels of expertise, from newcomers who are only starting their careers to professionals with years of experience. Ace consultants can provide top-notch consultations and charge up to $250 per hour.

Project-based consulting

When a consultant takes on a project, this means they sign a contract to complete a certain project or set of tasks related to one issue. In such a scenario, a consultant usually gets a fixed project fee. This is a good type of client relationship if the consultant can get work done faster than estimated. However, if a consultant spends more time on a project than expected for any reason, they won’t be compensated for the extra time. 

Project-based relationships don’t work for beginners, as it takes a lot of practice for a consultant to understand the scope of work they’ll perform in a certain period.

Full-time consulting

A full-time client relationship is very close to traditional employment. This type of consulting assumes a consultant devotes all their time and energy to working for one client and is available at any time during work hours. In this case, the amount of work a consultant does equals the daily workload of a full-time employee. Often, an independent consultant becomes a temporary part of the client’s team and works with them on one issue. Nevertheless, the consultant is still considered a contractor and gets paid hourly. 

This type of relationship is widespread among experienced consultants who have existing relationships with clients.

The pros and cons of being an independent consultant

There are multiple benefits that motivate people to start consulting. According to the Eden McCallum LBS Future of Consulting survey, higher income, more professional opportunities, independence, and flexible working hours are among the top concerns for people who switch to independent consulting.

However, as is the case with any career, there are some drawbacks to independent consulting. Below, we’ve collected the most discussed pros and cons.

Pros

• Autonomy and flexibility. Independent consultants are in control of the type of projects they take on, the clients they work with, and their work conditions. Thus, they’re free to schedule comfortable times and places for work. Additionally, independent consultants are often engaged in several projects simultaneously and solve different problems. This reduces the chance of getting bored at work.
• No daily commute. An independent consultant sets their own work schedule and work location. Most often, experts consult from home and occasionally travel to the client’s office. 
• Control over work benefits. Even though an independent consultant has to take care of things like health insurance, their work environment, and travel arrangements on their own, they still have a choice of what insurance provider to choose, what office equipment to buy, and what tickets to book.
• Higher income potential. The situation on the market and the professionalism of a consultant play a decisive role when calculating the potential financial gain. However, even if you subtract operating expenses, taxes, slow periods, and other costs, the final earnings are still the same or better on average than the salary of a full-time employee. According to research by Eden McCallum, out of about 180 working days, independent consultants mark 135 days as billable. Respondents to the research say they earn either the same or more than when they were in full-time employment while working fewer days on average.

• Lower unemployment risk. Employees are more likely to become jobless one day, while independent consultants often work with multiple clients simultaneously. Even if a consultant finishes working with one client, they will likely still have others (and constant income from them) while looking for new businesses to work with. Working with several clients reduces the risks associated with a sudden loss of income.
• Tax savings. Since an independent consultant is considered a self-employed person, in the US, there are several tax advantages depending upon the business structure and other factors. For instance, if an independent consultant works from home, they’re able to deduct expenses for the business use of their home. Acceptable deductions include office space, office supplies, hardware and software, internet and phone bills, car and truck expenses, repairs and maintenance, meals, online presence, etc. To learn more about home office deductions, read the respective guidelines on the IRS website.

Besides home-based business tax write-offs, there are other things on the tax-deductible list, such as health insurance, insurance premiums, travel expenses, advertising, legal and professional services, transaction fees, self-employment tax, retirement plans, professional development, educational expenses, and research materials. 

Cons

Being a successful independent consultant is demanding and stressful. This profession doesn’t tolerate undisciplined, unfocused, and unmotivated people who expect to get dozens of clients daily without any effort or even sacrifice, especially in the beginning. You have to develop a thick skin along with a savvy business mentality. Let’s consider what negative aspects of work consultants have to face daily.

• Unpredictability. It’s common for a consultant’s work to swing between two extremes — they either have too many clients or too few. As in any business, there’s typically a high and low season. It may take a year to figure out the seasonality in your sphere according to your skill set, get used to it, and schedule your work accordingly. Nevertheless, even if the income isn’t regular, it’s still sufficient according to consultants’ feedback.
• Need to find clients. As independent consultants are self-employed, no one will ever know about them until they advertise themselves. To guarantee yourself a constant flow of clients, you need to create a marketing strategy for promoting your own services, spread the word on social networks, build a professional network, take part in professional community life, and more. Such activities take much time, money, and effort and may hide some pitfalls a consultant might not be prepared for.
• Need for discipline. Being your own boss is another challenge consultants face. No one tells consultants what they should do and how to answer a client; they bear all the responsibility for their success. If a consultant isn’t motivated or can’t get the work done on time, there’s little chance they’ll stick around for long.
• Poor work–rest balance. Since independent consultants are considered self-employed individuals, they don’t have holidays, sick leave, or vacation time granted and paid for by an employer. Any time a consultant isn’t working results in lost potential income; thus, self-employed specialists prefer to take fewer days off and vacations, which can lead to chronic fatigue, tiredness, health issues, and possibly burnout.
• Additional expenses. As there’s no employer (who usually handles additional expenses associated with work), independent consultants have to pay for things like health insurance and a pension plan, office supplies, computer software and hardware, travel costs, and more themselves. The good news is that in the US, these things are tax-deductible.

The most popular spheres for independent consultants

As soon as a specialist feels they’ve gained extensive knowledge and experience in their sphere, they may want to focus on that sphere, share their knowledge with others, and go independent. Consultants may consult in any sphere, as thanks to the emerging gig economy, business owners prefer to turn to independent consultants and contractors, making consulting popular, lucrative, and marketable. 

How much independent consultants earn

Market research shows that independent consultants in the US earn about $65,000 to $70,000 per year. Salary.com states that the average independent consultant’s income in the US was $69,265 as of February 26, 2021. However, the earnings range between $53,470 and $113,975. 

The average hourly rate for consulting services in the US starts at $25 and goes up to almost $200, with a median rate of $76.30 according to PayScale.

Such a wide rate range is due to various factors, including differences in consultants’ experience, education and degrees, certifications, locations and cost of living, and spheres of expertise. 

PayScale reports average earnings as follows:

• Sales consultants — $52,768
• Business consultants — $74,799
• HR consultants — $74,880
• Healthcare consultants — $78,346
• IT consultants — $79,265
• Management consultants — $84,154
• Senior technical consultants — $102,962

Wrapping up

In this blog post, we’ve given you a comprehensive look at various aspects of working as an independent consultant so you can decide whether it might be a good fit for you. Independent consulting can be a very rewarding career choice. It offers almost unmatched flexibility and autonomy but also comes with its own unique challenges. Successful consultants are determined, strong-willed, and can cope with the uncertainty that accompanies consulting at the start. However, if you persevere, the reward will not be long in coming — together with a possible six-figure income.

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